Improving cash flow and profits

• What is a primary cause of poor cash flow?

  Poor profitability or incurring losses
• What can lead to a business having excess working capital?

  High stock levels and slow customer payments
• What is a key management technique for improving cash flow?

  Reliable cash flow forecasting
• Why is controlling costs important for cash flow?

  Losses or low profits cause poor cash flow
• What does managing working capital involve?

  Balancing stocks, debtors, and creditors
• What is working capital composed of?

  Stocks, debtors, and creditors
• How can reducing stock levels improve cash flow?

  It frees up cash tied in inventory
• What is the challenge in managing stock levels?

  Balancing sufficient stock with cash flow
• What is credit control?

  Managing amounts owed by customers
• What is a key ratio for managing trade receivables?

  Trade receivables days
• What is debt factoring?

  Selling debts to a finance company
• What is a benefit of debt factoring?

  Immediate cash flow improvement
• What is a potential downside of debt factoring?

  High fees or interest costs
• How can delaying supplier payments improve cash flow?

  It keeps more cash in the bank
• What is the risk of delaying payments to suppliers?

  Damaging supplier relationships
• What might indicate a poor cash flow position?

  Poor capitalization of the business
• What long-term solution can improve cash flow?

  Raising new equity finance
• What types of financing might a business consider for long-term stability?

  Long-term loans or debentures
• What are the key ways to improve cash flow?

  • Reliable cash flow forecasting
  • Controlling costs
  • Managing working capital
  • Reviewing finance sources
• What are the components of working capital?

  • Stocks (inventories)
  • Trade debtors (amounts owed by customers)
  • Trade creditors (amounts owed to suppliers)
• What are the short-term fixes for cash flow problems?

  • Reducing stock levels
  • Implementing credit control
  • Delaying supplier payments
  • Selling unused assets
• What are the long-term considerations for cash flow improvement?

  • Assessing capitalization
  • Raising new equity finance
  • Securing long-term loans or debentures