The importance of cash flow

• What is the importance of cash flow in a business?

  It prevents a business from failing
• What does cash flow refer to in a business?

  Money moving in and out of the business
• Why is cash management important for a business?

  It allows a business to pay its bills
• What are the main cash payments a business makes?

  Payments to suppliers and employees
• What are overheads in a business context?

  Fixed costs not affected by sales volume
• How does having a few large customers affect a business's cash flow?

  It can lead to financial difficulties if they delay payments
• What can happen if a business does not receive expected payments?

  It can lead to financial difficulties
• What are credit terms in a business context?

  Agreements to pay for goods later
• Why might a business negotiate longer credit terms with suppliers?

  To allow customers to pay later
• What are the key components of cash flow management?

  • Monitoring cash inflows and outflows
  • Ensuring timely payments to suppliers
  • Managing credit terms with customers and suppliers
  • Planning for unexpected expenses
• What are the consequences of poor cash flow management?

  • Inability to pay bills
  • Increased risk of business failure
  • Difficulty in obtaining credit
  • Loss of supplier trust