Cash flow

• What is the cash flow cycle?

  The gap between money going out and coming in
• what is working capital?

  The money available for its day-to-day running cost
• How can a business improve its cash flow?5


  • overdraft, allow flexibility however you need to pay interest on these.

  
  

  • Hold less stock so less cash is tied up in stock, but it may mean that you cannot meet sudden increase in demand for a product

  
  

  • Reduce the time between paying supplies and getting money from customers and give the customers a short credit period and the suppliers a longer one. However you still need to keep customers happy or risk losing them

  
  

  •Short term loan ,interest may be low

  
  

  •Debt factoring, but agents take a percentage out
• How else can businesses improve cash flows?

  Lease back
• What is a cash flow forcast?

  Forward looking statement that tries to predict cash inflow and outflow
• What type of statement is a cash flow statement?

  Backward looking statement that shows cash inflow and outflow
• In what context is a cash flow statement presented?

  As part of business accounts which means we can publicly see them
• what are examples of cash inflow?

  -Owners investment or other source of finance

  -Cash from sales forcast but it may be under or over and it depend on research and is hard for start ups

  -Debtor payments estimated from sales forecast which is determining by credit terms .Is the firm credit control good and will it be paid on time
• What are people owed money by a business called?

  Creditors
• What is money that a business owes known as?

  Payable
• What do you call people who owe money to the business?

  Debtors
• What is money owed to the business called?

  Receivable
• What is the ideal cash flow situation for a business?

  Short production time and longer credit from creditors
• What is a drawback of using overdrafts?

  They can be very expensive long-term
• What is debt factoring?

  Instant cash for unpaid customer invoices
• Factors affecting cash flows

  Transaction types e.g. sales or purchase

  Timings of cash flow e.g. seasonal sales

  the nature of the business e.g. a start-up
• What is mean by timings of cash flow

  If cash inflow or slow it may cause cash flow problems and to speed it up they could offer a shorter credit. Often a discount for early payments or penalties for later payments.
• What does cash flow forecast show?

  The amount of money that managers expect to flow into the business and flow out over a period of time in the future however isnt always accurate. Market can change rapidly and it can lead to disappointing results
• What is a primary reason businesses need cash flow?

  To meet day-to-day finances
• What are some day-to-day financial needs of a business?

  Buying stock, paying wages, utility bills
• What can limited cash result in for a business?

  Missed opportunities
• What types of problems can cash flow issues cause?

  Short term and long term problems. Long term problems could actually end your business though
• What are the causes of cash flow problems?


  • Credit sales
  • Overtrading- selling to the point you can’t pay suppliers until customers pay
  • Internal management issues
  • Seasonality
  • Unexpected events
• What is one cause of cash flow problems related to sales?

  Credit sales
• How can internal management lead to cash flow problems?

  Poor decision-making and resource allocation
• What does debt factoring provide to businesses?

  Instant cash for unpaid invoices
• What are the key features of debt factoring?

  • Debt factoring provides instant cash for invoices.
  • Agents pay about 80% of invoice value.
  • agents get customer to pay
  • Agents keep about 5% as a fee.