cash budgeting

Question 1

what do businesses spend cash on?

Answer 1

• purchasing raw materials from supplier
• paying staff wages
• paying utility bills (eg electricity, internet)
• paying insurance
• paying rent/mortgage
• advertising costs

Question 2

examples of cash flow problems

Answer 2

• demand falls for products/services
• increase in charges from utility supplier
• supplier increasing prices of raw materials
• bank charges due to late loan/overdraft payments
• investment in new technology required
• staff absence leading to extra staff cover being required

Question 3

cash flow solutions

Answer 3

• launch an advertising campaign to remind customers about your product
• switch utility supplier to find a better deal
• negotiate with supplier for a better deal for raw materials (or switch to a cheaper supplier)
• have a meeting with the bank to discuss charges and arrange a payment plan
• pay for new technology with hire purchase so full price is not paid up front
• train staff to be multiskilled so they can cover future staff absence