cash flow problems and forecasting Flashcards
when do cash flow problems arise?
when the enterprise has to pay out more money than it has coming in (deficit) in each month
what is essential to the health of an enterprise?
cash flow forecasting
causes of cash flow problems:
what will an enterprise that does not produce cash flow statements or forecasts will not be able to monitor?
its actual and forecast cash inflows and outflows each month. It may not be aware when cash flow problems arise
causes of cash flow problems:
why can a poor cash flow management arise?
from poor record keeping
causes of cash flow problems:
why may an enterprise not record?
when invoices are due for payment, and therefore not know to chase customers (debtors) who are slow to pay
causes of cash flow problems:
what could the cash flow forecast contain?
errors
causes of cash flow problems:
what does it result in if the enterprise receives several bills at once?
results in more money going out than coming in
causes of cash flow problems:
what could the several bills coming at once include?
requests from customers for refunds for faulty or unwanted goods
causes of cash flow problems:
what are examples of the enterprise may have to pay unexpected bills?
such as for the repair of faulty equipment
causes of cash flow problems:
what will some debtors take longer to do?
to pay than the terms given on the invoice (trade credit) or may not pay at all (known as bad debt)
causes of cash flow problems:
what could an enterprise try to do?
to grow too quickly
causes of cash flow problems:
what happens if an enterprise has ambitious sales targets?
may not have enough cash to
buy the raw materials reguired to make all the products customers have ordered
benefits of cash flow forecasting:
what is known?
timing of cash inflows and outflows
benefits of cash flow forecasting:
what can be spotted quickly?
potential problems
benefits of cash flow forecasting:
what can be planned to suit cash flow?
the purchase of expensive items
