Cashflow Forecasting Flashcards
What does the length of the cash flow cycle depend on?
The type of product-length of time it takes to produce it
Credit payments - when the goods are received by the buyer but there is an agreed time period before the payment is due
What are the ways of improving cash flow?
Over drafts - allow business to borrow money according to its needs
Holding less stock
Reduce the time between paying suppliers+getting money back
Sales and leasebacks
What are cash budgets and how are they used?
They show the amount of money the manager expects to flow in and of the business over a period of time
Managers use them to make sure they have enough cash to pay suppliers
What’s an income budget?
Forecasts the amount if money that will come into the business as revenue
What’s an expenditure budget?
Predicts the business total costs for year
Advantages of budgets?
Help achieve targets
Control income expenditure
Help focus on priorities
Disadvantages of budgets?
Can cause rivalry in departments
Can be restrictive
Inflation is hard to predict
Start up businesses may struggle to gather data
What’s zero based budgeting?
When a business starts from scratch each year with a budget of £0
What are expenditure budgets?
Tables of finance used to breakdown the amount of money spent in certain areas
What is the cash flow cycle?
The delay between a business paying for producing the product and getting the money back
