Improving Cash Flow Flashcards
Mcternan is Daddy-o
List reasons for wanting to improve cash flow.
Business start up
Day to day trading (overall capital)
Growth
Issues with cash flow
when a business hasn’t got enough cash to be able to pay its liabilities
The cash flow operating cycle can be sorted by…
reducing the level of stock
speeding up the rate of debtor collection
What causes cash flow problems
Low profits/losses
Too much stock
Over trading
Seasonal Demand
Risks of over investment in capacity
spending too much on fixed costs
hard to turn back into cash
Over trading
business expands too quickly and opens new outlet
What is seasonal demand?
Predictable. products or purchasing usually in advance of seasonal peak in demand. cash outflows before inflows
How to maintain a good cash flow forecast
updated regularly
makes sensible assumptions
allows for unexpected changes
How do you manage debtors?
Credit control - how much credit to give
Credit checking - to control doubtful debtors
- cash discount for prompt payment
- improving record keeping
