How To Improve Cash Flow

Front 1

Cash Flow Forecast

Back 1

A statement that estimates what money will be coming into the business and what money will be going out of the business over a future period of time.

Front 2

Cash Flow

Back 2

The movement of cash into (cash inflow) and out of (cash outflow) a business. They both need to balance and require careful management to avoid running out of cash at crucial times.

Front 3

Cash Inflow

Back 3

Cash which comes into a business over a period of time. For example, money from the sale of goods.

Front 4

How can a business improve Cash Flow?

Back 4

Increase the Amount of Money Coming In:
- Getting customers to pay quicker

- Selling stocks to avoid holding too much
- Obtaining external finance

Decrease the Amount of Money Going Out:

- Negotiating with suppliers to pay them later

- Spreading costs over a number of months wherever possible

- Selling off assets

Front 5

Cash Outflow

Back 5

Cash which leaves a business over a period of time. For example, it may be used to pay bills, or buy raw materials from suppliers.

Front 6

Deciding how to improve

Cash Flow

Back 6

The best way to improve cash flow will depend upon:

- What the business is trying to achieve e.g. a business trying to open more shops is not going to close down stores

- How realistic the objectives are

- How long the problem is expected to last for

- How easy it will be for the business to borrow (this will depend upon how much borrowing the business already has)

- How easy it will be to increase sales

- How easy it will be to reduce spending

Front 7

Identifying Cash Flow Problems

Back 7

A Cash Flow Forecast is only useful if a business uses it effectively. This means they must:

- Look at the Cash Flow Forecast (to identify all potential problems)

- Identify the cause of the problem (this requires an understanding of what affects cash flow)

- Decide what to do (the best solution for the circumstances should be used)