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AS Forecasting + Managing Cash Flows :explode: (Causes of cash flow…
AS Forecasting + Managing Cash Flows :explode:
Vocabulary
Cash flow - sum of cash payments to a business (inflows) less the sum of cash payments (outflows)
Liquidation - when a business stops trading + sells its assets for cash to pay suppliers and creditors
Forecasting cash flow
Outflow :
Annual rent payment
Electricity, water + wifi
Lease payments
Labour costs
Variable cost paymets
Inflows :
Bank loan payments
Customers cash payments
Owner's own capital injection
Trade receivables payments
Limitations :
Cost increases can lead to inaccuracies
Wrong assumptions can be made
Mistakes can be made
Reduce outflows by :
Delay spending on capital equipment
Using leasing
Delay payments to suppliers
Cut overhead spending
Causes of cash flow problems
Allowing customers too long to pay debts
Expanding too rapidly
Poor credit control
Unexpected events
Lack of planning