Year 12 AS Business Studies Improving cash flow

Year 12 AS Business Studies Improving cash flow

Causes of cash flow problems • • Seasonal demand Lack of planning (eg stock management) Over-investment in fixed assets Poor credit control Allowing customers too long to pay debts Overtrading Unexpected events

Main ways to improve cash flow: Increasing cash inflows • • • Bank overdraft Short-term loan Debt factoring Sale of assets Sale and leaseback

Other ways to improve cash flow: Reducing cash outflows • • Reduce credit terms to customers Delay payments to suppliers (creditors) Delay spending on capital equipment Use leasing not outright purchase of capital equipment • Cut overhead spending that does not directly affect output, eg promotion costs • Finally…sell more!

Your task… • In groups of 3 – you will be allocated one of: – Bank overdraft; Short-term loan; Debt factoring; Sale of assets; Sale and leaseback • As well as one of the following: – Reduce credit terms to customers; Delay payments to suppliers (creditors); Delay spending on capital equipment; Use leasing not outright purchase of capital equipment; Cut overhead spending that does not directly affect output, eg promotion • Produce a brief presentation / notes of: – What / Advantages / Disadvantages of your areas