1. How to improve
cash flow

2. Specification detail
• How to analyse the difference between
increasing cash inflows and reducing cash
outflows
• Key aspects of financial management such as
how to establish more favourable credit terms
with customers and suppliers and the practice
of destocking

3. This lesson
Lesson Aims:
• All students will understand that a cash flow forecast
shows the money coming in and money going out of a
business
• Most students will be able to complete a cash flow
forecast
• Some students will understand why businesses produce
cash flow forecasts

4. To know the difference between increasing cash inflows and
reducing cash outflows
BBC Profit and cash flow: here

5. A business needs enough cash to pay bills
CASH IN
CASH OUT

6. A business needs enough cash to pay bills
CASH IN
CASH OUT

7. cash flows are affected by stock levels
and credit terms
●
Managing your business finance : Here
●
What did the owner of Tulip Tree do to
improve stock levels and credit terms?

9. Helen and David’s hotel
pg304
• How could Helen and David reduce their outgoings?
• Decrease cash outflows:
• Increase cash inflows:
• Increase overdraft:
• Negotiate credit terms:
• Destocking:
• In your exam be sure to separate inflows from outflows.
• You need to decide: Will a cash flow boost come from bringing more
cash in or cutting the amount flowing out?

10. The firm’s control of cash flow
• Some cash flow issues can be managed by the firm, others
are out of their control. Complete the table by putting a cross
(x) or tick (√) next to the following opportunities.
Boosting cash in X/√ Cutting cash out X/√
Getting customers to pay more Cutting orders on new stock
quickly
Getting shareholders to invest more Stopping investments in expansion
Running a 25% off everything sale Stopping hiring temporary or
seasonal staff
Getting a bank to provide a load Delaying payment to your
suppliers (within reason)

11. Cash flow example
Cashflows are usually produced for 12 months
January February March
Cash In £10,000 £4,000 £12,000
INFLOW
Cash Out £2,000 £6,000 £10,000
(OUTFLOW
)
Net Cashflow
Opening NIL
Balance
Closing Balance

12. Why produce
Why produce
a cashflow?
a cashflow?

13. Summary questions
• What does a cash flow forecast show?
• Why does a company produce a cash flow
forecast?
• Who is interested in a company’s cash flow?
• REVISION: here (it is quite difficult).