# Managing cash flow

Source: https://projectalevel.co.uk/business_studies/finance/managing_cash_flow

> We offer many resources for students revising for their AS and A2 exams including: AS/A2 revision notes and practice questions, revision guides and the take a break section.

To manage cash flow, a company needs to delay and reduce outflows of cash and speed up inflows of cash to the business.

#### **Increase inflows:**

- Give customers a shorter credit period.
- Using a factoring company to chase up unpaid bills.
- General good credit management.

#### **Delay outflows:**

- Ask suppliers for a longer credit period.
- Buy in bulk to take advantages of economies of scale.
- Lease equipment instead of buying it.
- JIT (just in time) means avoiding keeping excess stock so less space is used up.
- Also, a company may reduce outflows by cutting costs or find cash to cover shortages such as a bank loan.

A firm may have excess cash but be unprofitable e.g. if they have just sold off a lot of old stock cheaply - made money from the sales but little profit.

A firm may be profitable but lacking cash e.g. if the amount they are spending is more than what they are receiving from sales.