Cash Flow - All the inflows and outflows of cash in a business

Cash Flow Forecasts - estimates of the likely inflows and outflows of cash into and out of the business over a given period of time.

Reasons for Forecasts:

• Useful to help a business set its price
• Allows the business to put into place strategies to deal with any forecasted negative cash flows
• Potential investors can look at them to determine whether to invest
• Managers use the information to monitor the business and react accordingly
• Suppliers may want to see the forecasts to see whether a business can pay for supplies

Limitations of Cash Flow forecasts is that they don't take into account:

• Changes to the interest rate
• Changes in economic policy
• Changes in the economic climate
• Forecasts are estimates
• Forecasting seasonal demand
• World events
• Competitors behaviour
• Changes in technology

Causes of Cash Flow Problems:

• Level of sales
• Business environment
• Excess Stock
• Late payments from debtors
• Paying creditors too quickly
• Over Trading

Improving the Cash Flows of the business:

• Increase sales
• Reduce stock levels by selling off stock or buying less stock
• Factoring
• Leasing not buying
• Loans
• Changing creditor and debtor days
• Cut operation Costs