Cash Flow


Cash Flow

Cash is vital to a business’s success and includes notes, coins, and money in the bank.

Cash flow is: The flow of money coming into and going out of a business

Cash Inflows: the cash coming into a business -

Cash from the individual.

Loan from the bank.

Cash payments from sales

Cash Outflows: the cash going out of a business -

Wages & training

Equipment & stock

Telephone, gas, electric & other bills

Intrest on loans


Maintenance & Repairs

Net Cash Flow

Net cash flow is the money left over when a business takes its outflows from its inflows.

In other words, NET CASH FLOW IS:

the receipts of a business minus its payments

Example: If Nestle has £30,000 per month coming in and pay out £10,000 in costs, their net cash flow is £20,000.

Costa Coffee

Cash inflows

Payments from customer

Interest on bank accounts, savings & investments 

Franchise fees, royalty payments etc

Merchandise (The gifts you can buy in store and places like Debenhams).

Receipt of bank loans/overdrafts

Cash outflows

Purchase of stock, raw materials or tools. 

Wages, rents, and daily operating expenses. 

Purchase of fixed assets - PCs, machinery, office furniture, etc. 

Loan repayments. 

Dividend payments.

Income tax, corporation tax, VAT and other taxes.

Reduced overdraft facilities.

Increasing Cash Inflows

Increasing sales revenue 


Improving C.F from customers

Long term solution e.g. loans

Increasing Sales Revenue

Sales revenue = Selling price x quantity sold

Main ways to boost sales revenue:

1. Improved marketing: Using alternative or additional forms of advertising or product trials

2. Better products: Introducing new or differentiated products to the marketplace


Reducing stocks of finished products (possibly having a sale to shift stock surpluses).

Improving Cash Flow

Reduce trade credit – pay for stock the following month.

Chase up late payments

Employ a factor

(A Factor is a financial company, often a bank that will advance the money owed to a business by its customers)

What are longer term solutions there to improving cash flow? 

Solutions: Bank loan, issue shares (PLC’s) or sale of assets. 

Changing cash outflows

Improve & reduce cash outflows

Lease rather than buy

Reduce your orders for materials & stock

Delay paying invoices

1.Financial management is the deliberate action of changing monetary variables to achieve financial objectives, such as improved…


No comments have yet been made