Monitoring cash flow Deficit = -ve cash flow at end of month Surplus = +ve cash flow at end of month

Cashflow Forecast For Sophie’s Shoe Stall 2007 £’sJanFebMarch Income10,00012,000 7,000 Expenditure 9,00010,00011,000 Net Income 1,000 2,000-4,000 Opening Balance 500 1,500 3,500 Closing Balance 1,500 3,500 (-500) 1)Complete the cashflow forecast 2)Is this a good situation?. Describe what is happening. 3)What could Sophie do to improve her cashflow situation?

Cash Flow Problems From? Borrowing too much – interest charged and monthly payments Too much trade credit – allowing customers to take goods without paying straight away – what if they don’t pay!!! Too much stock – paid £ to buy it, problems if do not sell quickly – stock could be out and date and difficult to sell

Cash Flow Problems From? Overtrading – growing business too quickly – spend out £ on equipment and resources without getting income in Outside Factors – rivals lower prices - higher interest rates – loans dearer - products out of date - laws e.g. higher minimum wage

Improving cash flow 1.Only buying in stock that needed – Just in time 2.Reducing time for credit sales 3.Spread larger payments over months 4.Sell assets to raise £ 5.Get longer credit terms when you buy things

Improving cash flow 6. Factor off any debtors – sell debts to special debt collectors who pay for debt! 7. Arrange overdrafts to get over short term deficits 8. Try and increase income – without spending too much money 9. Try and reduce expenses without lowering quality