Accounting and finance Managing cash flow problems

Solving cash flow shortages predicted cash shortages may be overcome by taking the following actions; 1.Speeding up cash inflows – i. negotiating shorter credit times given to customers (e.g. by offering a cash discount) ii. credit management (e.g. chasing debts) iii. debt factoring

Solving cash flow shortages 2.Delaying cash outflows – i. negotiating longer credit periods with suppliers thus postponing outflows ii. leasing and renting rather than buying fixed assets 3.Cutting or delaying expenditure – i. decreasing levels of stock ii. Cutting costs iii. Delaying purchases

Solving cash flow shortages 4.Finding additional funding to cover cash shortages i. using an overdraft ii. taking out a short-term loan iii. sale and leaseback of assets whichever measure is taken will have to be effective in the short-term