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Did u Know that 70% of all

? business failures are
because of cash-flow


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But what did we learn in Unit 1

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Cash flow:
The amounts of money into & out Cash flow cycle A. Holding of
of a business over a period of cash in business
Below is the pattern of inflows £ £
(money coming into business) & Inflows of cash in return for sale of Outflows of cash…

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In addition to that what do we have to
know for unit 2
o Causes of cash-flow problems


o Ways of improving cash flow

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Cash flow This is the amount of money flowing in and out of a business at a
given period of time.
Bank overdraft This is an agreement hereby the holder of a current account at a
bank is allowed to withdraw more money than there is in there
account. The…

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Cash flows help to spot debt before it may
arise, and also to find where the money
can come from to help in paying debts

CASH CYCLE A business always
needs to ensure that
they have enough
cash to meet daily
Sell to customers on credit Customers (debtors pay up)…

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Credit sales Increasing Overtrading Producing Over-investment in
sales and thus expenses. too many goods and fixed assets Leaves
running out of cash, NO money to pay bills .

Unforeseen changes
Seasonal These can be internal
demand Low (equipment
sales revenue or breakdown) or external
high costs during (government
part of…

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Getting goods to the market as soon as
Quick payment ­ Get paid in cash, or
call in credit customers within 30 days.
Obtaining maximum
possible credit for Control credit customers ­ Gain bank
purchases (delaying references before supplying credit
bills) Debt Factoring ­ Sell debt…

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Bank overdraft
Advantages: Disadvantages:
Easy to organise Interest rates are flexible HOWEVER it is difficult to budget accurately.
Flexible The rate of interest charged on an overdraft is higher than a short-term
Often cheaper than a loan> interest is paid on the amount overdrawn and bank loan> Expensive
for when…

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Other Ways Of Improving Cash Flow
·Improve working capital
Working ·Careful control of the firms main assets & make sure there is enough to pay creditors & other immediate payments

·Agree overdraft limit with the bank
·Set aside contingency fund for unexpected payments
Cash ·Improved decision making



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