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effective cashflow management

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Task 3 D1 It is now 12 months since Jane started the business. During the year she has had time to reflect on month to month trading. She has asked you as a friend to write her a report outlining the following: 1. What courses of action could be introduced to control the business's cash flow most effectively? 2. How will this contribute to the overall effective performance of the business operation and ultimately maximise cash flow. CASH FLOW FORECAST "Cash flow forecasting means preparing a cash flow statement for the future with predicted inflows and outflows." (Source: BTEC First Business) A business often prepares a cash flow forecast showing the money likely to flow into and out of the business in a given period. Forecasts are based on past experience of the business. Cash flow forecast include revenue such as cash sales, credit sales, loans and expenditures like wages, insurance, loan payment, etc. BUDGETARY CONTROL "A Budgetary control is a system of creating budgets, monitoring progress and taking appropriate action to achieve budgeted performance." (Source: www.brunswickis.co.uk) Budgetary control is a process of monitoring and analysing financial control within organisation. ...read more.


Running credit checks on customers It is difficult for businesses to run a credit check on every customer and supplier. Businesses run checks only when problem arise with customers or suppliers. If businesses run checks, it is better for businesses in the long term and businesses can avoid customers immediately who are slow pays or failing in paying bills. Comparison Suppliers Online Now a day, internet is a great source of information and also helps many businesses. There are some businesses which are 100% depended on internet like Google. The internet makes comparison very easy. Some suppliers don't cut their prices according to the market. By checking prices every quarter or half year on the internet, a business can gain knowledge of prices and how much they should be paying for particular goods like insurance and feed for horses. For example, he is paying insurance of �500 per month. If he finds cheaper insurance this costs him just �300 per months instead of �500 so he will save about �200 per month. Encourage Partial Payments When businesses don't have much cash in hand, they try to encourage their customers to pay part of their payment in advance and most customers will agree on it. ...read more.


This is just another way of getting money in from customer on time. Once customer pays interest on his bill then next time he will take care of it and usually pay on time therefore business will money in on time or early. Running credit checks on customer or supplier gives business financial information and credit report about customer or supplier. When business runs credit checks on customers, business will get to know if customer has any fraud, haven't paid his credit card bill, haven't clear his mobile contract, etc. These types of information help business and business will know credibility of its customer. When it comes to cutting down on finances, business always think about finding cheaper supplier or cheaper raw materials because this will reduce its fixed cost and variable costs and business will save money on its expenses. There are many comparison websites available on internet, it is great source for business to find cheap insurance or cheap telephone provider and it's very easy and quick too. As we have seen solutions to improve and make cash flow very effective in first part and we have also looked at effect it will make on overall business operation and cash flow. ?? ?? ?? ?? Unit 3 Investigating Financial Control ...read more.

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The writer has done some effective research and explored many of the ways of dealing with cash flow problems. Missing out on the overdraft is a fundamental flaw as it is an important method for dealing with cash flow problems.

Marked by teacher David Salter 05/04/2012

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