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Business studies> Finance> Managing cash flow

To manage cash flow, a company needs to delay and reduce outflows of cash and speed up inflows of cash to the business.

Increase inflows:
Give customers a shorter credit period.
Using a factoring company to chase up unpaid bills.
General good credit management.

Delay outflows:
Ask suppliers for a longer credit period.
Buy in bulk to take advantages of economies of scale.
Lease equipment instead of buying it.
JIT (just in time) means avoiding keeping excess stock so less space is used up.
Also, a company may reduce outflows by cutting costs or find cash to cover shortages such as a bank loan.

A firm may have excess cash but be unprofitable e.g. if they have just sold off a lot of old stock cheaply - made money from the sales but little profit.

A firm may be profitable but lacking cash e.g. if the amount they are spending is more than what they are receiving from sales.