| how does a business generate cash? | selling products/services
receiving a bank loan/grant
issuing shares (for Ltds only)
selling a non-current asset it no longer needs (eg delivery van or property) |
| what do businesses spend cash on? | purchasing raw materials from supplier
paying staff wages
paying utility bills (eg electricity, internet)
paying insurance
paying rent/mortgage
advertising costs |
| what is meant by cash budgets? | a cash budget shows a forecast of how much money the business thinks will be coming in and going out each month in the course of the year ahead
the final figure at the end of each month represents how much money the business forecasts it will have left (closing balance) |
| do cash budgets have anything to do with profit? | no
do not mention "profit" in your answer when talking about cash budgets |
| name some cash flow problems | demand falls for products/services and so sales may fall
increase in charges from utility supplier (electricity, gas)
supplier increasing prices of raw materials
bank charges due to late loan/overdraft payments
investment in new technology required
staff absence leading to extra staff cover being required |
| name cash flow solutions | launch an advertising campaign to remind customers about your product to increase sales
switch utility supplier to find a better deal
negotiate with supplier for a better deal for raw materials/ or switch to a cheaper supplier
have a meeting with the bank to discuss charges and arrange a payment plan
pay for new technology with hire purchase so full price is not paid up front (or leasing)
train staff to be multi skilled so they can cover future staff absence |
| what is meant by receipts in cash budgets | money coming into the business |
| What terminology describes all the money coming into and going out of a business? | cash flow |
| What term do we use to describe all the money going out of a business? | payments |
| What outcome would you expect if more cash is leaving a business than coming into it? | A closing balance showing a deficit |
| what are the benefits of preparing a cash budget? | it can identify times where there may be a shortage of cash, allowing the business to plan ahead and arrange extra funding, eg bank overdraft
can help to regulate expenses. any months where expenses are high will be highlighted by a cash budget
it will show clearly where a business has more cash than expected or less than expected. This will allow a business to more efficiently plan and make better decisions |
| what is this an example of | cash budget |
