CASH FLOW PROBLEMS = NEGATIVE NET CASH FLOW caused by
- Lack of financial planning (SALES LOWER THAN EXPECTED)
- DEBT
- HIGH PRODUCTION COST
- OVERSTOCKING ITEMS
- OVERTRADING (firm expands too fast, more outflow than inflow)
- Seasonal fluctuation (ice cream truck)
- Unexpected event
How do you get out of this situation? REDUCE YOUR CASH OUTFLOWS
- Improve trade credit terms by negotiating
- Buy things on trade credit instead of cash (so less cash outflow)
- Lease instead of purchase
- Reduce inventory, less money spent purchasing stocks INCREASE CASH INFLOW
- Raise product price
- Reduce price (get more customers)
- Reduce credit period (you get your money faster)
- Discount debtors to pay their invoices faster. Reduces working capital cycle (but not directly related to cash inflow???)
- MARKETING
- Debt factoring service ⇒ get someone to collect your debt
Bandages
- trade credit
- sponsorship, donations
- selling shares
- sell fixed assets