Introduction to cash flow management
In an ideal world, a business will experience a consistently positive cash flow – i.e. the amount of cash
coming into the business (cash inflow) is greater than the cash going out of the business (cash outflows)
This would allow a busness to build up cash reserves with which to plug cashflow gaps, seek expansion
and reassure lenders and investors about the health of the business.
However, it is important to note that income and expenditure cashflows rarely occur together, with
inflows often lagging behind.
An important aim of effective financial management must be to speed up the inflows and slow down
The main cash inflows are:
payment for goods or services from customers
receipt of a bank loan
interest on savings and investments
increased bank overdrafts or loans
The main cash outflows are:
purchase of stock, raw materials or tools
wages, rents and daily oper