The Times 100 Business Case Studies

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The Times 100 Business Case Studies

Edition 15 Controlling cash flow for business growth CIMA

Introduction   CIMA – the Chartered Institute of Management Accountants  The world’s leading professional body for management accountancy  Has over 172,000 members in 168 countries  Offers the most relevant financial qualification for business Management accountants    Involved in all sectors of industry Often in high level roles Forecast, monitor trends and control cash flow

Cash flow

 Cash is vital to longer term trading  Cash inflow from eg sales  Cash outflow from eg costs of goods or labour   More money spent than received = negative cash flow Cash is a ‘liquid asset’  Available for investment  Avoids having to seek credit or loans

The cash flow cycle

 Balances cash inflow against cash outflow  Lack of cash can:   lead to business failure affect the business’ reputation

Improving cash flow

 Businesses need to manage cash flow  Pay as little interest as possible  Pay debts on time; consolidate at low interest  Negotiate payment terms with suppliers  Avoid offering discounts  Make better use of assets  eg hire out warehouse space

Benefits of effective management accounting

 Reduces uncertainty  Helps to predict and plan for the future  Ensures enough cash to cover debts or possible shortfalls  Reduces unnecessary costs  Makes cash work for the business

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