Source: https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-4-cash-and-cash-flow-2 [Revision notes](https://senecalearning.com/en-gb/revision-notes.md) › [BTEC](https://senecalearning.com/en-gb/revision-notes/btec.md) › [Business](https://senecalearning.com/en-gb/revision-notes/btec/business.md) › [Business: BTEC Level 3](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3.md) › Cash & Cash Flow 2 # Cash & Cash Flow 2 Business: BTEC Level 3 National Extended Diploma, topic 3.2.4 ## Consequences of Cash Flow Problems A business having persistent negative cash flows is unlikely to be sustainable. The business will eventually run out of money and will not be able to pay for salaries, rent or raw materials. In the short-term, negative cash flows can cause problems with stakeholders: ### Employees ![Employees](https://image-v2.cdn.app.senecalearning.com/2018-03/0fdc821f-33af-4bab-af9a-a65a80c9d673/shutterstock_270755783.jpg) - If a firm runs out of cash, it may be unable to pay its employees. - If employees are worried about cash, this can have a negative impact on employee motivation and they may leave the firm. ### Suppliers ![Suppliers](https://image-v2.cdn.app.senecalearning.com/2018-03/95aa8455-a574-4d93-8a92-91bb6ade8f70/shutterstock_686184610.jpg) - If a business runs out of cash, it may not be able to pay its suppliers. - This could create a temporary halt (stop) in production. It may also damage the relationship between the business and suppliers. ### Creditors ![Creditors](https://image-v2.cdn.app.senecalearning.com/2018-03/f5e8e380-1821-4c29-9f5f-f1797275b52a/shutterstock_236029696.jpg) - Creditors are organisations (or people) that have loaned a business money. If a business runs out of cash, it may not be able to repay these loans. - If this happens, the business may not be able to get loans (finance) in the future or it may pay a higher interest rate. ## Solutions to Cash Flow Problems Businesses can improve their cash flow by: ### Rescheduling cash payments ![Rescheduling cash payments](https://image-v2.cdn.app.senecalearning.com/2018-03/e46cf782-dde7-4f3d-9cd7-a0bc9ed16792/shutterstock_566238307.jpg) - A business could delay payment to suppliers via things like trade credits. - If a business predicted negative cash flow in February but a positive one in March, it may be able to delay the payment until March. ### Overdrafts ![Overdrafts](https://image-v2.cdn.app.senecalearning.com/2018-03/3460108d-47f3-41e0-ba04-c66785ed3a2b/shutterstock_781746199.jpg) - Overdrafts allow a business to have a negative current account balance in the short-term. - Banks effectively provide “bridging finance” to plug a short-term shortfall (or lack) of cash. ### Reducing cash outflows ![Reducing cash outflows](https://image-v2.cdn.app.senecalearning.com/2018-03/5f153a8b-be2a-4758-9a5c-3aad824c8113/shutterstock_519335722.jpg) - A business can try to reduce cash outflows if they predict a liquidity problem. - Delaying the payment of bills is one way to do this. For example, a business change the payment dates for loans and try to secure trade credits. - Forecasts are useful because the earlier a company predicts a cash shortfall, the better they can adjust their cash payments. ### Finding new sources of finance ![Finding new sources of finance](https://image-v2.cdn.app.senecalearning.com/2018-03/62e724b4-cd8e-4fb2-97a3-0da4a5804630/shutterstock_572340157.jpg) - Finding other sources of finance can provide a firm with the money they need to overcome a liquidity problem. ### Increasing cash inflows ![Increasing cash inflows](https://image-v2.cdn.app.senecalearning.com/2018-03/a5895364-7b81-4f3e-84e1-0dda497c8497/shutterstock_211654672.jpg) - Increasing sales, chasing customers that owe money and selling assets can all increase cash inflows. ## Test yourself on Cash & Cash Flow 2 - If a company runs out of cash, who might they be unable to pay? - What do we call organisations that loan businesses money? - Which of these is not a way businesses can improve their cash flow? - How can businesses improve their cash flow? - Which of the following will not increase cash inflows? [Practise this topic for free](https://app.senecalearning.com/classroom/course/f0389213-3369-45a4-8126-07b001bb9007/section/50b0d26c-e7a6-4391-abb6-a6d5e6c2e66b/session) - Previous topic: [3.2.3 Cash & Cash Flow](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-3-cash-and-cash-flow.md) - Next topic: [3.2.5 Break-Even Analysis](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-5-break-even-analysis.md) ## Business: BTEC Level 3 National Extended Diploma contents ### 1 Exploring Business - 1.1 Features of Business Organisations - [1.1.1 Sole Traders & Partnerships](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-1-sole-traders-and-partnerships.md) - [1.1.2 Private & Public Limited Companies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-2-private-and-public-limited-companies.md) - [1.1.3 Types of Liability & Not-For-Profits](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-3-types-of-liability-and-not-for-profits.md) - [1.1.4 Purposes of Businesses](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-4-purposes-of-businesses.md) - [1.1.5 Purposes of Businesses 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-5-purposes-of-businesses-2.md) - [1.1.6 The Different Economic Sectors](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-6-the-different-economic-sectors.md) - [1.1.7 Multinational Companies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-7-multinational-companies.md) - [1.1.8 Stakeholders](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-8-stakeholders.md) - [1.1.9 Influence of Stakeholders](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-9-influence-of-stakeholders.md) - 1.2 Organisation of Businesses - [1.2.1 Organisational Structure](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-1-organisational-structure.md) - [1.2.2 Types of Organisational Structures](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-2-types-of-organisational-structures.md) - [1.2.3 Business Aims & Objectives](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-3-business-aims-and-objectives.md) - [1.2.4 Business Aims](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-4-business-aims.md) - [1.2.5 Business Objectives](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-5-business-objectives.md) - 1.3 Business Environment - [1.3.1 External Influences](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-1-external-influences.md) - [1.3.2 Political & Legal Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-2-political-and-legal-change.md) - [1.3.3 Economic Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-3-economic-environment.md) - [1.3.4 Social & Technological Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-4-social-and-technological-environment.md) - [1.3.5 Lifestyle & Technological Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-5-lifestyle-and-technological-environment.md) - [1.3.6 Corporate Social Responsibility](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-6-corporate-social-responsibility.md) - [1.3.7 The Competitive Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-7-the-competitive-environment.md) - [1.3.8 Innovation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-8-innovation.md) - [1.3.9 Risk & Uncertainty](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-9-risk-and-uncertainty.md) - [1.3.10 Porter's Five Forces](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-10-porters-five-forces.md) - [1.3.11 SWOT Analysis](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-11-swot-analysis.md) ### 2 Marketing Campaigns - 2.1 Marketing - [2.1.1 Setting Marketing Objectives](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-1-setting-marketing-objectives.md) - [2.1.2 Customer Needs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-2-customer-needs.md) - [2.1.3 The Market](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-3-the-market.md) - [2.1.4 Competition & The Market](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-4-competition-and-the-market.md) - [2.1.5 Consumer Behaviour](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-5-consumer-behaviour.md) - [2.1.6 Market Research](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-6-market-research.md) - [2.1.7 Forms of Market Research](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-7-forms-of-market-research.md) - [2.1.8 Market Segmentation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-8-market-segmentation.md) - [2.1.9 Cultural & Social Factors in Marketing](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-9-cultural-and-social-factors-in-marketing.md) - [2.1.10 Promotional Decisions 3](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-10-promotional-decisions-3.md) - [2.1.11 Pricing Strategies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-11-pricing-strategies.md) - 2.2 Marketing Mix - [2.2.1 Marketing Mix](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-1-marketing-mix.md) - [2.2.2 Product Life Cycle](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-2-product-life-cycle.md) - [2.2.3 Pricing Decisions & Price Skimming](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-3-pricing-decisions-and-price-skimming.md) - [2.2.4 Pricing Decisions & Price Penetration](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-4-pricing-decisions-and-price-penetration.md) - [2.2.5 Promotional Decisions](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-5-promotional-decisions.md) - [2.2.6 Promotional Decisions 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-6-promotional-decisions-2.md) - [2.2.7 Promotional Decisions 3](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-7-promotional-decisions-3.md) - [2.2.8 Market Mapping](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-8-market-mapping.md) ### 3 Business Finance - 3.1 Sources of Finance - [3.1.1 Internal Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-1-internal-finance.md) - [3.1.2 External Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-2-external-finance.md) - [3.1.3 External Finance 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-3-external-finance-2.md) - [3.1.4 Sources of Business Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-4-sources-of-business-finance.md) - 3.2 Financial Planning - [3.2.1 Revenue](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-1-revenue.md) - [3.2.2 Costs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-2-costs.md) - [3.2.3 Cash & Cash Flow](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-3-cash-and-cash-flow.md) - [3.2.4 Cash & Cash Flow 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-4-cash-and-cash-flow-2.md) - [3.2.5 Break-Even Analysis](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-5-break-even-analysis.md) - [3.2.6 Profits](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-6-profits.md) - 3.3 Financial Statements - [3.3.1 Balance Sheets](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-3-1-balance-sheets.md) - [3.3.2 Income Statements](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-3-2-income-statements.md) - [3.3.3 Liquidity](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-3-3-liquidity.md) ### 4 International Business - 4.1 Globalisation - [4.1.1 Growing Economies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-1-1-growing-economies.md) - [4.1.2 Specialisation & Trade](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-1-2-specialisation-and-trade.md) - 4.2 International Business - [4.2.1 Internationalisation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-1-internationalisation.md) - [4.2.2 International Trade](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-2-international-trade.md) - [4.2.3 MNCS](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-3-mncs.md) - [4.2.4 Conditions that Prompt Trade](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-4-conditions-that-prompt-trade.md) - [4.2.5 Assessment of a Country](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-5-assessment-of-a-country.md) - 4.3 International Economic Environment - [4.3.1 Globalisation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-1-globalisation.md) - [4.3.2 Factors Contributing to Globalisation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-2-factors-contributing-to-globalisation.md) - [4.3.3 Protectionism](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-3-protectionism.md) - [4.3.4 The EU & the WTO](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-4-the-eu-and-the-wto.md) - [4.3.5 Trading Blocs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-5-trading-blocs.md) - 4.4 Factors Affecting International Business - [4.4.1 Global Competitiveness](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-1-global-competitiveness.md) - [4.4.2 Ethics of Global Business](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-2-ethics-of-global-business.md) - [4.4.3 Controlling MNCs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-3-controlling-mncs.md) - [4.4.4 Cultural & Social Factors in Marketing](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-4-cultural-and-social-factors-in-marketing.md) ### 5 Principles of Management - 5.1 Management & Leadership - [5.1.1 Managers](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-1-managers.md) - [5.1.2 Management Theories](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-2-management-theories.md) - [5.1.3 Managing Organisational Culture](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-3-managing-organisational-culture.md) - [5.1.4 Management Style](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-4-management-style.md) - 5.2 Theories of Motivation - [5.2.1 Motivating & Engaging Employees](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-1-motivating-and-engaging-employees.md) - [5.2.2 Taylor's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-2-taylors-theory.md) - [5.2.3 Mayo's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-3-mayos-theory.md) - [5.2.4 Maslow's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-4-maslows-theory.md) - [5.2.5 Herzberg's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-5-herzbergs-theory.md) - 5.3 Managing Change - [5.3.1 Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-1-change.md) - [5.3.2 Key Factors in Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-2-key-factors-in-change.md) - [5.3.3 Scenario Planning](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-3-scenario-planning.md) - [5.3.4 Managing Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-4-managing-change.md) - [5.3.5 Managing Strategic Implementation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-5-managing-strategic-implementation.md) ### 6 Business Decision Making - 6.1 Business Principles & Practices - [6.1.1 Influences in External Environments](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-1-influences-in-external-environments.md) - [6.1.2 Product Decisions](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-2-product-decisions.md) - [6.1.3 Competitive Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-3-competitive-environment.md) - [6.1.4 Corporate Strategy](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-4-corporate-strategy.md) - [6.1.5 Quantitative Sales Forecasting](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-5-quantitative-sales-forecasting.md) - [6.1.6 Legislation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-6-legislation.md) - 6.2 Quality Management - [6.2.1 Importance of Quality](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-1-importance-of-quality.md) - [6.2.2 Measuring Quality](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-2-measuring-quality.md) - [6.2.3 Total Quality Management](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-3-total-quality-management.md) - [6.2.4 Evaluating TQM](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-4-evaluating-tqm.md) - 6.3 Human Resources - [6.3.1 Contracts](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-3-1-contracts.md) - [6.3.2 Recruitment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-3-2-recruitment.md) - [6.3.3 Training a Workforce](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-3-3-training-a-workforce.md) - 6.4 Documents & Business Decisions - [6.4.1 Sales Forecasts](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-4-1-sales-forecasts.md) - [6.4.2 Managing Strategic Implementation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-4-2-managing-strategic-implementation.md) - [6.4.3 Problems with Strategy](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-4-3-problems-with-strategy.md)