3.7.6—Cash flow problem strategies
- Syllabus
- First assessment 2024
- Objective
- 3.7.6
- Level
- SL
Fix cash-flow problems by changing timing, inflows or obligations
Cash-flow strategies aim to bring cash in sooner, delay or reduce outflows, or add finance while protecting the business’s ability to operate. The right choice depends on whether the gap is temporary, structural or caused by weak profitability.
Faster invoicing, tighter credit control, selling excess stock, negotiated supplier terms, an overdraft, new capital or sale-and-leaseback can all change cash timing. Each carries a cost: lost customers, lower margins, interest, dilution or future lease payments.
A seasonal café may use a short overdraft before summer receipts, while a business with persistently negative forecasts needs deeper cost, pricing or business-model changes. Recalculate the forecast after each action.
One cash injection does not cure an unprofitable operation, and delaying suppliers indefinitely can destroy creditworthiness. Explain the mechanism, duration and side effects of the strategy.