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 Lack of cash can: 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