IB Business Management — Cash flow

💵 Cash flow basics: **Cash inflow —** money coming into the business. **Cash outflow —** money leaving the business. **Net cash flow —** inflows − outflows. **Closing balance —** opening balance + net cash flow.

⚖️ Cash flow vs profit: **Profit —** revenue minus costs. **Cash flow —** actual money movement. **Profit but no cash —** customers haven’t paid. **Cash but no profit —** loans or asset sales.

Core structure (memorise)

• Cash flow forecast — predicts future inflows and outflows
• Negative closing balance — major danger sign
• Internal causes — overtrading, poor credit control, excess stock
• External causes — downturn, seasonality, competition
• Improve cash flow — increase inflows, reduce outflows, get finance

🛠️ Match problem to solution: **Customers pay late —** tighten credit control. **Too much stock —** reduce stock levels. **Seasonal dip —** use overdraft or reserves. **Short-term pressure —** arrange finance.

⚠️ Trade-offs: **Overdraft —** flexible but expensive. **Factoring —** lose part of revenue. **Cutting stock —** risk of shortages. **Delaying payments —** may damage relationships.

High-yield facts examiners expect

• Cash flow is about timing, not total money
• Businesses can fail from lack of cash
• Closing balance is the key figure
• Forecasts are estimates, not guarantees
• Overtrading = growing too fast without cash
• Best answers link problem to solution