Chapter 19: Cash flow

cash flow

the sum of cash payments to a business less the sum of cash payments from the business

cash outflow

payments in cash made by a business, such as those to suppliers and workers

cash inflows

payments in cash received by a business, such as those from customers (debtors) or from the bank, e.g., receiving a loan

net cash flow

the sum of cash payments to a business (inflows) minus the sum of cash payments made by it (outflows)

cash flow forecast

estimate of a firm’s future cash inflows and outflows

opening cash balance

cash held by the business at the start of the month

closing balance

cash held at the end of the month becomes next month’s opening balance

net monthly cash flow

estimated difference between monthly cash inflows and outflows

credit control

monitoring of debts to ensure that credit periods are not exceeded

bad debt

unpaid customers’ bills that are now very unlikely ever to be paid

overtrading

expanding a business rapidly without obtaining all the necessary finance so that a cash flow shortage develops