Solving Short-term Cash-flow Problems (Cambridge (CIE) O Level Business Studies)

The business may approach some of its most trusted suppliers and ask them for more generous repayment terms

• E.g. They may request their suppliers to extend the repayment period from 30 days to 90 days

If the business offers customers the ability to 'buy now, pay later', this delays the cash inflow. Removing the option to pay later will improve cash-flow

• However, the business may lose some customers to competitors who are able to keep offering credit terms

Businesses can often arrange short-term bank loans in a very short time frame, often a couple of days

• Interest will have to be paid

Postponing the purchase of new equipment, such as vehicles, may significantly reduce cash outflows

Businesses can choose to only accept cash as payment, meaning it receives money immediately

• Customers may buy from competitors that sell on credit instead

Temporary cash-flow problems can be solved by arranging to spend more than the businesses current account balance

• Interest rates may be relatively high, increasing business costs