• Cash flow = money received into and paid out by a business.
• Positive cash flow = receipts from customers and other inflows.
• Negative cash flow = payments to suppliers and other outflows.
• Net cash flow = difference between cash inflows and cash outflows.
• Turnover is not the same as cash received because sales may be invoiced but unpaid.
• Costs are not the same as cash paid because invoices may be outstanding.
• Cash circulates through capital, fixed assets, wages, overheads, creditors, stock and debtors.
• Slow debtor payments or excessive stock can restrict cash circulation and create liquidity problems.

10.1 Recording Cash Flows

• Record cash movements in a cash flow statement.
• Maintain enough cash to meet salaries/wages, suppliers, taxes and other payments.
• Also plan for fixed-asset purchases such as new vehicles and workshop equipment.
• Effective control of cash inflows and outflows is essential for survival and growth.

10.2 Debt Factoring

• Factoring can improve immediate cash flow.
• The business transfers current and future invoices to a factoring organisation.
• The factor pays a significant portion of invoice value immediately and the balance after collecting the debt.
• The factor may charge a percentage of turnover and interest on advances.
• Potential advantage: reduces the business's own credit-control workload.
• Disadvantage: factoring fees/interest reduce the amount ultimately received.