The cash budget is a process of predicting cash inflows and manages cash outflows in a specific period of time.
Purpose of this is to make sure there is allows the business to pay the daily operating expenses. So that, it had required to manage activities efficiently. For instance, financing, cash receipts, and cash disbursements.There are some ways to improve the Xpress Sdn Bhd’s cash flow.
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Firstly, delay payments or pay less to suppliers. This is a dangerous and also widely used in every business process. Company take a longer time to make payment but can reduce cash outflows as a result. By the way, this brings disadvantages to the company at the risk of detrimental relationships with the supplier and lose trust from them.
Conversely, if the company has maintained good communication and partnership with the supplier, the company can offer suppliers early payments if willing to give the company a discount in return. Furthermore, use supplier terms with making full use of terms of trade as equates to an interest-free loan and organization can try to find suppliers who are able to provide the stock only when the organization needs it. This is the way won’t waste money for paying stock that’s sitting in the warehouse.Next, Xpress Sdn Bhd was suggested an important part of a way to improve cash flow which is cutting stocks. They reduce the number of cash outflows by buying or holding the raw materials for resale. This would work through order less stock from the suppliers and offering discounts on stocks held to encourage the customer to buy it. This could facilitate business operations and transactions with the amount of money needed.
Organisation also can move aged stock with replace slow-moving and outdated stock that has a faster turnover. Besides, Xpress Sdn Bhd also needs to monitor stock levels to the track the movement of stock and have a process in order to identify when new stock should be ordered and replaced. Xpress Sdn Bhd also can improve cash flow in the future with only pay commission to sale employee when the received the payment. In addition, organization reward staff habit that improves cash flows, such as sales targets, reduce expenses or pay commission on the collection of payment from the customer. Lastly, cut down or delay the expansion project plans.
Many big cash outflows occur especially when the company is expanding such as buying a new equipment, offices or adding a new production line. By delaying these, cash can be held by in the short- term period time. In another way, Xpress Sdn Bhd could sell unnecessary assets. There are many businesses accumulate assets which organization no longer require and it help to increase cash in the business and save the costs such as insurance.