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Through cash flow management properly, the company avoids falling into financial difficulty
By using Cashflow forecasts and budgets as control tools, a company can determine in advance the cash requirements that it would need say in a year broken down monthly and hence act accordingly via the Debtors and Creditors management in order to maintain cashflows needed to cater for the forecast/budget.
Having predetermined the cash usage, the company can also reduce or eliminate the interest payable component of external credits depending on the cashflow forecast outlook.
