How can the control of cash be used to avoid or reduce the use of external credits?

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.