Analyse the cash flow problems a business might experience Essay
In this assignment I will be analysing that a business might experience in case their sales statistics turn out to be below the ones that they may have expected or perhaps predicted. 1 ) 1 problems of cash movement forecast Coming from what I can easily see on Ricky’s cash flow is the fact he is depending upon that one loan which is his capital that he starts with too and that is £17, 500 from the first month which is January.
Bank loans are great for starting a company but that will not mean that they can not let you down in such a case a financial loan can fail Rick since if the loan from the bank gets late or no for a longer time available in that case this is a big problem pertaining to Rick as they cannot do anything best way to explain this would be he would not be able to purchase the pickup truck which is £20, 000 and not just the pickup truck that would not be covered but the revenue cost would not be protected. His total payments just for the beginning of season which is the month January his total payments are £22, 475 with this type of problems or should I state impacts that can happen you cannot find any way that his organization would survive.
Problem a few Another crucial problem which could occur from that cash flow as if the product sales figure is leaner than the genuine sales number. For example the product sales figure that is predicted by Ricky is definitely £60, 000 but let’s say that this individual actually gets £40, 1000 as his total physique for his sales. This is certainly a major problem because what this individual as expected to acquire for his sales is not met and £40, 1000 worth of sales probably would not be enough to hold his organization running regularly. Costs for everything will not be covered just because with this problem which usually again is incredibly crucial for the business not to mention loss would happen there is no method that Ron would make virtually any profit just for this problem.
In addition the business will have to start the new month which has a loss and again this can be just because the entire sales are low this will yet again show that he simply cannot cover the expenses for that month and he’d have a better loss that he would not allow him to recover fast enough for the next month in order for his business to become still up and doing work. Problem four Looking at Rick’s cash flow forecast I can see that there can be another problem that can occur and this problem is regarding his expenses and that is in the event his bills turn out to be lower to what the actual expenses appear to be this can trigger him not only a problem although a failure to his organization because his expenses happen to be £71, 750 and lets say for example they actually appear to be seventy eight, 950 this is when the big issue will occur because his expenses will be higher which would result in Rick not being able to cover for year.
In addition if the expenses go up in a month in the year this will decrease the possibility of Rick gaining any type of profit and the equilibrium would be diverse for the next month by all means this may affect the profit and harmony within the business. 1 . a couple of recommendations and solutions to the difficulties Solution to trouble 2 For the second issue there is a remedy but this would have to be carried out correctly simply by Ricky plus the solution is definitely advertisement IN THE EVENT any type of business searching for to increase all their sales with the best approach is to ensure that you advertise their particular services a lot and explanation being is usually to make sure that they will let buyers know what they should offer.
Just as before we have to understand this from Ricky’s perspective the things i would advise for him to do can be whenever this individual decides to promote the best thing to accomplish is to make certain he will keep his rates low mainly because first of all this may give him a way to show persons what his business has to offer and secondly he would not have to shell out a great amount of cash to get his solutions advertised. Answer to problem three or more Another strategy to his second problem would be if Ricky uses ideal pricing just like low prices around the services this individual has to offer.
That due to the fact that he is just starting his business it is not very known to people that are frequent customers to other businesses and low pricing is a only approach that he would gain consumers. In addition this kind of relates to his advertisement answer because in the event that he promotes that his services are on low prices people would have more interest in going to discover what Ricky’s business is offering. I would likewise recommend for him to set his rates up only when his organization is making it with the product sales then he’d be able to boost sales even more by doing this.
One other solution to his final is actually to find fresh suppliers or maybe the best way is usually to make sure he buys his tools that he needs at a lower price. This will help him and his organization so much it is going to actually make his business manage fluently in the begging because that is what he would like so by him to get tool price low which would mean that his costs are low too after that at the end he can left with his expenses which will be low also and this signifies they can match the number that this individual has believed on his income forecast. 1 . 3 Conclusion In conclusion I use learnt that whenever you need to start a new business you would not only have to make a cash flow forecast but you could most certainly have to forecast the problems that might occur and how would you as a business guy stand up to these kinds of problems and solve all of them and you could also have to discover how to make sure these kinds of problems under no circumstances occur in buy for your business to be jogging smoothly.