Essay about analyse the cash flow problems a business might experience

1469 Words May 3rd, 2014 6 Pages
M1: analyse the cash flow problems a business might experience
D1: justify actions a business might take when experiencing cash flow problems
1.0 Introduction
In this assignment I will be analysing that a business might experience if their sales figures turn out to be lower than the ones that they have expected or predicted.
1.1 problems of cash flow forecast
Problem 1
Cash flow forecasts are something really important for a business and something that is a part of a business plan. A cash flow forecast is a plan for the future it will tell you whenever the costs are going to be raised over the year. It can also tell you what the business revenue is going to be and what the business performance for the following year is.
Problem
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In addition the business would have to start the new month with a loss and again this is just because the total sales are low this would yet again mean that he cannot cover the costs for that month and he would have a greater loss that he would not allow him to recover fast enough for the next month in order for his business to be still up and working.
Problem 4
Looking at Rick’s cash flow forecast I can see that there can be another problem that can occur and this problem is to do with his expenses and that is if his expenses turn out to be lower to what the actual expenses appear to be this can cause him not only a problem but a failure to his business because his expenses are £71,750 and lets say for example they actually come out to be 81,950 this is where the big problem will occur because his expenses are higher and this would lead to Rick not being able to cover for the next year. Plus if the expenses go up in any month of the year this would decrease the chance of Rick gaining any type of profit and the balance would be different for the next month by all means this would affect the profit and balance within the business.
1.2 recommendations and solutions to the problems
Solution to problem 1
Possible solution that Rick has for his bank loan problems is that he can