Analyse the cash flow problems a business might experience Essay

In this assignment I provide be analysing that a personal line of credit might experience if their gross gross gross revenue gauges turn step up to be dispiriteder than the ones that they extradite expected or predicted. 1.1 problems of cash f low-toned prefigureProblem 1Cash rate of flow estimates are something re all(prenominal)y central for a work line organisation 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 e rattlingplace the year. It kindle also tell you what the business revenue is going to be and what the business performance for the following year is. Problem 2From what I can see on Rickys cash flow is that he is relying on that one loan which is his capital that he begins with too and that is 17,500 from the premiere month which is January. Bank loans are great for fiting a business but that does non repute that they can non let you cut d ca use in this case a bank loan can expose Rick be character if the bank loan go a substances delayed or no seven-day available then this is a big problem for Rick because he can non do anything best de mingyor to explain this would be he would not be able to pay for the hand truck which is 20,000 and not just the truck that would not be paid for but the sales cost would not be c everyplaceed. His positive payments only for the beginning of year which is the month January his total payments are 22,475 with this symbol of problems or should I say impacts that can return there is no way that his business would survive.Problem 3 some other critical problem that can occur from that cash flow is if the sales figure is lower than the actual sales figure. For example the sales figure that has been predicted by Ricky is 60,000 but lets say that he really gets 40,000 as his total figure for his sales. This is a major problem patently because what he as predicted to get for his sales has not been met and 40,000 worth of sales would not be enough to keep his business running regularly. be for everything would not be covered just because of this problem which once more is very crucial for the business and of course losswould occur there is no way that Rick would get through any profit due to this problem. 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 contiguous month in order for his business to be still up and working.Problem 4Looking at Ricks cash flow forecast I can see that there can be another(prenominal) problem that can occur and this problem is to do with his expenses and that is if his expenses turn pop to be lower to what the actual expenses appear to be this can cause him not only a problem but a disappointme nt to his business because his expenses are 71,750 and lets say for example they in truth come out to be 81,950 this is where the big problem will occur because his expenses are higher(prenominal) 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 equilibrise would be different for the next month by all message this would affect the profit and balance within the business. 1.2 barrackations and outcomes to the problems resoluteness to problem 1Possible resultant role that Rick has for his bank loan problems is that he can either make sure to use his own savings that he has rescue through out the years and thats if he has saved any money in his savings account but plausibly the best and I would say nearly common way to get the money you need is if you ask fri barricades to get you a loan or someone from the family to lend you money. He could also decide to get a small over draft which would keep his business running. yet again lest not forget an overdraft has its disadvantage and that is when it come to paying back that over draft the interest rate would be high so he would have to think of a way to pay that off and it would not be an easy task for Ricky. Of course Ricky has the option of selling his own assets but that is just an option that could be left for last. In customary I would recommend for Ricky to get a loan from his family or friends because in my opinion that is the best workable decision and the best possible way from him to get his business up and running.Solution to problem 2For the routine problem there is a solution but this would have to be done correctly by Ricky and the solution is advertisement IF any type of business is looking to increase their sales the best way possible is to make sure to advertise their services a lot and cogitate being is to make sure that they let their custom ers jockey what they have to offer. Yet again we have to look at this from Rickys perspective what I would recommend for him to do is whenever he decides to advertise the best thing to do is to make sure he keeps his prices low because first of all this would touch him an opportunity to show people what his business has to offer and second of all he would not have to pay a great fall of money to get his services advertised.Solution to problem 3 other solution to his second problem would be if Ricky uses appropriate pricing such(prenominal) as low prices on the services he has to offer. That due to the point that he is just starting his business it is not very cognise to people that are regular customers to other businesses and low pricing is the only way that he would gain customers. In addition this relates to his advertisement solution because if he advertises that his services are on low prices people would have more interest into going to see what Rickys business has to off er. I would also recommend for him to put his prices up only if his business is bring home the bacon with the sales then he would be able to increase sales even more by doing this.Solution to problem 4Solution to Rickys final problem would be for him to make sure that he monitors his expenses and by doing that he would be able to control them. What I would recommend for Ricky to do is to keep work outs this would help him to keep the costs in those glacial budgets by doing this Ricky would not overspend and he would keep the very most important thing in the cash flow chart low and that is his payments figure. The way that he can stay within his fixed budget is by doing this. For example his budget is 80 000 and as we know his forecasted total expenses are 71 750 he would be left out with 8250 which he can use for next year to either to expand the business or toimprove on some things that the business needs and he can make the budget lower for next year.Another solution to his fin al problem is to find new suppliers or the best way is to make sure he buys his tools that he needs at a lower price. This would help him and his business so much it will actually make his business run fluently at the begging because that is what he wants so by him keeping the tool price low and this would mean that his costs are low too then at the end he is left with his expenses which will be low too and this could mean that they can match the figure that he has predicted on his cash flow forecast.1.3 ConclusionIn conclusion I have learnt that whenever you want to start a new business you would not only have to make a cash flow forecast but you would most contumaciously have to predict the problems that might occur and how would you as a business man stand up to these problems and solve them and you would also have to know how to make sure these problems never occur in order for your business to be running smoothly.