In this assignment I will analyse Alan Hull’s business cash flow problems,
recommend solutions and justify actions for its cash flow forecast.
As we can see in Alan’s business cash flow forecast, his balance from March
onwards it is a negative balance, meaning that they are spending more money
than they receive. The business is losing money and also doesn’t make any
profit.
I think that Alan needs to take into consideration to make some changes in its
own business otherwise he will be in loss.
He can start to think about reducing the wages bill, which is very high (approx.
£8000/month) by employing mostly part-time staff or individuals for zero hour
contracts, meaning that employees do not have fixed working hours and the
employer ask them to work when the company needs them. This will reduce
its wages bill with approximately £600 on a month which will help him to make
the balance positive again. The wages bill will be now from January to May
£7000, and from May onwards £7400.
The cost of the vehicle is also too high for just a month (£9000) when the
Company bought it. They struggle with paying the entire amount in just a
month. A solution for him it would be to rent it so he can pay the money for it
over several months. This will change its cash flow forecast regarding the
closing balance each month. This means that they will pay from January to
September £1000 for vehicle.
Alan decides to take for himself £1700 each month as drawings which is quite
a lot. I suggest for him to take with £700 less, so he can obtain a positive
closing balance. This means that he will take £1000 each month.
Because it is only a small business Alan doesn’t need to spend so much money
on advertising (£175 from January to August, £300 from September and
October, and £450 in November and December). I suggest for him to use
leaflets or online advertising, which would be cheaper, so he can save up to
£50 on a month.
Also, I think that Alan spends a lot of money on purchases. I suggest him to
look for more suppliers and compare their prices so he can save some money.
Also, he can ask for discounts when he buys more products at once. In this
way, Alan could save up to £30 on a month. This will have a positive effect on
his closing balance, and also the VAT TAX will change as well.
recommend solutions and justify actions for its cash flow forecast.
As we can see in Alan’s business cash flow forecast, his balance from March
onwards it is a negative balance, meaning that they are spending more money
than they receive. The business is losing money and also doesn’t make any
profit.
I think that Alan needs to take into consideration to make some changes in its
own business otherwise he will be in loss.
He can start to think about reducing the wages bill, which is very high (approx.
£8000/month) by employing mostly part-time staff or individuals for zero hour
contracts, meaning that employees do not have fixed working hours and the
employer ask them to work when the company needs them. This will reduce
its wages bill with approximately £600 on a month which will help him to make
the balance positive again. The wages bill will be now from January to May
£7000, and from May onwards £7400.
The cost of the vehicle is also too high for just a month (£9000) when the
Company bought it. They struggle with paying the entire amount in just a
month. A solution for him it would be to rent it so he can pay the money for it
over several months. This will change its cash flow forecast regarding the
closing balance each month. This means that they will pay from January to
September £1000 for vehicle.
Alan decides to take for himself £1700 each month as drawings which is quite
a lot. I suggest for him to take with £700 less, so he can obtain a positive
closing balance. This means that he will take £1000 each month.
Because it is only a small business Alan doesn’t need to spend so much money
on advertising (£175 from January to August, £300 from September and
October, and £450 in November and December). I suggest for him to use
leaflets or online advertising, which would be cheaper, so he can save up to
£50 on a month.
Also, I think that Alan spends a lot of money on purchases. I suggest him to
look for more suppliers and compare their prices so he can save some money.
Also, he can ask for discounts when he buys more products at once. In this
way, Alan could save up to £30 on a month. This will have a positive effect on
his closing balance, and also the VAT TAX will change as well.
