In this task I justify the action business might take when they are experiencing cash
flow forecast problems.
One cash flow problem a business might experiences is if the business cash flow
forecast is constantly negative resulting in business using its cash balance, which
results in the business having serious problems. One of the cause of this could be
business making small amount of profit or even worse making a loss. This could lead
to business having cash flow problems. This could result business to eventually to
run out of cash.
Another cash flow problem a business could face is when a business makes an over
investment in capacity. This happens when a business decide to overspend on
production capacity meaning business spending their expenditure on factory
equipment that the business is either not being used or won’t help the business
generate a lot of revenue. Result it being a waste of cash from the business. The
solution the business could uses is to sell the equipment and factory equipment that
the business don’t uses and generate some revenue out of that
Another cash flow problems a business may face is if they have too much stock that
ties up cash ,resulting in an increased risk of stock becoming obsolete meaning the
business are unable to sell their extra stock.
Another problem a business experiencing with a cash flow forecast is that customers
who buy on credit that also give late payments which is a common problem and
customers who are slow paying customers put a he strain on the business cash flow
forecast. It could be lots worse for the business as the debts could go bad meaning
it’s not paid back at all by the customers.
On the off chance that business customers do not pay until 60 days after business
gave and the services, business has a negative cash flow for those customers for 60
days. Cash that is coming in from must be higher the cash flowing out to
expenditure. One action a business take is to make contracts and proposals so
customers must prepay or provide a deposit for the goods and services they buy
from the business. Another solution is for the business to make politely demand from
their customers for them to make payments in 10 days and for the business to
encourage their workers to call or email customers with reminders.
To reduce the likelihood of bad debts, business needs to conduct credit checks on
their customers before offering them credit to buy with. If business discovers a
customer with a poor credit record, and business want to take them on as a
customer, the business can ask them for a deposit up front or issue partial invoices
they can pay as portions of the work are completed.
The best solution in this situation would be for the business to renegotiate terms with
their customers. However, sometimes this isn’t immediately possible as there are
some measures that business needs to set in motion:
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flow forecast problems.
One cash flow problem a business might experiences is if the business cash flow
forecast is constantly negative resulting in business using its cash balance, which
results in the business having serious problems. One of the cause of this could be
business making small amount of profit or even worse making a loss. This could lead
to business having cash flow problems. This could result business to eventually to
run out of cash.
Another cash flow problem a business could face is when a business makes an over
investment in capacity. This happens when a business decide to overspend on
production capacity meaning business spending their expenditure on factory
equipment that the business is either not being used or won’t help the business
generate a lot of revenue. Result it being a waste of cash from the business. The
solution the business could uses is to sell the equipment and factory equipment that
the business don’t uses and generate some revenue out of that
Another cash flow problems a business may face is if they have too much stock that
ties up cash ,resulting in an increased risk of stock becoming obsolete meaning the
business are unable to sell their extra stock.
Another problem a business experiencing with a cash flow forecast is that customers
who buy on credit that also give late payments which is a common problem and
customers who are slow paying customers put a he strain on the business cash flow
forecast. It could be lots worse for the business as the debts could go bad meaning
it’s not paid back at all by the customers.
On the off chance that business customers do not pay until 60 days after business
gave and the services, business has a negative cash flow for those customers for 60
days. Cash that is coming in from must be higher the cash flowing out to
expenditure. One action a business take is to make contracts and proposals so
customers must prepay or provide a deposit for the goods and services they buy
from the business. Another solution is for the business to make politely demand from
their customers for them to make payments in 10 days and for the business to
encourage their workers to call or email customers with reminders.
To reduce the likelihood of bad debts, business needs to conduct credit checks on
their customers before offering them credit to buy with. If business discovers a
customer with a poor credit record, and business want to take them on as a
customer, the business can ask them for a deposit up front or issue partial invoices
they can pay as portions of the work are completed.
The best solution in this situation would be for the business to renegotiate terms with
their customers. However, sometimes this isn’t immediately possible as there are
some measures that business needs to set in motion:
1|Page
