To: Imran Khan
From: Harry Fraser
Date: 16/11/2015
Subject: Analysis of cash flow
This memo will analyse your cash flow forecast for your first 12 months of operation.
The total receipts for the year is £194,000 and the total payments are £209,646.
Therefor the net cashflow for the year is a deficit of £15,646 because your total
payments are higher than your total receipts.
From January to february you closing bank balance is a surplus because of your
capital investment, government grant and loan from your grandparents. c
However from march to December the closing bank balance is a deficit because the
investment money has run out. By December the business has made a loss of
£15,646.
In order to not run out of money for the first 12 months you will need an overdraft of
£15,647. This is because the opening bank balance falls to £15647 in october.
A business can experience cash flow problems like this for many different reasons,
they are all to do with the expenses being higher than the receipts. To overcome
these problems you need to reduce the outflows of the business.
Due to your capital investment being higher than your deficit it's likely that the bank
will give you a loan that can help cover the loss.
To do this you could spend less on clothes, for example not going up to £10,000 in
the last months but increasing only half way through the year to £6,000. Another way
is to find a cheaper second hand vehicle, and find a cheaper office to rent. The last
way is to reduce the salaries.
Months March to June, September and December are where the net cash flow is a
deficit. This is mainly due to VAT expenses, as there is no way around this you will
have to look else where for Ways of lowering your total payments
other reasons for the liquidity problems could be that the salaries are too high and
that the cost of cloths on credit slowly increase throughout the year.
Even though it is unlikely to be achievable the business will need a loan of at least
£107,796 or an overdraft of £33,053 in certain months.
Regards Harry Fraser
From: Harry Fraser
Date: 16/11/2015
Subject: Analysis of cash flow
This memo will analyse your cash flow forecast for your first 12 months of operation.
The total receipts for the year is £194,000 and the total payments are £209,646.
Therefor the net cashflow for the year is a deficit of £15,646 because your total
payments are higher than your total receipts.
From January to february you closing bank balance is a surplus because of your
capital investment, government grant and loan from your grandparents. c
However from march to December the closing bank balance is a deficit because the
investment money has run out. By December the business has made a loss of
£15,646.
In order to not run out of money for the first 12 months you will need an overdraft of
£15,647. This is because the opening bank balance falls to £15647 in october.
A business can experience cash flow problems like this for many different reasons,
they are all to do with the expenses being higher than the receipts. To overcome
these problems you need to reduce the outflows of the business.
Due to your capital investment being higher than your deficit it's likely that the bank
will give you a loan that can help cover the loss.
To do this you could spend less on clothes, for example not going up to £10,000 in
the last months but increasing only half way through the year to £6,000. Another way
is to find a cheaper second hand vehicle, and find a cheaper office to rent. The last
way is to reduce the salaries.
Months March to June, September and December are where the net cash flow is a
deficit. This is mainly due to VAT expenses, as there is no way around this you will
have to look else where for Ways of lowering your total payments
other reasons for the liquidity problems could be that the salaries are too high and
that the cost of cloths on credit slowly increase throughout the year.
Even though it is unlikely to be achievable the business will need a loan of at least
£107,796 or an overdraft of £33,053 in certain months.
Regards Harry Fraser
