I will be recommending and justifying actions a business might take when experiencing cash flow
problems.
If a business has high expenses this affects cash flow because they will be spending a high amount of
money and if they have debts it will be difficult to pay especially if they are making low sales. Also the
money coming in from sales will be used to pay expenses and if it is too high the business will have less
money. An action a business can take is to reduce their expenses as this will help reduce the amount
they are paying and the business should reduce the cost carefully so they do not take out important
expenses such as reducing cost as that is important; the business should find lower cost options such as
finding new buildings to use where they will pay lower rent, cheaper supplier , use a cheaper advertising
company and budget well and compare budgets from previous years and see how that can help them
spend less.
When businesses allow customers to buy on credit, the customers can take long to make payment and
the businesses cannot afford to make this happen especially as they are not making enough sales or they
are in debt. To solve this, the business can allow only the customers who pay quickly to pay on credit as
this assures them that they will get quick payment, the business can also offer the customers that pay
quickly a 10% discount to use in store and this can influence customers to pay quickly as they will get a
discount of the products in store. Also the business can charge the business interest if they take long to
pay and this can motivate quick payment and improve the cash flow problem of slow paying customers.
Also giving the customers a longer time to pay can make them forget so the business can shorten the
day or remind them through email or phone call.
Too much stock cost a high amount of money and it holds the businesses money and wastes their
money if the products are not being sold. Also in general products can take long to sell maybe because
they’re not in demand or popular in that season or its cheaper at a competitor. Actions the business can
take is to buy the stock that is in demand and they know will sell and the products that will sell that is
popular in that season so it is not sitting on shelves and not selling. The business could also buy an
amount of stock they know will sell and when the stock is close to finishing they should make a new
order. Also it is good to monitor the inventory and make sure that popular products are always in stock
so customers do not go elsewhere and take note of the least popular products and when stock is being
bought next time; the least popular products should be bought less.
Debt is another cash flow problem as it causes the business to have less money and puts less trust in the
investor and supplier because the investor will not want to invest in a business that cannot pay their
debts and the supplier will not want to sell stock to a business that takes a long to make payment.An
action a business can take is to only have expenses that they can afford to pay such as taking out less
loans and buying less stock as this will save their money and sometimes a business has more than one
store they can not afford and they should sell this store as it will save them money and avoid debt.Also
when businesses allow customers to buy on credit sometimes the customers will not make payment at
all and what the business can do is only allow customers who have a good credit rate and payment
record to buy on credit with them.
problems.
If a business has high expenses this affects cash flow because they will be spending a high amount of
money and if they have debts it will be difficult to pay especially if they are making low sales. Also the
money coming in from sales will be used to pay expenses and if it is too high the business will have less
money. An action a business can take is to reduce their expenses as this will help reduce the amount
they are paying and the business should reduce the cost carefully so they do not take out important
expenses such as reducing cost as that is important; the business should find lower cost options such as
finding new buildings to use where they will pay lower rent, cheaper supplier , use a cheaper advertising
company and budget well and compare budgets from previous years and see how that can help them
spend less.
When businesses allow customers to buy on credit, the customers can take long to make payment and
the businesses cannot afford to make this happen especially as they are not making enough sales or they
are in debt. To solve this, the business can allow only the customers who pay quickly to pay on credit as
this assures them that they will get quick payment, the business can also offer the customers that pay
quickly a 10% discount to use in store and this can influence customers to pay quickly as they will get a
discount of the products in store. Also the business can charge the business interest if they take long to
pay and this can motivate quick payment and improve the cash flow problem of slow paying customers.
Also giving the customers a longer time to pay can make them forget so the business can shorten the
day or remind them through email or phone call.
Too much stock cost a high amount of money and it holds the businesses money and wastes their
money if the products are not being sold. Also in general products can take long to sell maybe because
they’re not in demand or popular in that season or its cheaper at a competitor. Actions the business can
take is to buy the stock that is in demand and they know will sell and the products that will sell that is
popular in that season so it is not sitting on shelves and not selling. The business could also buy an
amount of stock they know will sell and when the stock is close to finishing they should make a new
order. Also it is good to monitor the inventory and make sure that popular products are always in stock
so customers do not go elsewhere and take note of the least popular products and when stock is being
bought next time; the least popular products should be bought less.
Debt is another cash flow problem as it causes the business to have less money and puts less trust in the
investor and supplier because the investor will not want to invest in a business that cannot pay their
debts and the supplier will not want to sell stock to a business that takes a long to make payment.An
action a business can take is to only have expenses that they can afford to pay such as taking out less
loans and buying less stock as this will save their money and sometimes a business has more than one
store they can not afford and they should sell this store as it will save them money and avoid debt.Also
when businesses allow customers to buy on credit sometimes the customers will not make payment at
all and what the business can do is only allow customers who have a good credit rate and payment
record to buy on credit with them.
