Neon In this task I am going to analysis the cash flow problems a business Introduction In this assignment I will explain how to analyses the cash flow problems of KEN such as the problems they might exocrine and making references to KEN’s cash flow forecast. Causes of cash flow problems Overriding: Overriding takes place when a business accepts work and tries to complete it, but finds that It requires greater resources to complete It. It is also when the production cycle Is too long.
KEN enterprise Is overriding as they have employed extra staff In June and December which means they are paying more money. The sales and purchases are fine but because of the extra staff they have to spend more money, they spent an extra в?3,000 in June and an extra в?3,000 in December. This is overriding as they are spending more money than needed. They could have worked out a better idea instead of employing more people. Poor credit policy: This is when a business may give out too much credit to their customers; they should make sure the collection process is efficient.
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KEN enterprise have made a deal with customers in which they want to receive their payments of sales 50% of sales in one onto In advance which means If the sale Is OHIO, the customer will have to pay EYE in one month before and they have to pay 25% In the same month of sale and the remaining two months later. Failure to have credit Insurance, especially when working with customers internationally, can cause the business to lose substantial cash flow if the customer is slow to pay or defaults.
Failure to leverage these financing solutions when your business is producing or manufacturing a product or service for a client, can cause the business to suffer a short term cash flow problem. Increasing costs: This is when a business has an increase in operating expenses without management control, this could cause cash issues. KEN have increasing costs as they have been donating money monthly of an amount of OHIO which means they are paying an annual amount of EYE,OHO.
The analysis of cash flow ensures that the business Is not Investing finances In the wrong avenues, and Investments already made are paying part time during the summer and also during winter Christmas times this cost KEN EH for both those months. Falling revenue levels: When a business revenues keep falling. This will result in the business dealing with liquidity problems. KEN enterprise is dealing with falling revenue levels as they ended up with losses.
The falling level has occurred because off the poor credit policy because they haven’t collected the cash back from the customers. They can improve this by sending dead line days to customers so KEN doesn’t experience poor credit. Unplanned Acquisition: This is when you spend a high amount of cash and it caused a problem in the cash flow. The business has not planned the acquisition as they could of worked out other payment options. KEN enterprise have spent EH,OHO on a acquisition of a new motor van in July.