Cash Flow Report

by Aryad94 (student)

Unit 5

Nasimsadat Moeindarbari

Dear Apu,

As you asked me, I prepared a 12 month cash flow forecast to enable you to manage your cash. As I did that, I find out that your cash flow forecasting is worrying and you should change some of your expenses. As you can see in the cash flow forecast that I prepared for you, the closing balance in June is -1820 which is not good at all. The closing balance in June shows that after 1 year with all your sales and expenses, you didn’t get any profit at all and also you loss 1820.

There are some problems in your cash flow forecast:

In some months, September, October, January, February, April and June, your outflows are greater than your inflows. It means you spend more than what you get so you get net cash flow which means you are making loss.
From August to Jan, the out flow is approximately increasing in these months which mean less cash is available in your business.
In February, April and June you have negative closing balance which means you need to use overdraft. (This means you are in debt to the bank.)
Another problem that I saw in your cash flow forecasting is ...

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In some months, September, October, January, February, April and June, your outflows are greater than your inflows. It means you spend more than what you get so you get net cash flow which means you are making loss.
From August to Jan, the out flow is approximately increasing in these months which mean less cash is available in your business.
In February, April and June you have negative closing balance which means you need to use overdraft. (This means you are in debt to the bank.)
Another problem that I saw in your cash flow forecasting is the quarterly payments. This causes a big one off bills which is hard to pay. That means every 3 months you have to pay a large amount of money for your expenses. So this could be hard for you to pay all by one payment.
The last thing is that your closing balance is getting worse. From December your closing balance is almost decreasing and at the end of the year, June, you have negative closing balance.

I think the causes of these problems are as follow:

I think you pay a lot of money for light and heat. Light and heat cost 900 a quarter which is 300 each month. In my opinion this is not fair and you should change and transfer into another company which be cheaper. Or you should change it to monthly payments which are easier for you to pay.
Also another way that you can decrease your costs is to employ part-time staff instead of full time because it will be cheaper. If you employ a person to work 8 hours a day at the end of the day gives him/her 40 pound (5 pound/hour) and at the end of the month he/she will get 1200 which is £300 less than the one you pay for your assistance that you already have.
The other one is that you pay a lot of money for the raw materials. I think it is better to change your supplier to a cheaper one which decreases your expenses.
You also can increase your price so you will get more money.

These were the problems and if it doesn’t get fixed then the business wouldn’t survive. Because each year you get negative closing balance which means you are in debt and after 2 or 3 years you have lots of debts to pay so you cannot afford to run your business anymore.

Kind Regards,

Nasim