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Future Fashions should consider making a change to the Cash Flow Forecast if they want to succeed and be running for a long time.

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Introduction

M1 ? Problems Effecting Business The business Future Fashions is likely to experience problems due to their payments exceeding the amount that is affordable looking at the receipts. Future Fashions should consider making a change to the Cash Flow Forecast if they want to succeed and be running for a long time. Future Fashions needs to realise that over 70% of businesses failing within their first year; cash flows are the main reason that businesses fail therefore it is vital for Future Fashions to ensure that they have an adequate cash flow. 1. Opening Balance - This is the balance that business starts of with and the initial investment that they make at the start of the business so they are able to operate and essentially make sure that the investment fulfils the requirements of the business. 2. Receipts (Inflow) ? This is the money that the business make through sales however it could be that one month they received the loan that they required. The higher the amount receipts the safer the business will be so they can have more money to bring to the next month or spend on things that they need. 3. Total Receipts (Inflows) ? This is the total amount of receipts that the company received in a month meaning it is the opening balance and the receipts added together to give a total receipt this would be the money in the business (Inflow) ...read more.

Middle

3. Over Financing - If Future Fashions borrow too much than is required there will be high interest payments therefore they will not be able to pay it back and eventually go bankrupt therefore they need they need to ensure that they only borrow the amount that they essentially need for equipment and too pay rent; they need to search for a low interest lawn due to them being a new business they cannot afford a high interest rate. 4. Over Trading ? Future Fashions should not take on more work than they can handle and that finances are available to them. They should not take on lot of work and work that they simply do not have the equipment to make for example a sign might be too big and may require a more advanced machine therefore if they accept too make it and are not able to deliver it would look bad on them and ruin their reputation. 5. Over Investment ?Future Fashions need to ensure that they invest the bare essential they to operate they shouldn?t invests in assets that will not make them a sufficient amount of money and at least break even therefore they need to choose very carefully what king of equipment they need due to them being a new business they shouldn?t buy any equipment they do not need for the first year at least not that equipment that would make them go into overdraft. ...read more.

Conclusion

The owner of Future Fashions could find themselves in difficulties as they were not able to pay the suppliers, resulting in Future Fashions taking out a loan to keep the firm running. During the month of October Future Fashions had a negative opening balance. The total cash available to them was £11180.34 but they spent £12010.52 on outflows. During this month Future Fashions closing balance was -£830.18 even though the business had not bought any kind of equipment. The reason for this was because the business had a negative opening balance at the beginning of the month which meant that October was not a good month for the business. Future Fashions had an overdraft of £175.56 during this month which damaged the reputation of Future Fashions. During the month of November, Future Fashions opening balance was negative. Future Fashions balance was £12623.19 and the cash outflow was £12241.37 resulting in Future Fashions having a positive closing balance of £381.82. Future Fashions did not buy any equitment which meant they had a positive closing balance by for Novemeber. During the month of December, Future Fashions had a positive opening balance. The total cash available was £14373.33 and the total outflow was £12994.69. The business had spent £500 to pay for lighting and heating which left them with a closing balance of £1378.64, hence the business did not have any negetive balance by the end of the year. ...read more.

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