Cash Flow Problem (Creative Letter)
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Introduction
Date: 18/12/09 From: Richa To: Manuel, the owner of Gardener's Green Topic: Cash flow problem Your company (Gardener's Green) is clearly facing a cash flow problem because the cash flow of a business is the cash inflows and outflows over a period of time, and we produced a graph to see your forecasted sales revenue each month and it showed that your company does have a cash inflow but it's only for certain months: April, May and September but during the months: January, February and March your cash inflow is at its least. I think the reason for why your cash inflow is at its least during particular months (January, February and March) is because it is winter time and so your business may not be busy at this period of time. ...read more.
Middle
However, if you used that method it would be possible that you would lose your customers to competitors who offer a longer credit. If you do not want to reduce the credit given to customers and not take the risk of losing customers due to that, you could also factor debts that way immediate cash is made available and the risk of collecting the debt becomes the factor's. However, if you did choose the method of debt factoring you would have to keep in mind that you would not receive 100 per cent of the value of your debts, so it would be a good to use this method if you desperately need immediate cash for something. You could also lease out the land during the winter months (when you don't make cash inflow) ...read more.
Conclusion
However, it is hard to find new suppliers who know what exactly you are looking for. Also since, your work is only for a couple of months you should get seasonal workers instead that way you do not pay workers for the months when you do not need them, however your employees have been with you for the past four years and must have gotten very experienced so maybe finding seasonal and experienced workers would be a difficult job. According to me, I think the most beneficial solution to the cash flow problem would be to ask a longer credit from your suppliers as there would be no harm in doing so. Also another thing you should do is lease the land out in winter months as that is one of your main problem because you do not get much cash inflow during winter months and this solution could solve the problem of low cash inflow during winter months. ...read more.
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