Cash Flow Problems
Cash Flow Problems
In this task I will be analyzing the cash flow problems a business might experience by giving examples and describing how and why they cause cash flow problems in a business.
The cash flow problems a business may experience can be:
- CUSTOMERS TAKE TOO LONG TO PAY
This is when a customer purchases an item without paying which leads the customer into a debt as it owes the company money. They then take too long to pay back the money which means that the company has sold a product and still haven’t received the payment for it which leads to a cash flow problem as their income reduced and expenditure increases. This is a cash flow problem because businesses go into loss as their inflow reduces and outflow increases. an example of this is when a business that does credit terms such as "Yes Car Credit" and "Banks" as they use credit cards. This allows people to purchase products without paying for them straight away.
- SALES ARE SEASONAL
This is when businesses decide to sell seasonal products such as sunglasses. These products are mostly purchased during a certain time of year as they are seasonal. For example if a business just sold winter wear such as coats, most of their sales would be during winter and autumn time however during the summer and spring season which can lead to a cash flow problem as their stock will not be getting sold which means that their sales will be decreasing. This causes a cash flow problem as their stock will not have enough sales all year round as there won’t be demand for their products during certain times of the year. This will result to businesses not being able to sell all their products all year round which will mean that they will go to waste which will mean that the businesses expenditure will be increasing where as in contrast their income will be decreasing which is the main cause of a cash flow problem. However they can overcome a business can overcome this problem by reducing the price of their
In this task I will be analyzing the cash flow problems a business might experience by giving examples and describing how and why they cause cash flow problems in a business.
The cash flow problems a business may experience can be:
- CUSTOMERS TAKE TOO LONG TO PAY
This is when a customer purchases an item without paying which leads the customer into a debt as it owes the company money. They then take too long to pay back the money which means that the company has sold a product and still haven’t received the payment for it which leads to a cash flow problem as their income reduced and expenditure increases. This is a cash flow problem because businesses go into loss as their inflow reduces and outflow increases. an example of this is when a business that does credit terms such as "Yes Car Credit" and "Banks" as they use credit cards. This allows people to purchase products without paying for them straight away.
- SALES ARE SEASONAL
This is when businesses decide to sell seasonal products such as sunglasses. These products are mostly purchased during a certain time of year as they are seasonal. For example if a business just sold winter wear such as coats, most of their sales would be during winter and autumn time however during the summer and spring season which can lead to a cash flow problem as their stock will not be getting sold which means that their sales will be decreasing. This causes a cash flow problem as their stock will not have enough sales all year round as there won’t be demand for their products during certain times of the year. This will result to businesses not being able to sell all their products all year round which will mean that they will go to waste which will mean that the businesses expenditure will be increasing where as in contrast their income will be decreasing which is the main cause of a cash flow problem. However they can overcome a business can overcome this problem by reducing the price of their