M1 Unit 5 Business Report

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Business Accounting SIGNature overall cash flow forecast was positive, which was really good. This is because SIGNature, cash inflows during a period of time are higher than the cash outflows during the same period. This doesn’t necessarily mean profit for the business, but it is mainly due to a careful management of cash inflows and expenditure. Overall SIGNature looks like a viable business with a positive cash flow, however they may face a few cash flow problems. A cash flow problem is when there is an insufficient amount of money to meet the end of month/year bills. A potential problem maybe overdraft, this is when more money is taken out of a bank account than is in it, when this happens it becomes overdrawn. The business owners, Sharma and Ryan need to think of the problems that they may face, using the cash flow forecast we are able to see that they have a stable net cash flow all throughout the year although they have not thought about the problems that they may face, by buying the capital equipment in full (£105,000) it shows that they have not thought much into there options, they could of spread the costs of the capital across 12 months so that that the monthly costs will be £8750.00, by doing this it will prepare the business for future problems if…show more content…
For instants if they were to cut back on advertisement just for that month, as it is £660.00 you would be able to see positive effects on the cash flow. So if Sharma and Ryan pay £160.00 for advertisement that month their -£376.00 net cash flow would turn positive to £124.00. Making advertisement cut backs would not be a problem to make in December, as it is a seasonal month and not there busiest month. (Changes made, source 1 in

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