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BTEC Unit 5 Business Accounting D1 (Distinction)
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BTEC Unit 5 Business Accounting D1 (Distinction)
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D1:Justify actions a business might take when experiencing cash flow
problems.
For this assignment I am going to justify actions a business might take
when experiencing cash flow experience. In assignment M1 I
mentioned problems what problems can occur when the cash flow is
managed poor. Now I am going to tell the solutions a business can
use to solve the problems.
A business could cut out overheads such as capital expenditure to
solve a cash flow problem. This includes different equipment`s used
by the business like; vehicles and machinery. A business can also
divide capital expenditure equally for the twelve months’ otherwise
they will have to pay too much money in one month compared to
another month. The business could also face problems in months like
October, November and December they will have high profits if they
must pay too much capital expenditure they will not have much
profit left over. The company can also hire purchases this means the
business can use the equipment but pay it back in small sums
monthly. Eventually it will cost more money, but it will save the initial
costs of the business at that money, so the business can invest that
money somewhere else. If the above actions are considered by a
company there will be no negative cash flow.
In month`s where a business doesn`t have enough sales for example
July and August, the business could consider a decrease in purchases
by doing this the business will improve the negative closing balance
from the previous moth into a positive balance. If a company spends
too much money on stock in month`s where the sales are low the
business can not reclaim the purchases from their sales by saving
money from useless purchases the business would end up saving
money instead of wasting it and the saved money can be used later in
month`s the sales increase.
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