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The opening balance Essay

In this cash forecast I will analyse where the Steve’s business can improve on whether they are making a profit or not. Also I need to identify where they have regular inflow and outflows and irregular inflow and outflows. I will also comment on how the fresh business can maintain more regular numbers.

January and February

In January the sales is £17,000 it increases by £2,000 to £19,000.the total income in January was £32,000 it decreases by £13,000 to £19,000 because the loan was one off income. It an irregular cash inflow which only happened in January. These profit can be use to expand or give the staff bigger salaries for there hard work. A regular cash inflow is good for business you know how much money going in to business. This makes it easily to predict future sales. Fresh business had total of £174,000 for there sales revenue.

In January and February raw material has regular cash outflows going out of the business. For gas, electric and water bills fresh business has to pay the £700 each month. This regular cash outflow is very good for the business. The business can identify how much money is going out business. This is the same with salaries which £4,000, lease for premises was £1,500 and advertising that was. However in January there was no lease payment this mean the total expenditure is 17,000 this increases in February to £18,200.

The monthly net cash flow in January is £15,000 and in February is £800. It has decrease by £14,200. I think the business should decrease the salaries to £3000 because the monthly cash flow tells you that they are making a loss. The closing balance is £25,000 and in February is £25,800. The closing balance has increases by £800 this because their no loan taken out.

March and April

The opening balance for the start of March is £25,800 and for April it was £25,600. Is has decrease by £200. This is because loan was cash inflow and the sales revenue has decreases by £3000. The sale revenue is £18,000 in March and in April it was £15,000.this is because there were lower demands for product meaning less people brought them. Loan is irregular payment so no money from loan came into the business both months.

In March and April raw material has regular cash outflows going out of the business £10,000 each month. For gas, electric and water bills fresh business has to pay the £700 each month. This regular cash outflow is very good for the business. The business can identify how much money is going out business. This is the same with salaries which £4,000, lease for premises was £1,500 and advertising was £200. However in March there was lease payment this mean the total expenditure is £18,200 this is the same with April £18,200.

The new cooking equipment, delivery van and fuel for van are an irregular cash outflow at nothing in both March and April and the bills are a regular cash outflow at £700 for both months. The total expenditure for both months is £18,200 because there are an equal amount of payments. By reducing salaries and increasing advertisement the business will earn more money, Steve will then not make a loss at the closing balance.

The monthly net cash flow in both months is negative at -£200 and -£3,200. This will have a bad impact on the business. The closing balance is £25,000 and £22,400 for each of the months a decrease of £3,200. This has had a bad impact the business on Steve’s business as he is making less money and will eventually lead to bankrupt if he carry on like this.

May and June

The opening balance for May is at £22,400 and for June at £14,500. Steve has made a decrease of £7,900 this is because of the sales revenue as the demand kept on going up and down for the previous months. The sales revenue for May is at £11,000 because of a high demand Steve’s however this decreases to £8,000 in June because of a lower demand for Steve’s product even though Steve has bought the same amount of raw materials. There is no loan and the total income for both months is at £11,000 and £8,000 a decrease of £3,000.

The expenditure stays the same however, the delivery van and the fuel for the van both being an irregular cash outflow starts to kick in at £8,000 only in May and £200 for both months. The total expenditure for May is at £18,900 and this is because of the cost for the delivery van. Irregular expenditure is bad for the company because you don’t know when it going to happen or how much going to cost. It had effect the business badly because it had a monthly cash flow. However, Steve has made a dramatic improvement between this month and all the others as the total expenditure totals up to £10,900 for June it was better than may total expenditure £18,200 the reason why there is a decrease is the delivery van was an irregular outflow.

The monthly net cash flow is at -£7,900 for May and -£2,900 for June this is a decrease of -£5,000 and this is decreasing hopefully meaning it will time we will see more positive monthly cash outflows.

The closing balance for May is at £14,500 and for June at £11,600 a decrease of £2,900. This is having a bad impact on the business because of the monthly net cash flow and total expenditure are both negative means Steve’s business is not making profit only loss. It could be costly in the long run. I think Steve should lower his salary to £3000 since they are not having positive monthly net cash and total expenditure.

July and August

The opening balance for July starts off with £11,600 however the opening balance for August is £6,700 a decrease of £4,900. This is because of the sales revenue for the previous month. The sales revenue for July is £6,000 however; this increases to £8,000 the next month an extra £2,000 profit. Although they had the same amount of raw materials price they sold more. No loan has been taken out for any of the months. The reason why there increase in Steve sales revenue, is that the demands for Steve product have increase.

The total expenditure for July and August is the same at £10,900. This is having a good impact on the business as this will result in a regular cash flow which will then allow Steve to easily predict future cash flows and make plans to help advance his business.

The monthly net cash flow for July is at a negative at -£4,900 however; this is getting better and the money should eventually go to a positive as in August the price lowers to -£2,900 and increase of £2,000. This must be because of the sales in the months before and the sales revenue in these months. The closing balance is at £6,700 for July a decrease from the previous months and this gets worse at it progresses to the next month and the closing balance goes to £3,800. This reason for this decrease is the sales revenue prevised month.

September and October

The opening balance starts off with £3,800. This is having a bad impact on the business as Steve will not be able to pay the bills or pay for stock and he will then eventually go bank-corrupt. In October there is a slight improvement as the opening balance is £3,900. The sales revenue starts to recover as for September it is £11,000 a huge improvement from the previous months. For October there is a higher increase £18,000. This is having a good impact on the business.

The raw materials increases from £2,500 to £12,500 from October to December to all of this change the prices of raw material increase significantly to £12,500. The reason for why the prices of raw material have gone up is the demands for the product has gone up. Therefore Steve has to buy more raw materials for his customers. Regular cash outflow is good for the business because there always has to be money going out of your business. This makes it easier for the business to prepare them for the money going out of the business.

The Monthly net cash flow starts off with a positive for September at £100 this is a huge improvement from the previous months. The monthly net cash flow goes to -£2,900 a huge drop in October from previous months. This is because of the raw material costs have increased.

September’s closing balance stays at a positive £3,900 and increase of £100 from the previous months. On the other hand, for October although it stays at a positive the closing balance drops to £1,000 and this is because of the raw materials costs.

November and December

The opening balance starts to drop from the previous month to now at £1,000 in November. This is because of the raw material costs from the previous months. This drops even more in December to -£18,900. This is having a very bad impact on the business as they are not starting off with a positive amount. This will not allow them to operate. This is the only month that has had a negative opening balance and will affect the business.

The sales revenue for November is at £21,000 which is a strong amount and has had an improvement from the previous months. This sales revenue has a bigger improvement and goes to £22,000 in December. This is having a good impact on the business. The raw materials cost stays at £12,500 which will have a bad impact on the business if the total price of expenditure doesn’t go higher than the previous month.

New cooking equipment is one of fresh business irregular expenditure. On November £20,000 went out of business. This is really bad for the business. Irregular expenditure is bad for the company because you don’t know when it going to happen or how much going to cost. Although this decreases to £20,900 in the next month this will still have a bad impact on the business and may cause them to go bank-corrupt.

The monthly net cash flow for November is at -£19,900 and this is having a bad impact on the business. For the last month the monthly net cash flow goes to a positive £1,100. However, this still won’t help the business. The closing balance for November is at -£18,900 a huge decrease from the positive previous month and the closing balance for the last month is at -£17,800 a decrease from the previous month but will not help the business.

Finally, the total opening balance for this year is at £131,400. This figure has been affected by the negative amount at the last month. The total monthly net cash flow for the whole year is at -£27,800 this is because of the over expenditure and has affected the business earning them a smaller and even negative closing balance. The total closing balance for the year is at £103,600 and this has been affected by the negatives.

Key words

Total expenditure: All of cost added up. The total amount of money that is spent on a product in a given time period

Monthly net cash flow:
Equals cash receipts minus cash payments. In simple English it tells you if you’re making a profit or loss.

Total income: All of your income added up (income is money you get from your goods and service)

Cash outflows: The total money going out from a company in a given period of time. Cash outflows include expenses such as salaries, supplies, and maintenance, and lease

Cash inflows: The total money going in to a business or company for sales of goods and services. Cash outflows include income such as sales revenue, loan etc.


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