Analyzing cash flow issues and solutions: Case Study

This case study examines the challenges of managing cash flow within a business context, focusing on issues such as excessive overhead expenses, competitive pricing, and the impact of rapid customer acquisition. The analysis highlights the importance of auditing expenses, adjusting pricing strategies to ensure adequate margins, and forecasting cash flow to anticipate potential deficits. The case emphasizes the need for careful consideration when taking on large orders and the potential benefits of securing financing options to bridge cash flow gaps. Moreover, the case underscores the value of professional accounting support and the importance of strategic planning in maintaining financial stability and operational efficiency. The solution suggests practical steps like cost-cutting, pricing adjustments, and financial forecasting to address these challenges and improve the company's financial health.

Cash flows
Case study 5
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Buying unwanted space and products leads to overhead expense which was not tied directly
towards selling any service or product. This leads to high overload expenses which in turn hurts
the cash flow of the business. Because of being highly persistent, the high overhead expenses are
very challenging. The solution is to audit all the expenses and cut back on wherever possible.
Robert needs to consider that over-cutting might lead to hurting the company and therefore he
needs to consider the cheaper options and he should audit his expenses regularly for ensuring
that every overhead expense stays in the line.
Sometimes he might sell his products and services at a comparative lower prices which leads to
low and even negative gross margins. This usually happens in the case of competitive
environment. Therefore, Robert needs to audit all the products and services for determining the
all-inclusive cost for delivering the products. He can then raise the price of the product and
services having weak margins and can even ensure that all the proposals must price their
products as per their cost.
Additionally, Robert must engage himself in cash flow forecast. This will help him in seeing the
time periods where he can expect a cash deficit and the periods where his company will expect a
surplus profit. This is one of the best ideas for tracking down the amount of cash being going in
the business and how much is expected for the survival.
Robert must not add too many customers quickly. This will lead to major cash flow problems in
case too many customers are added and can be hard for Robert. This will lead to elimination of
the operating deficit. He should use financing for covering up the cash flow gap until he finds
himself to be in a financially strong position. He can use a line of credit, factoring, business load
and even an asset-based loan (Lewellen, J., & Lewellen, K., 2014).
Additionally, he should be careful while taking a very large order as it might take too many
resources from the organization. In case of lack of resources, the organization might face critical
issues. Therefore Robert needs to be careful while taking up the order and can get term credit for
his vendors. He can also train his employee and staff to suggest the related service or a costly
option for the service, the customer has been requesting for.
Cash flows are high professional and complex and therefore require a professional accountant in
order to assist a proper functioning of the organization.

References
Lewellen, J., & Lewellen, K. (2014). Investment and cash flow: New evidence. Tuck School of
Business Working Paper, (2010-77).