Stan was at his banker’s trying to get a short term loan. “I need about $10,000

Question

Stan was at his banker’s trying to get a short term loan. “I need about $10,000 for three months, just until I get things straightened out. This is my situation: I got this nice order last February from Baker Company. Their bill was due last month, but so far I haven’t seen anything. Now I have another big order, this time from Gisher Construction and I need to order raw materials, but I can’t since Baker hasn’t paid. Even when they do pay, it’s only about 75% of what I’ll need to order to do the Gisher contract. And then, we’re headed into our slow months; no one much does anything through the winter. And with the hurricane down in Florida, people are thinking twice before placing their orders.”

Stan was experiencing a number of cash flow problems that small businesses (and often larger businesses) face. Can you identify five problems?

Explanation / Answer

Cash flow is just like the blood in living being, without proper and adequate cash flow a business will not able to run.Here cash flow problems facing by Stan are

-Uncertainity in business due to negative external environment because of hurricane down in Florida such uncertainity in his business is bound to occur.

-Poor collection method of this organization because Baker company is not paying the due amount in time.

-The business has not received any advance from Gisher Construction which placed a big order.Due to this it will be difficult for the organization to procure raw material.

-Shortage of funds in this organization which is making its unability to procure the required raw material for processing the orders.

-Slow demand of the product in the coming month so due to this revenue will increase in the coming months.

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