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Introduction
SAJ Solutions focuses on the major cash flow issues within the business and provides an absolute Solution that perfectly fits to solve the issue. Here are some major reasons for the financial issues in the business:
Increased competition
Smaller pool of clients
Loss of major contract or client
Increased operating cost
Major changes in industry
Legal disputes with partners
Force majeure (Natural Disasters)
Various accidents
Departure of important staff members
Therefore, here are the issues described in detail:
Not Enough Cash Flow
Cash flow is calculated by subtracting total expenses from total income. If the resulting number is positive, the company is making a profit, and is considered to "be in the black."
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High overhead expenses
Overhead expenses are the costs of running a business that are not tied directly to selling a specific product or service. Examples of overhead include rent, telephone, utilities, etc. Sometimes overhead expenses get out of hand relative to the revenue the business produces. High overhead expenses can hurt your business’s cash flow.
High overhead expenses are particularly challenging because they are persistent. These expenses affect your cash flow every day until the problem is corrected.
Solution
The solution to this problem is simple, but it is not easy. Audit your expenses and cut back where you can. Be careful not to cut too much, as that approach could also hurt the company.
If you cannot cut back, consider cheaper options. In fact, every business should audit expenses regularly to ensure that overhead expenses stay in line.
2. Slow-paying invoices
Slow-paying invoices are a common cause for cash flow problems. As a small business, you have to offer 30-day to 60-day payment terms to clients. However, small companies can’t always afford to wait this long for payment. They need money sooner. Eventually, slow payments create a financial problem that can seriously affect your business even if it’s growing
Overhead based on direct labor includes the cost of the Product Development Support Center, interest expenses, and general and administrative expenses. The Product Development Support Center failed to account for hours spent on each product, which will not only complicate the product cost calculations, but also the calculation of capitalization expenses later on. The Development Support Center will be most used during the peak (i.e. most hours) time of development for each product, and hours worked will probably be the best way to divvy up the costs of the support center. The money invested in the company is being used on developing each product right now. I figured interest would best be divvied up by hours to attribute the interest expense to the product using the most of the investment. Similar to the reasons stated before general and administrative costs are going to be associated with the most prominent product, and that is best seen through hours. (Figure A)
Furthermore, the cash-flow demonstrates the monetary receipts and monetary expenses in a certain time period. The cash-flow budget greatly centers on viability, which relates to the organization’s generating enough cash to meet both short-term and long-term financial obligations to maintain their existence (Finkler et al., 2013). In essence, an organization generating more cash than using in their operations produces a more
The presentation of the material is in dollars only. Overhead is applied to products as a percent of direct labor dollar cost. Factory profit for each year is found by subtracting direct material, direct labor, and direct overhead costs from total sales. The overhead percentage is calculated at the same time budgeting and is applied as a single overhead pool throughout each model year. The consulting company used 435% of direct labor costs in 1987 for their study; the budgeted was actually 437% (OH/DL=107,954/24,682). A similar percentage applies in the following year (109890/25294=434.5%). However in the next two years, after the outsourcing of oil pans and mufflers was enacted, the allocation of overhead in...
* Encourage administrative simplification (in the form of digitalization of information) to help reduce costs.
An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx, 2009). The key to cost allocation under ABC is to identify the activities that are performed to provide a particular service and then aggregate the costs of the activities (Gapenski, 2012). This is a marked departure from the practice of sharing overheads costs equally or overheads becoming part of the overall profit-loss estimate instead of component product pricing (Nayab, 2011).
Discounted Cash Flow Method takes the forecast free cash flows during forecasted horizon. Then we estimate the cost of capital (weighted average cost of capital) and estimate continuing value (value after forecast horizon). The future value is discounted to the present value. We than add back cash ($13 Million) and non-current assets and deduct total debt. With the information provided several assumptions had to be made to obtain reasonable values (life period of 30-years, Capital expenditures not to exceed $1 million dollars, depreciation to stay constant at $1.15 Million and a discounted rate of 10%). Based on our analysis, the company has a stand-alone value of $51 Million at the end of fiscal year end 1990 with a net present value of cash flows of $33 million that does not include the cash and non-current assets a cash of and non-current assets.
As Human Resource Manager for our organization, it is imperative that you understand the current discussions surrounding the company’s budget issues. There are several terms used to describe cost. Hopefully this memo will provide you a better understanding of the terms used when discussing our budget. The terms of importance include, but are not limited to: fixed, variable, direct, indirect, sunk, marginal and total cost.
Variable costs: “Variable costs are costs that vary with the volume of activity”2 and they are: direct labor, Materials, Material spoilage & direct department expenses.
Organizational changes that reduce cost. The M&S reduced its management levels to reduce the cost.
Treating overhead costs as "fixed" can cause an unfair and highly misleading distribution of overhead costs which are in fact variable.
The statement of cash flows reports a firm’s major cash inflows and outflows for a period. This statement provides useful information about a company’s ability to generate cash from operations, maintain and expand its operating capacity, meeting its financial obligations, and pay dividends. There are three types of activities to look at in this statement, which are cash flows from operating activities, investing activities, and financial activities (3, 2005).
Every company has some kind of Revenue and they all have costs that are associated with running the company. It is also true that if a company wants to increase their Revenue, their costs will increase too. It is every company’s goal to maximize revenue and either through Production or Services, and minimize cost. These things are easy to figure out, but actually identifying the production and figuring out how it will increase or decrease with change is very difficult.
Therefore, the amount of profit obtained is somewhat arbitrary. However, cash flow is an objective measure of cash and it is not subjected to a personal criterion. Net cash flow is the difference between cash inflows and cash outflows; that is, the cash received into the business and cash paid out of the business (Fernández, 2006). Whereas, net profit is the figure obtained after expenses or cost of resources used by the business is deducted from revenues generated from the business operations activities. Nonetheless, the figure for revenue and cash are not entirely cash, some of the items may be sold on credit and some of the expenses are not paid up
Expense control remains a test for the vitality business. The expansion sought after for oil and gas and expanding movement is prompting mount vast scale and complex tasks with high capital expe...
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.