#Immediacy on speech making

In due course a workshop was found and rented a 6-month moratorium ...

In due course a workshop was found and rented a 6-month moratorium on rent was arranged a bank loan negotiated to buy extra equipment, and various other items including a breakdown van were leased. The new, more elaborate, service was popular with local farmers who could now have major repair work done locally.. Unfortunately, Alan and Ted did not realize that their cash-flow pattern would now change dramatically.

This was due to a failure to keep income and expenditure records in the past or to estimate them for the future.

The great difference was that whereas in the past they did small jobs taking, say, one or two days to complete, they were now taking on jobs requiring an elapsed time of as much as six weeks. In addition, the bills for these jobs were much larger and the 'on-the-spot' payments of the past were replaced with lengthy delays before payment was made. Had Alan and Ted made a simple forecast of their cash flow for the months ahead, taking into account their fixed costs, they would have seen that they were heading for trouble.

January was a slow month with much of Alan and Ted's time spent in setting up the new workshop. In consequence they lost much of the winter opportunities for small repairs. February and March were a little better more work was coming in while Alan and Ted looked for large contractor By the end income, so far, had exceeded expenditure by £1970. They saw the first major job repairing two combine harvesters for which some major parts were purchased.

Alan also bought a few more stock items of parts 'in case they are needed'. Income was limited because they spent almost all the month on the combine harvesters, and by the end of April retained income for the year so far had fallen to only £1150. May brought £1150 from small sobs and a further note for spares resulting in a deficit for the year to date. No payment was received for the combine harvester job which, being invoiced on 1 May, was ignored by the customer until 1 June. June was a quiet month with farmers using much of their machinery for seasonal work, and July, August and September were similar.

The combine harvester payment was received in July, just in time to meet the bills for rent and rates and some insurance.

October saw Alan and Ted obliged to pay out yet more money on spares for the autumn repair sobs, leaving them in a parlous financial position. Had Alan and Ted worked out a cash-flow forecast in advance, they would have realized that: January, the peak of the repair season, was the wrong time to be temporarily out of action; Substantial sums would be needed for spare parts at a time when revenue was inadequate; Only one-major job could be done before the spring and summer seasons when machinery would be in use; and The large jobs required more time to complete and there would be long gaps between spending money and being paid. Every business needs a cash-flow forecast to warn of problems and, where cash resources are limited or income likely to be variable, such a forecast should be updated regularly and frequently. A further advantage of cash-flow forecasting lies in the fact that it is a constant reminder of the fixed costs.

Alan and Ted had rent and rates to pay regardless of how ...

Alan and Ted had rent and rates to pay regardless of how much work they did while their variable costs' mostly spare parts were increased only when

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Having costed out both scenarios, the result may suggest that even in ...

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