Jonathon is a sole trader. He owns a shop selling office equipment including printers. To encourage sales Jonathon allows customers 4 weeks to pay for the office equipment. Jonathon thinks his business is likely to remain small. He knows managing cash flow is important for his business and he has prepared a cash flow forecast. An extract is shown in Table 2.1. Explain two reasons why Jonathon's business might have a cash flow problem. Reason 1: Explanation: Reason 2: Explanation: .......................................................................................................................................

Award 1 mark for identification of each relevant reason (max 2).

Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
- Allow customers too long to pay / customers are slow to pay / customer does not pay on time / high level of credit sales [k] as customers have 4 weeks to pay [app] which delays cash inflows [an]
- No trade credit / suppliers want payment straightaway / paying suppliers too quickly [k] for the office equipment [app] which increases cash outflows [an]
- Poor (financial) planning / unexpected costs [k] as operates as a sole trader [app] which leads to additional cash outflows [an]
- Holding too much inventory [k]
- Growing too quickly / overtrading [k]
- Seasonal / low(er) demand / sales [k]

Other appropriate responses should be credited.