Part II: Analyze the cash budget and make recommendations to the board of directors of Gladiator Robotics regarding your findings. Be specific regarding possible causes and remedies (if applicable).
The cash inflows on sales during February and March are less compared to the expenses incurred during the period. The cash flow is gradually decreasing as the months precede indicating seasonal trends in the business. The reduction in cash flows is attributable to reduced sales, increased expenses, limited investments and lack of cash in hand. The following are the recommendations to increase cash flows for Gladiator Robotics in the following months:
- They should consider limiting costs such as salaries and wages, selling costs, G&A costs and material purchases.
- Management should allocate an ample amount of cash on hand to enable cater for salaries and wages and also pay suppliers. During the two months, the company did not have any cash on hand responsible for remunerating the employees thus heightening expenditure.
- Management should also prioritize on increasing sales and reduce expenditure. The gap between the two should be significant enough to generate surplus capital for investment.
- Management should also consider diversifying their portfolio by investing in short-term investment. Examples of short-term investments include the treasury bills and the certificates of deposits whose return are less timely compared to the long-term investments. Such investment will aid the company guard against any future capital losses.
Part III: What if any concerns do you have about the ability to donate? Also, do you have any concerns about cash on hand which might impact variable HR expenses such as recruitment costs or other commitments to employees including staffing, development or rewards? Be specific
Donating at the precise period may serve as a burden to Gladiator Robotics. The company in this instance is unable to generate surplus funds through its sales and investment which are long-term. It is currently operating on credit to maintain the minimum required balance. Adding a donation to its expenditure may end up limiting funds generation and instead of raising its liability. The cash on hand also needs to be allocated in all the preceding months. Cash on hand is used in recruitment, remuneration, staffing, development and rewarding. The employees are offered bonuses and gifts with the cash on hand increasing motivation and performance. The cash on hand also helps reduce expenditure, for instance, paying salaries using cash on hand will reduce amounts expected on salaries and wages thus increasing surplus cash amounts.