bfs cf forcast webinar 8-26-2008
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8/13/2019 BFS CF Forcast Webinar 8-26-2008
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Cash Flow Management
The man who does things makes manymistakes, but he never makes the biggestmistake of all – doing nothing.
-Benjamin Franklin
Business Finance SolutionsCreating Cash Flow for Small Businesses
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About Business Finance Solutions
Financial consultants andbrokers.
Over $400 million in loansoriginated.
Working Capital, Real Estate,Import-Export, Equipment,
Governmental Contract Finance.
20+ years business experience.
Leslie Thacker
Sam Thacker
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Sam Thacker – Business Articles
Visit my small business finance articles onwww.allbusiness.com, the Internet's #1 information
resource for small business owners.
3 times a week
Business finance articles are also appearing on the onlinewebsites for:
The San Francisco Chronicle
The Washington PostCBS NewsBusiness Week
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Goal of Presentation
1.Provide a strong understanding of EBITA andcash flow and what components make up cashflow.
2.Have each participant leave today withknowledge of various ways of managing their
cash on a day to day basis.
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Cash Flow Management
Three Basic Concepts
Cash = spending power
It is sometimes necessaryto accelerate collection ofreceipts and deceleratepayments
Minimize current assetsand maximize currentliabilities
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Cash Flow Warning Signs
Five Warning Signs of CF Trouble:
Decreased Liquidity
Missed Trade Discounts
Late Vendor Payments
Slow Collections
Less safety cash in bank
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The Cash Flow Cycle
PURCHASES
CASH
INVENTORIESSALES
RECEIVABLES
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EBITA
Earnings
BeforeInterestTax
Amortization
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EBITA Defined
Sales- Cost of Goods Sold
= Gross Margin- SG&A Expenses
= EBITA
Sales 1,200,000
COGS (800,000) Gross Margin 400,000
SG&A 200,000
EBITA 200,000
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Cash Flow Components
EBITA, or earnings
+/- Changes in A/R
+/- Changes in Inventory+/- Changes in Net WIP +/- Changes in Fixed Assets +/- Changes in A/P+/- Changes in Accruals +/- Changes in Debt
= CASH FLOW
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Real World Example Cash Flow
Sales 1,200,000
COGS (800,000) Gross Margin 400,000
SG&A 200,000
EBITA 200,000
1 2
Cash = spending power
EBITA 200,000
+/- A/R (375,000) +/- WIP (75,000)
+/- Assets 15,000
Cash Flow (235,000)
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A/R Turnover Calculation
Total A/R 375,000
Average Mo. Sales 100,000
Average Daily Sales 3,333 A/R Turn in Days 113
Total A/R / Average Daily Sales= A/R Turn in Days
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Increasing A/R Collections
Reduce the # of daysA/R outstanding
improves CF.
Ultimate risk ofcollection is
decreased as daysoutstanding decrease.
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Lengthening A/P Average Time
Slow down payables,improve CF
Negotiate current liabilitiesinto notes payable improvesCF.
Increases risk of venderCOD.
Decreases discount leveragewith vendor.
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Communication with Key People
Make sure your critical vendors andkey employees understand that cashflow is tight and you are working toimprove it. Share your plan!
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Create a Cash Flow Forecast
A cash flow forecast will assist youmanaging through the period of tight cash.
A good (free) cash flow Excel based cashflow forecast with directions can be
downloaded here:
http://www.lesliethacker.com/resources.htm
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Make sure you know your true cost ofsales or cost of goods sold (COGS)
Make sure you know what your truegross margin is
Try as hard as possible to pass along
any supplier / vendor price increasesto your customer
“Gottchas” to Remember
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“Gottchas” to Remember
Never, ever, ever use the IRS as anunauthorized lender
File 941 tax reports on time Pay 941 taxes on time
Monetary penalties are very high for:
Failing to file 941 tax returns on time
Failing to pay tax on time
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“Gottchas” to Remember
If your business is subject tocollecting sales tax
File quarterly sales tax reports timely
Do not fail to remit sales tax collected ontime
Though the IRS is slower to catch you
then the State sales tax collectors,the Comptroller’s actions are swiftand sure
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“Gottchas” to Remember
Once a year, chartered entities must
file a Public Information Report withthe State Comptroller’s Office
It contains very basic information aboutthe company
Failure to file this report on time willresult in the forfeiture of your charter
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Questions and Answers
Business Finance Solutionswww.lesliethacker.com
800-492-8842
sam@lesliethacker.com
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