managing and forecasting cash flow

1

Managing and Forecasting Cash FlowThe most important financial tool CEOs should use and understand.

What’s so great about a cash-flow forecast?

Cash is more important than your rev and monthly financials

Your BOD will spend WAY more time on your cash-flow forecast than financials

It’s a tool that helps you make faster and better decisions

The answer is surprisingly easy when you don’t have the money

Use for short-term and long-term planning

Most fundraising rounds are predicated on cash burn

2

Start with a short-term cash forecast13-week rolling forecast

Used for operations

KEEP IT SIMPLE

Start with where you are currently

Precise but not to the penny

Use logical categories

3

4

Cash flow is about money in and money out

Fundraising is predicated on long-term cash forecasts

12-18-month rolling forecast

Used for fundraising and strategic planning

Usually based on hiring plans and revenue projections

Start with where you are currently

Less detailed and precise

Use logical categories

5

Cash is hard to predict at every stage of growth

Early-stage companies: Why you’re forecasting cash; what investors need to know; numbers you need to have ready, and do you need a CFO now?

Early-revenue companies: MVP in market, non-predictable revenue, expenses easy to accumulate

Growth stage companies: Predictable revenue, but lots of other challenges to manage

6

Cash flow financing helps, especially when bootstrapping

Receivables financing: Smooth cash flow from lumpy payers

Purchase order financing: Help with those big orders

Inventory financing: Leverage your assets

Revenue-based financing: Lump sum based on trailing revenue

Merchant cash financing: Credit card payment advances

Asset-backed lines of credit: Working capital based on company assets

7

Different industries have unique cash flow challenges

Manufacturing/distribution: Managing inventory and cash flows tough balance; perishable inventory harder to manage

SaaS: Great MRR, but money comes in over time; how does that impact how you manage cash?

Subcontractors: How to predict cash in a longer supply chain

8

Case Study: SaaS company cash flowSteadily growing SaaS company with predictable revenue of $300K/month.

Trying to increase sales by offsetting a typical large up-front fee that makes it harder to onboard customers quickly.

Wanted to test a three-month offset of the fee. Took out a line of credit based on contractual monthly revenue to borrow against the next three months to continue to keep up expenses while testing the offset of the up front fee.

Sales are up.

9

Terms matterPricing strategy

When will you require customers to pay you?

Will you take up-front fees?

Will you make it easy for them to leave?

What is your return policy?

10

Getting Creative with Cash Flow• A/P management

• Personal / business card mangement

• Ask your investors / be transparent

• Talk to your staff openly and honestly

11

Good CEOs (not just CFOs) always know• The month, if not the day, you will run out of cash

• Current monthly burn rate

• Max cash burn before you become profitable

• Max cash burn for the next 18 months based on growth

• Current payroll

12

Tips for SuccessKeep it simple!

Avoid analysis paralysis

Regular maintenance is critical (helps when it’s linked to hiring)

13

14

We’d like to fund your brains out.

899 Logan St Ste 210Denver, CO 80203720.361.1500P2Bi.com | hello@p2bi.com

twitter.com/p2binvestor

facebook.com/p2binvestor