cash flow management
DESCRIPTION
http://www.Cash4Impact.com. Presentation provides overview of business cash flow and cash flow management. Also provides an example to illustrate the importance of managing cash flow. [email protected], 404-642-0509TRANSCRIPT
Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
1
How to Manage Cash How to Manage Cash FlowFlow
How to Manage Cash How to Manage Cash FlowFlow
What is cash flow?
How do you manage
cash flow?
Explanation and Example
Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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Cash flowCash flowWhat is it?What is it?
Cash flowCash flowWhat is it?What is it?
Cash Flow• = Incoming cash – outgoing cash • = Cash receipts – cash payments
• What is cash?– Actual, literal cash: cash, money orders, cashier’s
checks , and checks– NOT accounts receivables or invoices
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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Cash Flow Cash Flow ManagementManagement
What is it?
Cash Flow Cash Flow ManagementManagement
What is it?• Ensuring cash inflows > cash outflows
for any given time period• Tracking, analyzing, and adjusting your
company’s cash flows
• REMEMBER: You can have positive (+) net income and negative (-) cash flow
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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ExampleExamplePart IPart I
ExampleExamplePart IPart I
Background / Assumptions
• Enter into $200,000 contract for 6 months
• Submit invoices at end of month. Client has 30 days to pay you.
• Primary costs – personnel costs and overhead allocation
• Prior year revenue of $1,000,000. So contract provides 20% of the previous year’s revenue. Your firm starts fulfilling the contract on February 1.
• On contract, will make gross profit of 60% and operating profit of 30%
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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ExampleExamplePart I (cont’d)Part I (cont’d)ExampleExample
Part I (cont’d)Part I (cont’d)
Revenue Op. Income Cash Flow
End of week 2 (day 15)
$16,667 $5,000 -$6,667
End of week 4 (day 30)
$33,333 $10,000 $-13,333
End of week 6 (day 45)
$50,000 $15,000 -$20,000
End of week 8 (day 60)
$66,666 $20,000 $6,667
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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Cash Flow Cash Flow ImprovementsImprovements
Cash Flow Cash Flow ImprovementsImprovements
• To improve cash flow, shorten the invoicing and A/R period, such as:– Offer early payment discounts– Structure contracts to say “payment upon receipt
of invoice” or “net 15”– Invoice on the 15th and 30th, for better timing
• Or obtain a deposit for services rendered or a partial payment in advance
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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ExampleExamplePart IIPart II
ExampleExamplePart IIPart II
Revenue Op. Income Cash Flow
End of week 2 (day 15)
$16,667 $5,000 $3,333
End of week 4 (day 30)
$33,333 $10,000 -$3,333
End of week 6 (day 45)
$50,000 $15,000 $6,667
End of week 8 (day 60)
$66,666 $20,000 $16,667
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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SummarySummarySummarySummary
- This (unplanned cash flow shortage) is how fast growing companies can go bankrupt.
- Companies book revenue at a rate multiples higher than the previous year but they have negative operational cash flow.
- These companies don’t have the financing/working capital to cover the gap in operational cash flow.
- You must engage in budget planning and analysis before EACH and every project in order to plan your cash needs.
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Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
9
Additional Information:Solving the Capital
Equation: Financing Solutions for Small Businesses
Available on Amazon
Or get the ebook
Help! I Need Money for
My Business Now!!www.Cash4Impact.com
Getting StartedGetting StartedGetting StartedGetting Started
Cash flow
Cash flow management
Example
Improvements
Example
Summary
Getting Started
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Thank You!
Tiffany C. Wright
Follow my blog,
Small Business Finance Forum: http://www.Cash4Impact.com
Tiffany C. WrightThe Resourceful CEO
Toca Family Business Services
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