how to grow without bankruptcy - 1107-pt2 - v4

8/14/2019 How to Grow Without Bankruptcy - 1107-Pt2 - V4

1/24

T3 = CAPITAL SOLUTIONS

How to Grow

Fast (withoutGoing Bankrupt)

Part 2 Staying Afloat (& Keeping More Cash)

2007, T3 Capital Pty Ltd, All rights reserved


2/24

Topics for Today1. Quick Recap of Last Session

2. Cash Forecasting

3. Should I Sell on Credit?

4. How to Get Paid Faster

5. The Payoff of Managing Your Debtors

6. How to Reduce Stock

7. The Payoff of Managing Your Stock

8. How to Use Your Creditors

9. The Payoff of Managing Your Creditors

10. The Total Payoff

11. Recap

12. How T3 Can Help


3/24

Recap of Last Session Case Study labour hire company liquidation

Industry

Business Strategy

Business Model

Cost Structure


4/24

Cash Forecasting

How often?

How far out?


5/24

Cash Forecasting Cash Receipts

Sales collected

GST refunds

Borrowings (bank or you)

Equity injections

Government grants

Customer deposits

Sale of Assets


6/24

Cash Forecasting Cash Payments Frequent

Rent & utilities

Staff & contractors & PAYE tax

Stock

IT costs

Loan & lease payments

Marketing & advertising

Office supplies


7/24

Cash Forecasting Cash Payments Less Regular

GST collected

Income taxes

Superannuation

Fixed assets purchases (machines, furniture, etc.)

Dividends

Professional services (lawyers, accountants, consultants, etc.

Insurance (e.g. workers comp, PI, public liability, business

interruption, etc.)


8/24


9/24

How Can I Get Paid Faster? Credit policy & credit checks

Credit terms clear to customer

Accurate invoices

Follow up early

Log your follow up

Send statements

Take deposits

Offer discounts for early payment

Use debtor finance


10/24

It Pays to Manage Your Debtors KPI = Days Sales Outstanding

Example

Annual Sales $10,591,000

Divided by 365 = $29,016 of sales per day

Debtors of $2,225,600 divided by $29,016

= 76.7 days sales outstanding (DSO)

Invoice Terms were 30 days!!


11/24

It Pays to Manage Your Debtors Impact of improving DSO

Company had cash = $1,079,000 @ 76.7 DSO

If DSO cut to 60 days, cash up by $489,000 to over $1.5m

If DSO were 30 days (per terms), cash up by $1.4m to morethan $2.4m

$489k @ 5% interest for 12 months = $25k

It pays to manage your debtors!


12/24

The Payoff of Managing Debtors

$1,079

$1,593

$0

$500

$1,000

$1,500

$2,000

Before After

Cash in Thousands


13/24


14/24

It Pays to Manage Your Stock KPI = Days Stock on Hand

Example

Annual Cost of Sales (CoS) $6,884,400

Divided by 365 = $18,861 of CoS per day

Stock of $1,131,700 divided by $18,861

= 60 days stock on hand


15/24

It Pays to Manage Your Stock Impact of Reducing Days Stock on Hand to 50 days

Company had cash = $1,079,000 @ 60 stock days on hand

If cut stock to 50 days on hand, cash up by $190,000 to

$1,269,000


It pays to manage your stock!


16/24

The Payoff

$1,079

$1,279

$750

$850

$950

$1,050

$1,150

$1,250

$1,350

Cash

Before

Cash After

Cash


17/24

How Can I Use My Creditors? Take discounts or pay as late as possible?

Could any suppliers be stretched a bit further?

Example of paying fast & taking discounts


18/24

It Pays to Manage Your Creditors KPI = Days Creditors Outstanding

Example

Annual Cost of Sales (CoS) $6,884,400

Divided by 365 = $18,861 of CoS per day

Creditors of $1,131,700 divided by $18,861

= 60 days creditors outstanding


19/24

It Pays to Manage Your Creditors Benefit of Stretching Creditors to 65 days

Company had cash = $1,079,000 @ 60 stock days creditorsoutstanding

If stretched to 65 days, cash up by $95,000 to $1,174,000


It pays to manage your creditors!


20/24

The Payoff of Managing

Creditors

$1,079

$1,179

$750

$800

$850

$900

$950

$1,000

$1,050

$1,100

$1,150$1,200

Before After

Cash


21/24

Total Benefit = $814,000 Benefit of Reducing DSO to 60 days = $514,000

If DSO cut from 76.7 to 60 days, cash up by $489,000

$489,000 @ 5% interest for 12 months = $25,000

Benefit of Reducing Days Stock on Hand to 50 days = $200,000

If cut from 60 to 50 days, cash up by $190,000


Benefit of Stretching Creditors to 65 days = $100,000

If stretched from 60 to 65 days, cash up by $95,000



22/24

Total Benefit = $814,000

$1,079

$1,893

$0

$500

$1,000

$1,500

$2,000

Cash

Before

Cash After

Cash in Thousands


23/24

Recap To make improvements (and avoid trouble):

Forecast & measure

Set & manage your credit policy

Write a script & follow up your past due debtors

Review & reduce your stock (and office supplies) where possible

Review & stretch your creditors where possible


24/24

Let T3 Help You Grow your cash flow & profit

Increase the value of your business

Get new customers & increase sales

Sell your business if you want to cash out (we are business brokers)

Find a business for you to buy

Arrange growth capital if you want to expand (we are business financebrokers)

Tom Richardson is available as a consultant, mentor/coach, business& finance broker, company director, keynote speaker and workshopfacilitator

Contact T3 Capital today: [email protected] or 0412 257 274
mailto:[email protected]:[email protected]

how to grow without bankruptcy - 1107-pt2 - v4

Documents