propel cash flow

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  1. 1. Cash Flow Management qWhy cash flow? qWhat is cash flow? qCash flow analysis qAn eight step approach
  2. 2. Why Cash Flow? Controlling Your Cash Before It Controls You q In an ever-changing market, be ready to respond q You have choices q Reactive Management qChanges come from the outside, the business passively responds q Proactive Management qThe business anticipate problems, and forms strategies
  3. 3. What Is Cash Flow? Flows of cash: qIn-flow qNew investment qNew debt qSale of fixed assets qOperating profits qOut-flow qIncome statement expenses qPrincipal portion of loans
  4. 4. What Is Cash Flow? Five severe warning signs of cash flow: 1. Decreased liquidity 2. Overtrading 3. Over-reliance 4. Dropped discounts 5. Slow collections If you suffer from one or more of these, you have a cash flow problem!
  5. 5. Cash Flow Analysis? Objective profitable business planning & operation q If cash in-flows exceed cash out-flows, your business can continue qIf cash outflows exceed cash inflows, your business grinds to a halt
  6. 6. Cash Flow: The Eight Steps 1. List cash in-flows 2. List cash out-flows 3. Identify when cash flows in or out 4. Examine timing: cash in-flows minus cash out-flows 5. Identify major consequences of cash as it currently flows 6. Show constraints: cash in-flows and out-flows that cannot be changed 7. Identify in-flows and out-flows that can be changed or rescheduled 8. Establish a plan for positive cash flow
  7. 7. Step 1: List Cash In-flows q Focus on operations as your main source of cash qTiming is everything Timing and operations go together
  8. 8. Cash Flow Analysis Cash Purchases InventoriesSales Receivables The Cash Flow Cycle Notice the direction of the arrow. This is how cash flow can be a problem.
  9. 9. Step 2: List Cash Out-flows (Uses) q Start with your cash journal and checkbook qWhere is the cash going? qIn-flows are a bit faster than out-flows, but they must balance q Again, timing is everything! qMaintain an accounting system qMake sure your accountant works for and with you
  10. 10. Step 3: Identify When Cash Flows In or Out q Calendar: useful tool q List by date major cash in-flows and out-flows q List fixed out-flows that have fixed dates q List cash in-flows by date Objective Identify your business cycle and balance in- flows and out-flows to allow growth
  11. 11. Step 4: Examine Timing: Cash In-flows Minus Out-flows q Know your business rhythm q Know your business cycle q Are you in phase or out q Look for industry data q Try your trade association q Dont forget the US Small Business Administration (SBA)
  12. 12. Step 4: Examine Timing: Cash In-flows Minus Out-flows Business Growth Patterns
  13. 13. Step 4: Examine Timing: Cash In-flows Minus Out-flows Business Growth Patterns
  14. 14. Step 5: Identifying The Major Consequences Of Cash As It Currently Flows q Plan on payments being slower than you expect qLearn your own cash flow patters qThey will become the foundation for your plan qCan you really afford to offer credit? qLeave credit decisions to professionals
  15. 15. Step 6: Show Constraints: In-flows or Out-flows That Cannot Be Changed q Which payment schedules can be changed and which cannot? qList inflexible out-flows; plan around them qCash in-flows not all can be influenced qIdentify those that create snags and deal with them on a one-by-one basis
  16. 16. Step 7: Identify In-flows and Out-flows Which Can Be Changed or Rescheduled q Delayed payments are one way to improve cash flow qNegotiate with your creditors qThey may be more flexible than you might guess qIts a balance and can be accomplished qCareful planning
  17. 17. Step 8: Establish A Plan For Positive Cash Flow q Go back to your calendar in Step 3 and provide more detail q Indicate cash flow items that cannot be changed q List anticipated cash in-flows allowing a margin of safety q Allocate payment dates to suit your business needs q Identify periods of negative cash flow and how to subsidize
  18. 18. Cash Flow Management ~ Q&A ~