13 steps to developing a 13-week rolling cash forecast

H o w t o a d e v e l o p a r o l l i n g c a s h f o r e c a s t m o d e l t h a t c a n b e e a s i l y u p d a t e d a n d i s t h e r e s u l t o f t e a m c o l l a b o r a t i o n

P r e s e n t e d t o S o C a l E X P O a t t e n d e e s

o n A p r i l 2 5 , 2 0 1 4

B y P a z H e r n a n d e z , C T P

13 Steps to Developing a 13-Week Rolling Cash Forecast

The 13 Steps

1. Obtain the necessary information 2. Determine the categories/line items in the forecast 3. Develop the forecast model (in Excel) 4. Identify the Owners 5. Meet with the Owners 6. Analyze historical receipts 7. Analyze historical sales

April 25, 2014 SoCal EXPO / Paz Hernandez, CTP

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The 13 Steps - continued

8. Review the sales forecast 9. Review the budget and forecast together 10. Test forecast for reasonableness 11. Set framework for variance analysis 12. Prepare variance analysis 13. Roll the forecast


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Step 1: Obtain the necessary information

ó For the current year, ¡ The Sales Forecast (by week, if available) ¡ The budget

ó For the last year (by week), ¡ Sales ¡ Sales taxes collected ¡ Cash receipts ¡ Credit/debit card fees


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Step 2: Determine the categories/line items in the forecast

ó The line items/categories in the forecast should be: ¡ Categories on which variance analysis can be performed (or at least

most of them) ¡ Meaningful to senior management ¡ Included if the category are sizeable/large expenses (e.g. inventory

purchases and/or payroll, debt related, capex)


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Exhibit I Sample Forecast Line Items/Categories


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INFLOWS Sales Receipts Miscellaneous Receipts Credit Facility Borrowings Short Term Investment RedemptionsOUTFLOWSOperating: Inventory Rent Taxes

Payroll & 401K Contributions Insurance Banking Fees Utilities Other Expenses Non-Operating: Debt/Interest/Letter of Credit Fees Capital Expenditures Credit Facility Repayments Short-Term Investment Purchases Other Non-Operating

Step 3: Develop the forecast model (in Excel)

ó All sheets are formatted the same way on top and they have the same column headings ó All sheets are linked to the “Dates” sheet ó All sheets should have a row that contains the

sum of the calculations below it (that then flows to the Cash Flow Projections sheet/Forecast


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Exhibit II Sample Dates Master and Flow of Information From Owners Sheets

DATESFYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9

Week Ending 3-Jan-14 10-Jan-14 17-Jan-14 24-Jan-14 31-Jan-14 7-Feb-14 14-Feb-14 21-Feb-14 28-Feb-14

Owner uses this area to gather/format information in whatever way works for him/her

Totals by week flow to the area just above (and below the dates)

Totals then flow to the Cash Flow Projections sheet


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Exhibit III Sample Workbook – Cash Flow Projections and Owners Sheets

(at bottom)


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Step 4: Identify the Owners

ó The Owners are the individuals who are (or will be) responsible for each of the line items in the forecast ó You may be an Owner ó An Owner may be responsible for more than

one category/line item ó An Owner may be responsible for only part of

what makes up one category/line item April 25, 2014 SoCal EXPO / Paz Hernandez, CTP

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Step 5: Meet with the Owners

ó Share the vision, goals and objectives óWork to understand their role and challenges ó Educate them to think in terms of cash timing

(rather than G/L timing) ó Go over their Owner’s sheet


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Step 6: Analyze historical receipts

óSeparate sales-related and miscellaneous óAdjust miscellaneous óCalculate effective debit/credit card rate


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Step 7: Analyze historical sales

óWhat are sales and what are sales taxes óCalculate effective sales tax rate


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Exhibit IV Effective Sales Tax and Credit/Debit Cards Rates


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ACTUAL DATA (BELOW)RECEIPTS - (FYE 2013)Receipts (including Sales Taxes) 30,325,444 29,355,430 28,443,001 35,765,432 32,678,346 Add back Credit/Debit Card Fees 200,000 199,456 188,888 239,456 221,567 Deduct estimated sales taxes (using effective sales tax rate) (270,845) (267,046) (254,589) (323,459) (289,023) Net Receipts 30,254,599 29,287,840 28,377,300 35,681,429 32,610,890 Miscellaneous Receipts 100,250 55,000 44,000 33,456 123,478 TOTAL RECEIPTS (including sales taxes) 30,425,694 29,410,430 28,487,001 35,798,888 32,801,824 Effective Credit/Debit Card Fees 0.661% 0.681% 0.666% 0.671% 0.679%

SALES - (ACTUAL FYE 2013)Sales 29,955,643 28,945,890 27,654,321 35,856,123 31,985,234 Sales Taxes Collected (not in Sales above) 265,789 261,543 245,897 322,123 280,988 Effective Sales Tax Rate 0.8873% 0.9036% 0.8892% 0.8984% 0.8785%

Step 8: Review the sales forecast

óDetermine the following: ¡ How much will come from new business and in which periods ¡ How much will come from existing business ¡ If some businesses will be eliminated this year, how much revenue

will be lost and when ¡ The percentage of growth anticipated from existing business


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Exhibit V Forecasting Cash Receipts (top area of sheet)


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Receipts Use X % for forcast period Wks 1-21 3.0000000%Owner(s): Mary Jones FYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014

Week 1 Week 2 Week 3 Week 4 Week 5Week Ending 3-Jan-14 10-Jan-14 17-Jan-14 24-Jan-14 31-Jan-14

EXPECTED CASH RECEIPTS EXISTING BUSINESS 31,162,237 30,166,476 29,228,619 36,751,871 33,589,216

Adjustments for holidays falling in a differenct week 5,000,000 (5,000,000) NEW BUSINESS 1,000,000 1,000,000

SALES TAXES (using effective sales tax rate) 276,495 272,572 259,895 339,154 303,864 CREDIT/DEBIT CARD FEES (using equivalent rate) (207,828) (207,296) (229,566) (222,072) (237,073)

NET TOTAL RECEIPTS ATTRIBUTABLE TO SALES 31,230,904 30,439,047 34,488,514 33,091,025 34,893,080 MISCELLANEOUS RECEIPTS (non sales) 100,250 55,000 44,000 33,456 123,478

TOTAL EXPECTED CASH RECEIPTS 31,331,154 30,494,047 34,532,514 33,124,481 35,016,558 ACTUAL DATA (BELOW)

RECEIPTS - (FYE 2013)Receipts (including Sales Taxes) 30,325,444 29,355,430 28,443,001 35,765,432 32,678,346 Add back Credit/Debit Card Fees 200,000 199,456 188,888 239,456 221,567 Deduct estimated sales taxes (using effective sales tax rate) (270,845) (267,046) (254,589) (323,459) (289,023) Net Receipts 30,254,599 29,287,840 28,377,300 35,681,429 32,610,890 Miscellaneous Receipts 100,250 55,000 44,000 33,456 123,478 TOTAL RECEIPTS (including sales taxes) 30,425,694 29,410,430 28,487,001 35,798,888 32,801,824 Effective Credit/Debit Card Fees 0.661% 0.681% 0.666% 0.671% 0.679%

SALES - (ACTUAL FYE 2013)Sales 29,955,643 28,945,890 27,654,321 35,856,123 31,985,234 Sales Taxes Collected (not in Sales above) 265,789 261,543 245,897 322,123 280,988 Effective Sales Tax Rate 0.8873% 0.9036% 0.8892% 0.8984% 0.8785%

Step 9: Review the budget and forecast together

ó Determine which expenses are part of the budget that are not covered by the categories/line items in the forecast ó Prepare schedule of line items within the “Other

Expenses” sheet (e.g. supplies, postage, advertising)


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Step 10: Test forecast for reasonableness

ó Test expenses against the budget (making allowances for timing differences) ó Test total receipts attributable to sales in the

forecast against last year’s equivalent receipts


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Step 11: Set framework for variance analysis

ó Prepare variance analysis sheet ó Establish % margin of error that is acceptable ó Determine how often forecast will be rolled


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Exhibit VI Sample Completed Forecast


20 Weekly Cash Flow Projections

2014ENDING CASH & SHORT-TERM INVESTMENTS 11,005,044 4,363,274 3,338,432 38,556 3,757

ENDING CREDIT FACILITY BALANCE - - - (5,600,000) (3,300,000)

FYE 2014 FYE 2014 FYE 2014 FYE 2014 FYE 2014Week 1 Week 2 Week 3 Week 4 Week 5

Week Ending 3-Jan-14 10-Jan-14 17-Jan-14 24-Jan-14 31-Jan-14BEGINNING CASH & SHORT TERM INVESTMENTS 15,000,000 11,005,044 4,363,274 3,338,432 38,556 CASH IN: Sales Receipts 31,230,904 30,439,047 34,488,514 33,091,025 34,893,080 Miscellaneous Receipts 100,250 55,000 44,000 33,456 123,478 Credit Facility Borrowings 5,600,000 Short Term Investment RedemptionsTOTAL CASH IN 31,331,154 30,494,047 34,532,514 38,724,481 35,016,558 CASH OUT: (a) INVENTORY PURCHASES 35,000,432 36,456,897 35,100,567 33,481,234 31,980,123 (b) OPERATING 7,346,313 1,512,390 3,502,262 8,120,466 5,265,674 Rent 6,500,000 - - - - Taxes - - 235,432 - 3,567,891

Payroll & 401K Contributions 125,439 675,456 222,567 7,456,782 784,700 Insurance 15,439 - 1,245,370 - 14,304 Banking Fees 47,000 - - 45,000 - Utilities 658,435 635,478 453,215 564,764 785,212 Other Expenses - - - - - (c ) NON-OPERATING 325,678 678,921 456,789 8,543,123 3,071,234 Debt/Interest/Letter of Credit Fees - - - - - Capital Expenditures 325,678 678,921 456,789 543,210 771,234 Credit Facility Repayments 2,300,000 Short-Term Investment Purchases Other Non-Operating

TOTAL CASH OUT 42,672,423 38,648,208 39,059,618 50,144,823 40,317,031

ENDING CASH & SHORT-TERM INVESTMENTS 11,005,044 4,363,274 3,338,432 38,556 3,757

Step 12: Perform variance analysis

ó Initially, test forecast methodology against historical data ó Perform variance analysis by line item, for Total

Cash In and for Total Cash Out ó Prepare graph(s)


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Step 13: Roll the forecast

ó After performing variance analysis, prepare the next period’s forecast ó Give feedback to Owners and deadline to submit

next rollover info ó Encourage Owners to communicate ó Give all the credit for success to the Owners


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End of Presentation

QUESTIONS? Paz Hernandez, CTP Phone: (310) 714-8778 Email: [email protected]


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13 steps to developing a 13-week rolling cash forecast

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