bbt webinar peace of mind cash flow management

8/4/2019 BBT Webinar Peace of Mind Cash Flow Management

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n as

FlowManagem

ent

Philip Campbell


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There Is A

Hole In MySidewalk

By Portia Nelson


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Chapter 1

$ I walk down the street

$ There is a deep hole in the

sidewalk$ I fall in

$ I am lost I am hopeless

$ It isnt my fault$ It takes forever to find a way out


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Chapter 2

$ I walk down the same street$ There is a deep hole in the

sidewalk$ I pretend I dont see it$ I fall in again$ I cant believe I am in the same

place$ But it isnt my fault$ It still takes a long time to get out


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Chapter 3

$ I walk down the same street

$ There is a deep hole in the sidewalk

$ I see it is there$ I still fall in its a HABIT

$ My eyes are open

$ I know where I am

$ It is my fault$ I get out immediately


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Chapter 4

$ I walk down the same street

$ There is a deep hole in the

sidewalk$ I walk around it


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Chapter 5

$ I walk down another street


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Our Focus Today

Cash Flow


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Heres What You

Will Learn Today$ Why cash flow problems dont just

happen

$ How to implement a tsunamiwarning system in your business

$ The 4 keys to creating cash flowprojections you can trust


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Heres What You

Will Learn Today$ Two questions that will instantly tell

you whether you have the cash

flow of your business under control$ A powerful tool for understanding

and projecting your cash flowcalled the Peace of Mind schedule


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A Different

Perspective


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Blah, Blah,Blah, Blah

Blah, Blah

Accountant Business Owner

???


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Two simple questionswill put you back in

control of your cash


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The 2 CriticalCash Flow

Questions

1. What is my cash balance right

now?

2. What do I expect my cash

balance to be six months fromnow?


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How Do YouDefine Cash

Flow?a. Revenues expenses

b. EBITDA

c. Net income + noncash expensesd. Cash receipts

e. Cash disbursements

f. Cash receipts - disbursementsg. None of the above

h. All of the above


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Three GoodReasons to Focus

on Cash


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FailureHurts!


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The Definition ofFailure in

Business is


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The Definition ofFailure in

Business is

Running Out ofCash!


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All your hard work goes

right down the toilet


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Its Important toUnderstand the

Destructive Impact ofWorry


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The Worry Cycle

1

Cash gets tight


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The Worry Cycle

1 2

Worry sets in


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The Worry Cycle

1 2 3

Youre role shifts


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The Worry Cycle

1 2 3

M t b


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Money may not buyhappiness but it does

buy

e


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eProblem

Cash FlowSurveyQuestions

Do you feel like you

have your cash flowunder control?

Do you know whatyour cash balancewill likely be 6months from now?

Answers

0% 20% 40% 60% 80% 100%

82% No

0% 20% 40% 60% 80% 100%

79% No

e


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eProblem

Cash FlowSurveyQuestions

Do you feel like you

have your cash flowunder control?

Do you know whatyour cash balancewill likely be 6months from now?

Answers

0% 20% 40% 60% 80% 100%

82% No

0% 20% 40% 60% 80% 100%

79% No


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Why is Cash Flow

Such a Mystery?1. Many owners dont have accurate

and timely financials

2. Belief that all you need arefinancial statements (especially the

P&L)

S


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Statements

Create

______________?


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Using YourFinancials to GetWhat YOU Want!

1. What did I want to achieve?and

2. What actually happened?

It all starts with what


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It all starts with whatyou want to makehappen

What Do I

WANT toHappen?

WhatACTUALLY

Happened?

MakeChanges to

Achieve theGoal



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What Do I

WANT toHappen?

WhatACTUALLY

Happened?

MakeChanges to

Achieve theGoal



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What Do I

WANT toHappen?

WhatACTUALLY

Happened?

MakeChanges to

Achieve theGoal

St t t


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Statements

ByThemselves

Are NotEnough


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The Myth

Profit or

Loss

CASHFLOW

NotTrue!

P fit V


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Profits Vs.Cash

Net Income

Microsoft (2005) $12.3 billion

Microsoft (2009) $14.6 billion

Ford (2006) Loss ($12.6) billion

Ford (2009) $2.7 billion

Private company Loss ($5.5) million

Change In Cash

Down ($9.5) billion

Down ($4.3) billion

Down ($0.5) billion

Down ($0.6) billion

UP $400 thousand


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Other

"Timing"

Differences

Borrowings

and Debt

Service

Capital

Expenditures

Accounts

Payable

Inventory

Accounts

Receivable

Profit or Loss

CASHFLOW

Financial


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FinancialStatements

Are Focusedon the Past


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BusinessDecisions Affect

Cash Flow$ Can I add another store?

$ Can I/should I hire a manager or

staff?$ Can I pay my loan back on time?

$ Will I have enough cash to getthrough the slow months?

$ Can I buy the new equipment Ineed?

Cash Flow Problems


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Cash Flow ProblemsDont Just

Happen

T e punc t at

The punch that knocks you out is the


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T e punc t atknocks you out is theone you didnt see

Joe Frazier, Boxing

Champion

The punch that knocks you out is the

one you didnt see

Joe Frazier, Boxing Champion

id


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How to Avoid aCash Flow

Problem$ See the potential problem in

advance

$ Define how much of a problem itwill be (putting a dollar amount onthe problem)

$ Determine when it will likely arrive

Which Statement


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Which StatementWill Help You

Avoid a Cash FlowProblem?$ Oh $#*&, I think I may be short of

cash sometime soon.

Or

$ I expect to be $23,500 short ofcash 60 days from now.

Absolutel


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AbsolutelyPositively

CannotRun aBusinessIntelligen

tlyWithoutCashFlowProjections


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Lets grow really

FAST$ Double sales in month 2

$ Double them again in month 3

$ What happens to profitability?

$ What happens to the cash?

Double Revenues in


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Double Revenues inMonth 2 and 3

3 Months 3 Months

No Rapid

Growth Growth Increase

Revenues 6,748,993$ 16,028,858$ 9,279,865$

Cost of goods sold 4,049,396 9,617,315 5,567,919

Gross profit 2,699,597 6,411,543 3,711,946

Total operating expense 2,057,132 2,795,871 738,739

Operating income 642,465 3,615,672 2,973,207

Interest expense 69,862 69,862 0

Pretax income 572,603 3,545,810 2,973,207

Income tax expense 211,863 1,311,950 1,100,087

Net income 360,740$ 2,233,860$ 1,873,120$

What Happened


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What Happenedto the Cash

Balance?The P&L View

$ Revenues increased by

$9.3 million$ Gross profit increased by

$3.7 million

$ Operating income

increased by $2.9million.

$ Net income increased by$1.8 million

What did Cash do?$ Up by $3.7 million

$ Up by $2.9 million$ Up by $1.8 million

$ Down by $738k

$ Down by $1.2 million

$ Down by $2.4 million$ Down by $4.1 million

$ Down by $5.6 million


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And the Answer

IsThe cash balance

went DOWN by$4.1 million


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The Peace ofMind

Schedule


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Peace of Mind

Schedule$ Shows your cash flow in an easy to

follow format (answers whathappened to the cash)

$ Its the key to taking control of yourcash flow

$ Its the perfect tool for creating

cash flow projections (answerswhats aboutto happen to thecash)

The Peace of Mind Schedule


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The Peace of Mind Schedule(page 1)

Actual Actual Actual Actual Actual Actual

Jan Feb Mar Apr May Jun

Beginning cash balance 110,235$ 135,163$ 139,906$ 111,134$ 17,432$ 4,652$

Section 1

Total sales 1,952,387 1,880,077 1,928,284 1,976,491 1,952,387 2,097,009

Cost of good sold 1,171,432 1,128,046 1,156,970 1,185,894 1,171,432 1,258,205

Gross profit 780,955 752,031 771,313 790,596 780,955 838,803

Operating expenses

Salaries and benefits 302,620 291,412 298,884 306,356 302,620 325,036

Advertising and marketing 64,429 62,043 63,633 65,224 64,429 69,201

Occupancy 107,381 108,431 106,371 105,271 107,281 106,181

All other expenses 132,762 127,845 131,123 134,401 132,762 142,5970 0 0 0 0 0

0 0 0 0 0 0

Total expenses 607,192 589,731 600,012 611,253 607,092 643,015

EBITDA 173,762 162,300 171,302 179,343 173,862 195,788



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Section 2 Actual Actual Actual Actual Actual Actual

Debt Service (principal and interest) Jan Feb Mar Apr May Jun

Note payable (16,546) (16,546) (16,649) (16,753) (16,858) (16,963)

Line of credit (23,000) 0 0 150,000 0 200,000

Interest payment (21,397) (21,397) (21,294) (22,221) (22,116) (23,386)

Owner investment 0 0 0 0 0 0Other 0 0 0 0 0 0

Totals (60,942) (37,942) (37,942) 111,026 (38,974) 159,651

Section 3

Investments

Leasehold improvements 0 0 0 0 0 0

Fixtures and equipment 0 (25,000) 0 (60,000) 0 0

Other 0 0 0 0 0 0

Totals 0 (25,000) 0 (60,000) 0 0

Section 4

Other cash flow items and timing differences

Less: revenues (1,952,387) (1,880,077) (1,928,284) (1,976,491) (1,952,387) (2,097,009)

Add: cash collected 1,991,435 1,902,387 1,830,077 1,878,284 1,926,491 1,952,387

Add: cost of goods sold 1,171,432 1,128,046 1,156,970 1,185,894 1,171,432 1,258,205

Less: inventory purchases (1,128,046) (1,181,970) (1,210,894) (1,196,432) (1,283,205) (1,373,902)

Estimated tax payments (160,326) 0 0 (160,326) 0 0

Change in A/P & accrued liabilities 0 (53,000) 0 (45,000) 0 0

Distributions to owner (10,000) (10,000) (10,000) (10,000) (10,000) (10,000)Other 0 0 0 0 0 0

Totals (87,892) (94,614) (162,131) (324,071) (147,669) (270,318)

Net cash flow 24,928 4,744 (28,772) (93,702) (12,780) 85,121

Ending cash balance 135,163$ 139,906$ 111,134$ 17,432$ 4,652$ 89,773$

Minimum cash balance target 22,000$ 22,000$ 22,000$ 22,000$ 22,000$ 22,000$

Cash excess (shortfall) 113,163$ 117,906$ 89,134$ (4,568)$ (17,348)$ 67,773$



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A c t u a l A c t u a l A c t u a l A c t u a l A c t u a l A c t u a lP r o j e c t e dP r o j e c t e dP r o j e c t e dP r o j e c t e dP r o j e c t e dP r o j e c t e dP r o j e c t

J a n F e b M a r A p r M a y J u n J u l A u g S e p O c t N o v D e c F u l l Y e

B e g in n in g c a sh b a l a n c e 1 1 0 , 2 3 5$ 1 3 5 , 1 6 3$ 1 3 9 , 9 0 6$ 1 1 1 , 1 3 4$ 1 7 , 4 3 2$ 4 , 6 5 2$ 8 9 , 7 7 3$ 8 9 , 7 7 3$ 8 9 , 7 7 3$ 8 9 , 7 7 3$ 8 9 , 7 7 3$ 8 9 , 7 7 3$ 1 1 0 , 2$

S e c t i o n 1

T o t a l s a l e s 1 , 9 5 2 , 3 8 71 , 8 8 0 , 0 7 71 , 9 2 8 , 2 8 41 , 9 7 6 , 4 9 11 , 9 5 2 , 3 8 72 , 0 9 7 , 0 0 9 0 0 0 0 0 0 1 1 , 7 8 6 ,

C o s t o f g o o d so l d 1 , 1 7 1 , 4 3 21 , 1 2 8 , 0 4 61 , 1 5 6 , 9 7 01 , 1 8 5 , 8 9 41 , 1 7 1 , 4 3 21 , 2 5 8 , 2 0 5 0 0 0 0 0 0 7 , 0 7 1 , 9

G r o s s p r o f i t 7 8 0 , 9 5 5 7 5 2 , 0 3 1 7 7 1 , 3 1 3 7 9 0 , 5 9 6 7 8 0 , 9 5 5 8 3 8 , 8 0 3 0 0 0 0 0 0 4 , 7 1 4 ,

O p e r a t i n g e x p e n s e s

S a l a r i e s a n d b e n e f i t s 3 0 2 , 6 2 0 2 9 1 , 4 1 2 2 9 8 , 8 8 4 3 0 6 , 3 5 6 3 0 2 , 6 2 0 3 2 5 , 0 3 6 0 0 0 0 0 0 1 , 8 2 6 , 9

A d v e r t i s i n g a n d m a r k e t i n g 6 4 , 4 2 9 6 2 , 0 4 3 6 3 , 6 3 3 6 5 , 2 2 4 6 4 , 4 2 9 6 9 , 2 0 1 0 0 0 0 0 0 3 8 8 , 9

O c c u p a n c y 1 0 7 , 3 8 1 1 0 8 , 4 3 1 1 0 6 , 3 7 1 1 0 5 , 2 7 1 1 0 7 , 2 8 1 1 0 6 , 1 8 1 0 0 0 0 0 0 6 4 0 , 9

A l l o th e r e x p e n s e s 1 3 2 , 7 6 2 1 2 7 , 8 4 5 1 3 1 , 1 2 3 1 3 4 , 4 0 1 1 3 2 , 7 6 2 1 4 2 , 5 9 7

0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0

T o t a l e x p e n s e s 6 0 7 , 1 9 2 5 8 9 , 7 3 1 6 0 0 , 0 1 2 6 1 1 , 2 5 3 6 0 7 , 0 9 2 6 4 3 , 0 1 5 0 0 0 0 0 0 2 , 8 5 6 ,

E B I T D A 1 7 3 , 7 6 2 1 6 2 , 3 0 0 1 7 1 , 3 0 2 1 7 9 , 3 4 3 1 7 3 , 8 6 2 1 9 5 , 7 8 8 0 0 0 0 0 0 1 , 8 5 7 ,



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S e c tio n 2 A c tu a l A c tu a l A c tu a l A c tu a l A c tu a l A c tu a l P ro j e c te dP ro j e c te dP ro je cte d P ro je cte dP ro j e c te d P ro je cte d P ro je cte

D e b t S e rv i c e (p r in c ip a l a n d in te re st)J a n F e b M a r A p r M a y J u n J u l A u g S e p O c t N o v D e c F u l l Y e a r

N o te p a ya b le (1 6 ,5 4 6 ) (16 ,5 4 6 ) (1 6 , 6 4 9 ) (1 6 , 7 53 ) (1 6 ,8 5 8) (1 6 ,9 6 3 ) (1 7 , 0 6 9 ) (17 ,1 7 6 ) (1 7 , 2 8 3 ) (1 7 ,3 9 1 ) (1 7 ,5 0 0 ) (1 7 ,6 09 ) (2 0 4 , 3 4

L i n e o f c re d i t (2 3 ,0 0 0 ) 0 0 1 5 0 , 0 0 0 0 2 0 0 , 0 0 0 2 7 5 , 0 0 0 (1 5 0 , 0 0 0 ) (3 5 0 ,0 0 0 ) 0 (1 5 0 ,0 0 0 ) (2 2 0 ,0 0 0 ) (2 6 8 , 0 0I n te re st p a ym e n t (2 1 ,3 9 7 ) (21 ,3 9 7 ) (2 1 , 2 9 4 ) (2 2 , 2 21 ) (2 2 ,1 1 6) (2 3 ,3 8 6 ) (2 5 , 1 7 0 ) (24 ,0 3 2 ) (2 0 , 6 5 9 ) (2 0 ,5 5 1 ) (2 0 ,4 4 3 ) (2 0 ,3 33 ) (2 6 2 , 9 9

O w n e r in v e stm e n t 0 0 0 0 0 0 0 0 0 0 0 0 0

O th e r 0 0 0 0 0 0 0 0 0 0 0 0 0

T o ta ls (6 0 ,9 4 2 ) (37 ,9 4 2 ) (3 7 , 9 4 2 ) 1 1 1 , 0 2 6 (3 8 ,9 7 4) 1 5 9 , 6 5 1 2 3 2 , 7 6 1 (1 9 1 , 2 0 8 ) (3 8 7 ,9 4 2 ) (3 7 ,9 4 2 ) (1 8 7 ,9 4 2 ) (2 5 7 ,9 4 2 ) (7 3 5 , 3 4

S e c t i o n 3

I n v e s t m e n t s

L e a se h o ld im p ro v e m e n ts 0 0 0 0 0 0 0 0 0 0 0 0 0

F i x tu re s a n d e q u ip m e n t 0 (25 ,0 0 0 ) 0 (6 0 , 0 00 ) 0 0 0 0 0 0 0 0 (8 5 ,0 0

O th e r 0 0 0 0 0 0 0 0 0 0 0 0 0

T o ta ls 0 (25 ,0 0 0 ) 0 (6 0 , 0 00 ) 0 0 0 0 0 0 0 0 (8 5 ,0 0

S e c t i o n 4

O t h e r c a s h fl o w i t e m s a n d t i m i n g d i f fe r e n c e s

L e ss: re v e n u e s (1 ,9 5 2 , 3 8 7 )(1 ,8 8 0 , 0 7 7 )( 1 , 9 2 8 , 2 8 4 )( 1 , 9 7 6 , 4 9 1 )(1 ,952,3 87)(2 ,097,0 09)( 2 , 2 8 9 , 8 3 7 )(2 ,386,251) (2 ,072,905) (1 ,904,180)(1 ,928,2 84)(1 ,735 ,455)(24,103 ,5

A d d : c a sh c o ll e cte d 1 ,9 91 ,4 35 1 ,9 02 ,3 87 1, 83 0, 07 71 ,8 78 ,2 84 1 ,9 26 ,4 91 1 ,9 52 ,3 872 ,0 97 ,0 092 ,2 89 ,8 37 2 ,3 86 ,2 51 2 ,0 72 ,9 05 1 ,6 54 ,1 80 1 ,8 78 ,2 84 2 3, 85 9, 52

A d d : c o st o f g o o d s so l d 1 ,1 7 1, 43 2 1 ,1 2 8, 04 61 ,1 5 6, 97 01 ,1 8 5, 89 4 1 ,1 7 1, 43 2 1 ,2 5 8, 2 051 , 37 3 ,9 0 21 ,4 3 1, 75 1 1 ,2 4 3, 74 3 1 ,1 4 2, 50 8 1 ,1 5 6, 97 0 1 ,0 4 1, 27 3 1 4 ,4 6 2, 12

L e ss: i nv e nto ry p u rc ha se s (1 ,1 28 ,0 46 )(1 ,1 81 ,9 70 )( 1 , 2 1 0 , 8 9 4 )( 1 , 1 9 6 , 4 3 2 )(1 ,283,2 05)(1 ,373,9 02)( 1 , 4 3 1 , 7 5 1 )(1 ,243,743) (1 ,142,508) (1 ,156,970)(1 ,391,2 73)(1 ,041 ,273)(14,781 ,9

Estim a te d ta x p a y m e n ts (1 6 0 ,3 2 6 ) 0 0 (16 0 ,3 2 6 ) 0 0 (1 6 0 ,3 2 6 ) 0 0 (1 6 0 ,3 2 6 ) 0 0 (6 4 1 , 3 0

C h a n g e in A /P & a c c ru e d l ia b i l i tie s 0 (53 ,0 0 0 ) 0 (4 5 , 0 00 ) 0 0 0 0 0 0 0 0 (9 8 ,0 0

D istri b uti o n s to o w n e r (1 0 ,0 0 0 ) (10 ,0 0 0 ) (1 0, 0 0 0 ) (1 0 , 0 00 ) (1 0 ,0 0 0) (1 0 ,0 0 0 ) (1 0 , 0 0 0 ) (10 ,0 0 0 ) (1 0 , 0 0 0 ) (1 0 ,0 0 0 ) (1 0 ,0 0 0 ) (1 0 ,0 00 ) (1 2 0 , 0 0

O th e r 0 0 0 0 0 0 0 0 0 0 0 0 0

T o ta ls (8 7 ,8 9 2 ) (94 ,6 1 4 ) ( 1 6 2 , 1 3 1 )(32 4 ,0 7 1 ) (1 4 7 ,6 6 9 ) (2 7 0 ,3 1 8 )(4 2 1 ,0 0 3 ) 8 1 ,5 9 3 4 0 4 ,5 8 1 (1 6 ,0 6 4 ) (5 1 8 ,4 0 7 ) 1 3 2 ,8 2 8 (1 ,4 2 3 ,1 6

N e t c a sh fl o w 2 4 ,9 2 8 4 , 7 4 4 (2 8, 7 7 2 ) (9 3 , 7 02 ) (1 2 ,7 8 0) 8 5 ,1 2 1 5 0 ,2 0 3 1 4 9 ,2 7 1 2 0 9 ,0 9 4 1 0 2 , 6 8 0 (5 4 4 ,5 5 3 ) (4 ,1 9 8 ) (5 7 ,9 6

En d in g c a sh b a l a n c e 1 3 5 ,1 6 3$ 1 3 9 , 9 0 6$ 1 1 1 , 1 3 4$ 1 7 , 4 3 2$ 4 , 6 5 2$ 8 9 , 7 7 3$ 1 3 9 , 9 7 6$ 2 8 9 , 2 4 6$ 4 9 8 , 3 4 1$ 6 0 1 , 0 2 1$ 5 6 , 4 6 8$ 5 2 , 2 7 0$ 5 2 , 2 7$

M in im u m c a sh b a la n c e ta rg et 2 2 ,0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0 0$ 2 2 , 0 0$

C a sh e x c e ss (sh o r tfa l l ) 1 1 3 ,1 6 3$ 1 1 7 , 9 0 6$ 8 9 , 1 3 4$ ( 4 , 5 6 8 )$ ( 1 7 , 3 4 8 )$ 6 7 , 7 7 3$ 1 1 7 , 9 7 6$ 2 6 7 , 2 4 6$ 4 7 6 , 3 4 1$ 5 7 9 , 0 2 1$ 3 4 , 4 6 8$ 3 0 , 2 7 0$ 3 0 , 2 7$

Creating Cash Flow


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Creating Cash FlowProjections You Can

Trust

ve gol


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ve goa cleanslateNow Imready tocreate

my cashflowprojectio

ns,right??

Creating Cash Flow


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Creating Cash FlowProjections You Can

Trust$ The near future almost always

looks a lot like the recent past


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Rule #2

considerwhat ischanging

Rule #3 Be conservative


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Rule #3 - Be conservative

Rule #4 - Use the Smell Test


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Rule #4 - Use the Smell Test

Understand the Peak


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Understand the Peakand Trough Cash

MonthsCash Balance (Service Company)Dollars in Thousands

0

200

400

600

800

1,000

1,200

1 2 3 4 5 6 7 8 9 10 11 12 13

Months

Dollars

How Do You


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How Do YouDefine Cash

Flow?a. Revenues expenses

b. EBITDA

c. Net income + noncash expensesd. Cash receipts

e. Cash disbursements

f. Cash receipts - disbursementsg. None of the above

h. All of the above


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Questions?


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Here Are YourNext Steps

$ Download the Peace of Mind schedule atNeverRunOutOfCash.com/freetools.htm

$ Get the Cash is King FREE email

newsletter.$ Feel free to contact me with questions at

713 962 1646 or at [email protected].

G d L k


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Good LuckGrowing An

AwesomeBusiness

bbt webinar peace of mind cash flow management

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