bfs cf forcast webinar 8-26-2008

8/13/2019 BFS CF Forcast Webinar 8-26-2008

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Cash Flow Management

The man who does things makes manymistakes, but he never makes the biggestmistake of all – doing nothing.

-Benjamin Franklin

Business Finance SolutionsCreating Cash Flow for Small Businesses



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About Business Finance Solutions

Financial consultants andbrokers.

Over $400 million in loansoriginated.

Working Capital, Real Estate,Import-Export, Equipment,

Governmental Contract Finance.

20+ years business experience.

Leslie Thacker

Sam Thacker



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Sam Thacker – Business Articles

Visit my small business finance articles onwww.allbusiness.com, the Internet's #1 information

resource for small business owners.

3 times a week

Business finance articles are also appearing on the onlinewebsites for:

The San Francisco Chronicle

The Washington PostCBS NewsBusiness Week

http://www.allbusiness.com/9567343-1.html






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Goal of Presentation

1.Provide a strong understanding of EBITA andcash flow and what components make up cashflow.

2.Have each participant leave today withknowledge of various ways of managing their

cash on a day to day basis.



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Cash Flow Management

Three Basic Concepts

Cash = spending power

It is sometimes necessaryto accelerate collection ofreceipts and deceleratepayments

Minimize current assetsand maximize currentliabilities



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Cash Flow Warning Signs

Five Warning Signs of CF Trouble:

Decreased Liquidity

Missed Trade Discounts

Late Vendor Payments

Slow Collections

Less safety cash in bank



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The Cash Flow Cycle

PURCHASES

CASH

INVENTORIESSALES

RECEIVABLES



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EBITA

Earnings

BeforeInterestTax

Amortization



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EBITA Defined

Sales- Cost of Goods Sold

= Gross Margin- SG&A Expenses

= EBITA

Sales 1,200,000

COGS (800,000) Gross Margin 400,000

SG&A 200,000

EBITA 200,000



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Cash Flow Components

EBITA, or earnings

+/- Changes in A/R

+/- Changes in Inventory+/- Changes in Net WIP +/- Changes in Fixed Assets +/- Changes in A/P+/- Changes in Accruals +/- Changes in Debt

= CASH FLOW



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Real World Example Cash Flow

Sales 1,200,000

COGS (800,000) Gross Margin 400,000

SG&A 200,000

EBITA 200,000

1 2

Cash = spending power

EBITA 200,000

+/- A/R (375,000) +/- WIP (75,000)

+/- Assets 15,000

Cash Flow (235,000)



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A/R Turnover Calculation

Total A/R 375,000

Average Mo. Sales 100,000

Average Daily Sales 3,333 A/R Turn in Days 113

Total A/R / Average Daily Sales= A/R Turn in Days



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Increasing A/R Collections

Reduce the # of daysA/R outstanding

improves CF.

Ultimate risk ofcollection is

decreased as daysoutstanding decrease.



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Lengthening A/P Average Time

Slow down payables,improve CF

Negotiate current liabilitiesinto notes payable improvesCF.

Increases risk of venderCOD.

Decreases discount leveragewith vendor.



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Communication with Key People

Make sure your critical vendors andkey employees understand that cashflow is tight and you are working toimprove it. Share your plan!



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Create a Cash Flow Forecast

A cash flow forecast will assist youmanaging through the period of tight cash.

A good (free) cash flow Excel based cashflow forecast with directions can be

downloaded here:

http://www.lesliethacker.com/resources.htm





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Make sure you know your true cost ofsales or cost of goods sold (COGS)

Make sure you know what your truegross margin is

Try as hard as possible to pass along

any supplier / vendor price increasesto your customer

“Gottchas” to Remember



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Never, ever, ever use the IRS as anunauthorized lender

File 941 tax reports on time Pay 941 taxes on time

Monetary penalties are very high for:

Failing to file 941 tax returns on time

Failing to pay tax on time



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If your business is subject tocollecting sales tax

File quarterly sales tax reports timely

Do not fail to remit sales tax collected ontime

Though the IRS is slower to catch you

then the State sales tax collectors,the Comptroller’s actions are swiftand sure



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Once a year, chartered entities must

file a Public Information Report withthe State Comptroller’s Office

It contains very basic information aboutthe company

Failure to file this report on time willresult in the forfeiture of your charter



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Questions and Answers

Business Finance Solutionswww.lesliethacker.com

800-492-8842

[email protected]

http://www.lesliethacker.com/

mailto:[email protected]

mailto:[email protected]

http://www.lesliethacker.com/

bfs cf forcast webinar 8-26-2008

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