Manage Your Cash Flow EVERY Day 2015 Manager... · 2018. 1. 22. · Manage Your Cash Flow EVERY Day...
Transcript of Manage Your Cash Flow EVERY Day 2015 Manager... · 2018. 1. 22. · Manage Your Cash Flow EVERY Day...
Manage Your Cash Flow EVERY Day
John Schimmoller, CPA
Certified Marketing Consultants, Ltd.
January 12, 2015
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Managing Cash Flow
The following material presented by Certified Marketing Consultants, Ltd. is based upon historical data collected by CMC, Ltd. The opinions and conclusions expressed during this presentation are the unbiased and professional opinions of CMC, Ltd. and are being presented for the purpose of discussion only.
Manage Your Cash Flow EVERY Day
If you don’t manage cash flow your business will fail.
The faster you grow, the sooner your business will fail.
What does “managing cash flow” mean?
– To think about?
– To be aware of?
– To watch?
Managing Cash Flow
Managing is “to direct, to exert authority, discipline or persuasion.”
MANAGING CASH FLOW IS NOT A PASSIVE ACTIVITY!
Managing Cash Flow
What is Cash Flow?
When does Cash Flow?
Where does Cash Flow?
How does Cash Flow?
Managing Cash Flow
Cash flow is the difference between what you get paid by customers and
what you pay to vendors, employees, utility companies, Uncle Sam, etc.
Managing Cash Flow
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When Does Cash Flow?
Cash Flows EVERY DAY. So that means you must manage Cash Flow EVERY DAY.
• Deposit customer checks daily,
• Bill customers the same day you get billed,
• Collect accounts receivable daily,
• Review daily cash disbursements,
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Where Does Cash Flow? Into your bank from your customers.
Out of your bank to: • Landlord
• Employees
• Salespeople
• Vendors
• Phone company
• Electric company
• Government
• Freight company
• Office supply company
• Computer store
• Insurance company
• Post office
• Contract programmers
• Yourself?
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How Does Cash Flow?
• Is it predictable?
• Is it measurable?
• Is it random?
• Is it arbitrary?
• Can it be influenced?
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Managing Cash Flow
“The sale isn’t over until the
cash is in the bank.”
It doesn’t matter if you’re the best salesperson in the world. You will experience hardship if you don’t manage cash flow. We have seen MANY sad situations where great sales organizations have failed because
THEY DIDN’T MANAGE CASH FLOW!
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Managing Cash Flow
There are 4 steps to intentionally managing cash flow:
1. Plan
2. Involve
3. Monitor
4. Adjust
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Planning Cash Flow
1. Compile an annual budget with monthly cash projections,
2. Base the budget on prior year experience adjusted for new facts,
3. Consider AR collection & AP payment cycles,
4. Be conservative,
5. Identify expenses that can be adjusted,
6. Insert capital expenditures where needed & available,
7. Budget next year month when current month is over.
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Annual Budget January February March…… Total year Last Year
Sales $10,000 $50,000 $100,000 $1,000,000 $800,000
Cost of Sales $ 6,500 $32,500 $ 65,000 $ 650,000 $520,000
Gross Profit $ 3,500 $17,500 $ 35,000 $ 350,000 $280,000
Commissions $ 1,750 $ 8,750 $ 17,500 $ 175,000 $140,000
Wages $10,000 $10,000 $ 10,000 $ 120,000 $100,000
Payroll Taxes $ 800 $ 800 $ 800 $ 9,600 $ 8,000
Advertising $ 200 $ 0 $ 300 $ 1,000 $ 1,000
Office Expenses $ 200 $ 500 $ 300 $ 2,000 $ 1,700
Rent $ 1,000 $ 1,000 $ 1,000 $ 12,000 $ 12,000
Utilities $ 500 $ 500 $ 300 $ 6,000 $ 5,700
Insurance $ 5,000 $ 0 $ 0 $ 5,000 $ 4,600
Miscellaneous $ 100 $ 100 $ 100 $ 1,200 $ 1,000
Net Income (Loss) ($16,050) ($ 4,150) $ 4,700 $ 18,200 $ 6,000
Change in AR $90,000 ($40,000) ($ 50,000) ($ 20,000) $ 10,000
Change in AP ($58,500) $26,000 $ 32,500 $ 13,000 ($ 6,500)
Capital Expenditures $ 0 $ 0 ($ 3,000) ($ 10,000) ($ 2,000)
Net Cash Flow $15,450 ($18,150) ($ 15,800) $ 1,200 $ 7,500
Bank Funds ($15,000) ($18,000) $ 16,000 ($ 1,200) ($ 7,500)
Beginning Cash Balance $ 1,000 $ 1,450 $ 1,300 $ 1,000 $ 1,000
Ending Cash Balance $ 1,450 $ 1,300 $ 1,500 $ 1,000 $ 1,000
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Involve
There are many people who can help you manage your cash flow:
– Employees
– Salespeople
– Customers
– Suppliers
– IT providers
– Post office
– Bank
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Monitor
Use management reports:
Cash balance daily.
Aged unbilled orders with expected gross profits weekly.
Aged accounts receivable weekly.
Aged accounts payable weekly.
Actual income statement / cash flow monthly.
Balance sheet monthly.
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Adjust
1. Compare actual cash flow to budgeted cash flow,
2. Change efforts to better achieve targets,
3. Change capital expenditure plans if necessary,
4. Adjust operating expenses as needed,
5. Consider accelerating spending if excess cash is available,
6. Tax planning.
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Cash Flow Tools
• Cash or credit card charge with order,
• Pay once a week or twice a month & communicate your payment plan to vendors,
• Take trade discounts,
• Negotiate with suppliers,
• Credit policy,
• Consistent collection efforts with customers,
• Have suppliers bill large orders direct,
• Have suppliers e-mail or fax invoices immediately upon shipment of orders,
• Bill your customers immediately via e-mail or fax,
• Credit hold.
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Cash Flow Traps
• Paying vendors with company or personal credit cards,
• Owning customer inventory,
• Buying decorating equipment,
• Accepting credit card payments on normal terms,
• Low margins,
• Huge orders,
• Importing,
• Financing negative cash flow with bank debt,
• Low owner’s compensation.
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Manage Your Cash Flow EVERY Day
It requires cash to grow your business to finance higher receivables, additional personnel, bigger facility, new computer hardware & software, etc.
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Manage Your Cash Flow EVERY Day
You need to have strong positive cash flow to grow your business.
If your cash flow is negative or marginal, your business will surely fail if you successfully grow it.
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Manage Your Cash Flow
EVERY Day
Questions?
Thanks and Good Luck!