Successful Cash Management For Your Business

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Timely content providing strategies and tools to implement an effective cash management strategy for your business


  • 1. Successful Cash ManagementFor Your Business! Presented by Strategic Growth Partners, LLCFor

2. Successful Cash ManagementFor Your Business!Discussion Agenda Understanding the Keys to good Cash Flow Management Maximizing Cash Flow in Your Business Tips and Tools in Implementing a Cash Flow Management Strategy 3. Understanding the Keys to goodCash Flow ManagementCash flow refers to themovement of cash into orout of a business.Measured by cash receiptsless cash outlays(expenses).Accrual accounting differentfrom cash accounting(accounts receivable,accounts payable, etc.) 4. Understanding the Keys to goodCash Flow ManagementWhat is Working Capital?Current Assets Current LiabilitiesCurrent Ratio is a metric that measures the amount ofcurrent assets to current liabilitiesRepresents operating liquidity available to a businessPositive working capital is required to ensure that afirm is able to continue its operations and satisfyupcoming operational expenses and maturing short-term debt. 5. Understanding the Keys to goodCash Flow ManagementWhat Affects Cash Flow and WorkingCapital?Accounts Receivable: When ARincreases, you are using cash; whenAR decreases you are producing cashInventory: When inventoryincreases, you are using cash; wheninventory decreases you are producingcashAccounts Payable: When AP goesup, you are producing cash; when APgoes down, you are using cash. 6. Understanding the Keys to goodCash Flow ManagementThe Cash Flow Statement The Holy Grail to good cashflow managementBasic elements of a cash flow statement Starting Cash Cash In-Flows: Cash Sales Collections on Accounts Receivable Loan Proceeds Cash Out-Flows: Operating expenses paid Payments to vendors (accounts payable) Loan repayments (principal) Ending Cash 7. Understanding the Keys to good CashFlow ManagementCash Flow WorksheetOct-09Nov-09 Dec-09Jan-10Feb-10 Mar-10 Total Beginning Cash Balance 50,000 $50,000$50,000 $50,000 $50,000$50,000 Cash Inflow (Incomse):Accts. Rec. Collections200,000175,000125,000100,000125,000175,000 900,000Loan Proceeds32,800 42,800 20,550175 96,325Cash Sales15,00010,000 12,500 13,000 15,00065,500Other: 0 0 Total Cash Inflows $215,000 $207,800 $177,800 $133,050 $138,175 $190,000 $1,061,825 Available Cash Balance $265,000 $257,800 $227,800 $183,050 $188,175 $240,000 Cash Outflow (Expenses): sA dvertising 5,0005,0005,0005,0005,0005,00030,000Bank Service Charges 300300300300300300 1,800Credit Card Fees 2,5002,0002,0002,2502,3752,50013,625H ealth Insurance 10,000 10,000 10,000 10,000 10,000 10,00060,000Insurance5,0005,0005,0005,0005,0005,00030,000Interest 2,5002,5002,5002,5002,5002,50015,000Inventory Purchases 75,000 20,000 20,000 25,000 30,000 35,000 205,000M iscellaneous15,000 15,000 10,000 10,000 10,000 15,00075,000Payroll 40,000 40,000 40,000 40,000 40,000 40,000 240,000Payroll Taxes7,5007,5007,5007,5007,5007,50045,000Professional Fees5,0005,0005,0005,0005,0005,00030,000Rent or Lease 15,000 15,000 15,000 15,000 15,000 15,00090,000Subscriptions & Dues 1,0001,0001,0001,0001,0001,000 6,000Supplies 2,0002,0002,0002,0002,0002,00012,000Taxes & Licenses 1,0001,0001,0001,0001,0001,000 6,000U tilities & Telephone 1,5001,5001,5001,5001,5001,500 9,000Other:000 Subtotal $188,300 $132,800 $127,800 $133,050 $138,175 $148,300$868,425 Other Cash Out Flow s: Capital Purchases 50,00050,000 Loan Principal 26,700 25,00041,70093,400 Owner's Draw 50,000 50,000 Other: 0Subtotal$26,700 $75,000$50,000 $0 $0$41,700 $193,400Total Cash Outflow $215,000s$207,800 $177,800 $133,050 $138,175 $190,000 $1,061,825 Ending Cash Balance$50,000 $50,000$50,000$50,000$50,000$50,000 8. Maximizing Cash Flow in Your Business Managing Accounts Receivable Establishing credit policies and limits Invoicing- timing and terms Managing and monitoring your A/R Open invoices reports A/R turnover metrics Collections Write offs 9. Maximizing Cash Flow in Your Business Managing Accounts Payable Getting the terms you need A/P turnover metrics Taking discounts Taking inventory on consignment Managing inventory Just in time practices Inventory requires healthy working capital Inventory on hand reports; inventory turnover metrics 10. Tips and Tools in Implementing a Cash Flow Management Strategy Depository Services Depositing funds via the internet Receiving payments via credit card and ACH debit On-line account services Balance and account activity information Bill payments, timing to coordinate with available cash Funds transfer between accounts (deposits and loans) 11. Tips and Tools in Implementing a Cash Flow Management Strategy Credit Card Services Using to pay bills and obtain benefits of float Look for card associated benefits (i.e. reward points, frequent flyer miles, etc.) Manage use appropriately, paying off balance monthly to avoid interest charges and late fees 12. Tips for Managing a Cash Flow CrisisPrepare/update cash flow projectionDetermine cash short fall (timing and extent)Managing cash inflows: Sell to clients who pay Pre-bill/Job deposits Invoice for work more frequently/Discounts for quick payments Collect by credit card/ACH debits/remote deposit servicesManaging cash outflows: Extended terms with vendors Pay vendors on agreed terms, not beforehand Review all expense itemsOutside sources of cash: Banks, leasing resources, factoring Federal, State & Local Government resources (direct loans, SBA, economic development, etc.) Personal and family resources (home equity loan, credit cards, retirement accounts) 13. Successful Cash ManagementFor Your Business! Questions? 14. Successful Cash ManagementFor Your Business!Strategic Growth Partners is a joint venturebetween Donohue-Hart & Associates andAlliance Advisory Group.It was formed to provide businesses withaccess to professional and affordablestrategic planning and execution advisoryservices.The professionals that make up StrategicGrowth Partners have over one hundredyears of combined experience in owning,operating and managing various businessenterprises. 15. Successful Cash ManagementFor Your Business! To Contact Us for Further Information:Randy Farnum 410-409-0286


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