Managing cash flow, Slide Presentation


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Managing cash flow, Slide Presentation

  1. 1. MANAGING CASH FLOW Presentation on: Date: 19th September, 2013
  3. 3. What is a Cash flow management ? Forecasting, collecting, disbursing, investing, and planning for the cash. It is needed for a company to operate smoothly. It helps to evaluate whether a shortfall or surplus in cash could potentially occur.
  4. 4. Cash Flow Cash Accounts Payable Decrease in Cash Production/Cash Purchases Inventory Accounts Receivable Cash Sales Increase in Cash Leakage Leakage
  5. 5. A “cash map,” showing the amount and the timing of a firm's cash receipts and cash disbursements over time. Predicts the amount of cash a company will need to operate smoothly. A helpful tool for visualizing the resulting cash balance. The Cash Budget
  6. 6. Five Steps of Preparing a Cash Budget  Determine a Minimum Cash Balance  Forecast Sales  Forecast Cash Receipts  Forecast Cash Disbursements  Estimate End-of-Month Cash Balance
  7. 7. Determine a Minimum Cash Balance Determine the opening balances by obtaining latest bank balance, account receivable, and accounts payable balance, if the business is already in operation. If the business is new, show the current capital and the estimated capital can be gained from investors and lenders.
  8. 8. Forecast Sales The heart of the cash budget. Sales are ultimately transformed into cash receipts and cash disbursements. Cash forecast is only as accurate as the sales forecast from which it is derived.
  9. 9. Forecast Cash Receipts Address the timing of cash collection of sales. Record all cash receipts when actually received (i.e., the cash method of accounting). Determine the collection pattern for credit sales; then add cash sales. Monitor closely slow and nonpayers.
  10. 10. Forecast Cash Disbursements Record disbursements when you expect to make them. Start with those disbursements that are fixed amounts due on certain dates. Review the business checkbook to ensure accurate estimates. Try making a daily list of the items that generate cash and those that consume it.
  11. 11. Estimate End-of-Month Balance Take Beginning Cash Balance. Add Cash Receipts. Subtract Cash Disbursements Result can be Cash Surplus or Cash Shortage.
  12. 12. The “Big Three” of Cash Flow Management Accounts Receivable Accounts Payable Inventory
  13. 13. Accounts Receivable A sale is not a sale until you collect the money. The goal with accounts receivable is to collect your company’s cash as fast as you can. About 90 percent of industrial and wholesale sales are on credit, and 40 percent of retail sales are on account.
  14. 14. Accelerating Accounts Receivable Ask customers to fax or e-mail orders. Send invoices when goods are shipped. Highlight the due date on invoices. Restrict customers’ credit until past-due bills are paid Deposit checks and credit card receipts daily.
  15. 15. Accounts Payable Stretch out payment times as long as possible without damaging company’s credit rating. Verify all invoices before paying them. Take advantage of cash discounts. Negotiate the best possible terms with your suppliers. Use credit cards wisely.
  16. 16. Inventory Monitor it closely; it can drain a company’s cash. Avoid inventory “overbuying.” It ties up valuable cash at a zero rate of return. Arrange for inventory deliveries at the latest possible date. Negotiate quantity discounts with suppliers when possible.
  17. 17. Avoiding the Cash Crunch Consider bartering, exchanging goods and services for other goods and services, to conserve cash. Trim overhead costs. For example: Ask for discounts and “freebies” Periodically evaluate expenses. Lease rather than buy. Avoid nonessential cash outlays. Negotiate fixed loan payments to coincide with your company’s cash flow.
  18. 18. Continued (Trim overhead costs) Buy used equipment. Hire part-time employees and freelancers. Control employee advances and loans. Establish an internal security and control system. Devise a method for fighting check fraud. Change shipping terms. Start selling gift cards. Switch to zero-based budgeting.
  19. 19. Small Business Success No matter what the economic forecast, keeping company’s cash flowing can: Help the company to grow and expand. Keep vendors and employees paid and happy. Invest in new products or markets. Make the business a success.