Cash Flow Management

Andrew Guerin FCPA AITI
Andrew Guerin Associates.
www.aguerin.ie

Andrew Guerin Associates-Business
and Taxation Advisers www.aguerin.ie
21 May 2012 Phone 021-4840721 1

 Managing cash flow for Businesses
 Personal cash flow issues
 Own Personal experiences
 Revenue Commissioners
 Tax planning
 Personal financial planning
 Bank negotiations
 Wealth management
 Future of Euro
 Budget 2012
Andrew Guerin Associates-Business and Taxation Advisers
21 May 2012 2
www.aguerin.ie Phone 021-4840721

21 May 2012 www.aguerin.ie Phone 021-4840721 3

Cash is King

Profit V Cash

Profitable businesses will always survive !!

What happens if profit is tied up in working capital ?

Stock, debtors, work in progress

Impact of bad debts !!

21 May 2012 4

“Cash flow is the movement of
money in and out of the business”

21 May 2012 5

Cash

Debtors

Purchases

Sales

Stock

21 May 2012 6

•Regular management meetings

•Debtor management

•Supplier / creditor management

•Stock control

•Cost management
21 May 2012 7

•Short term funds

•Long term funds


•Cash generated within business(profits)

•Trade creditors

•Bank overdraft

•Leasing/hire purchase

•Debtor financing

•Employment and R & D grants

•Invoice discounting


• Retained profits

• Equity investors/Share capital

• Long term leases

• Capital grants

• Business expansion scheme EIIS


Document in house collection procedures
Assign responsibility for implementation
Encourage up front payments
Offer discounts for Early payment
Monitor credit limits regularly
Use internet banking

Andrew Guerin Associates-Business and Taxation
21 May 2012 Advisers www.aguerin.ie Phone 021-4840721 12

21 May 2012 13

 Bill early( ideally before completion)
 Issue invoices early and follow up with monthly
statements
 We frequently get what we deserve !!!
 Problems frequently arise on issuance of invoices for
services provided but forgotten
 Cash on delivery
 Get paid while still needed (once goods or services
provided supplier is no longer priority)


 Get deposits for new and or bigger orders
 Consider invoice discounting
 Accept post dated cheques
 Re-present bounced cheques(talk to bank)
 Accept/encourage electronic payment
 Arrange early face to face meetings to resolve accounts
in dispute.
 Don’t accept current perceived entitlement to discount
 Accept debit/credit cards

 Avail of credit terms
 Negotiate discount for early payment ( cash !!)
 Continually review costings (look for 3 quotes)
 Pay electronically
 Switch utility suppliers


 Surplus stock incurs unnecessary costs including bank
interest, insurance premises.

 Monitor stock turnover(purchases/stock)

 Identify slow moving stock and dispose of

 Monitor security procedures to minimise pilferage

 What are the optimum stock levels

 Consider just in time.

 Identify Key cost Drivers
 Review all cost categories
 Implement action plan to reduce business costs
 Spread larger cost including insurance over
year.

21 May 2012 Phone 021-4840721 18

 Sales
 Purchases
 Gross profit margin
 Net profit margin
 Stock turnover(stock/net purchases)
 Debtors days (debtors/gross sales per day)
 Creditors days (creditors/purchases per day
 Monthly cash payments


 Why !!!

 Will help predict cash shortages thereby enabling
businesses arrange funds to ensure that sufficient
funds are available during these periods to sustain the
business.

 The days of ringing the bank to increase the overdraft
facility temporarily are now a distant past. Those were
the days !!


Cash flow statement is similar to the profit and loss account with
a few notable differences including:

 P & L figures are historic

 Cash flow statements usually are projections for the future.

 Cash flow statement ignore amounts due and reflects expected
cash receipts and payments i.e . It reflects what is expected to
go through the bank.

 P & L accounts are vat exclusive if the business is registered
for vat. The figures in cash flow statement are vat inclusive.


• Discuss with accountant
• Use the previous years P & L account as starting
reference
• Project figures for next 12 mts
• Use an excel template or accounting package
• Keep up to date
• Anticipates potential cash shortages


 Estimate sales and cash receipts for next 12 months.

 Quantify costs including loan repayments ,tax
payments, leasing , capital expenditure etc.

 Include no trading receipts including grants, tax
rebates, loans received capital and revenue grants.


€
Cash receipts 50,000
Cash payments 70,000
Surplus payments 20,000

Opening Bank Balance 25,000
Closing Bank Balance 5,000

21 May 2012 Phone 021-4840721 24

Simple Cash Flow projection

3 months to 31 march 2012

Month Jan-12 Feb-12 Mar-12
€ € €
Income
Sales receipts (vat inclusive) 10000 8000 4000
Vat refunds 2000 0 1000
Grants received 0 0 5000
Total cash received 12000 8000 10000

Less cash payments

Wages 6000 6000 6000
Rent 2000 2000 2000
Miscellaneous expenses 5000 4000 4250

Total payments 13000 12000 12250

Surplus payments over receipts -1000 -4000 -2250

Bank Summary

Opening bank balance 10000 9000 5000

Surplus payment over receipts -1000 -4000 -2250

Closing Bank Balance 9000 5000 2750

21 May 2012 25

MAY JUN JULY AUG SEPT OCT NOV DEC JAN FEB
11 11 11 11 11 11 11 11 12 12


 Be ruthless
 Take immediate action/don’t delay
 Directors loans/personal cash injection
 Avoid personal guarantees
 Be pro active
 Talk to creditors
 Agreement with creditors
 S 201 arrangements
 Examinership
 Liquidation

21 May 2012 27

 Collect/ agree fee before conclusion(Revenue audit)
 Test the water (small invoice)
 Letter of engagement/documentary agreement
(court case)
 Bank relationships (bounced cheques)
 Advance agreement
 Tyre kickers (Numerous previous agents)

21 May 2012 Phone 021-4840721 28

 Foreign customers (Dutch partnership)
 Monthly statements
 House renovation (invoices)
 Black economy
 Issuance of invoices before completion
 Timing of collection


 Corporate V Sole traders/partnerships
 Corporate tax rate 12.5%
 Tax breaks for new companies
 Salaries for spouses/partners in family businesses
 Children's salaries in family businesses
 Company cars
 Claiming civil service mileage rates
 Bes relief
 Research and development credits


4year rule for claiming tax refunds
Medical expenses and other tax credits

Basis for accounting for vat

Recovering vat on bad debts

Entertainment expenses

Timing of tax receipts

DD for tax payments

Electronic tax filing

Revenue online & Paye Anytime

Loss relief

5/10 % surcharge (File & don’t pay !!)


 Electronic returns
 Electronic payments
 Paye,Vat, CT, IT, RCT,Capita taxes
 Revenue Audits
 Instalment arrangements
 Post dated cheques
 5/10% surcharge
 Revenue E brief 71/11 Tax payment difficulties
Andrew Guerin Associates-Business and Taxation Advisers www.aguerin.ie
21 May 2012 Phone 021-4840721 32

 Tracker mortgages to preserved at all costs
 Life assurance
 Transferring properties to Companies
 Creating group structure/inter co financing
 Golden shares for group structure
 Revenue settlements
 Tax deferrals

21 May 2012 Phone 021-4840721 33

 Limited funding
 Will fund businesses that are viable and have strong cash
flows
 Restricting/reducing credit for struggling businesses
 Detailed management information required including
monthly accounts, projections, debtors listings etc.
 Repayment capacity key lending criteria


 Surviving businesses will be leaner, with cash
retention, good monitoring systems , and strong
management.
 Be pro-active
 Bank want to see owners funds in business.
 Want evidence that business is capable of returning to
solvency in foreseeable future.
 Identify new opportunities /markets.

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o Detailed documentation
o Strong management
o Tax clearance
o Copy of premises lease if leased by individual
to Company
o Attitude softening in relation to loan
repayments on property transactions


 Will probably be determined at the EU leaders
summit in Brussels next Friday.

 Collapse will obviously have major
repercussions for everyone and doesn’t bear
thinking through.

 Lets hope the European leaders come to an
eventual agreement before its too late.
21 May 2012 38

 Return on investments
 Dirt rates
 Potential devaluation
 Foreign currencies
 Exchange rate risks
 Current deposit rate in excess of 4% unsustainable
 Spread deposits to benefit from €100 k
Government guarantee.


 How accountants operate
 Basis for charging
 Avoid bottlenecks
 Provide all relevant information
 Minimise accountants time on routine work and get
advice on growth ,potential savings, tax planning and
strategic management
 Added value services
 Obtain written recommendations


 Consider audit exemption

 Company V Sole Trader

 Review annual letters of audit findings and
letters of recommendation

 Agree /document and monitor an action plan


 Vat rate up 2% to 23% from 01/01/2012
 Property Tax €100. Will increase in future
 Prsi extended to unearned income including
rental ,deposit interest and other investment
income
 Dirt increased to 30%
 Capital gain tax
 Capital acquisitions tax

Andrew Guerin Associates-Business and Taxation Advisers www.aguerin.ie
21 May 2012 Phone 021-4840721 42

 BES /EIIS investments
 Film investments
 Pension Top ups
 Corporate Pensions - 4 year time limit for
overlooked tax claims
 File outstanding tax returns to avoid surcharge
increasing from 5% to 10%.
 Make negligible value loss relief claims.


Know your key performance indicators
Prepare monthly management accounts
Continually review your cash flow projections
Match short /long term funding to nature of

expenditure.
Keep bank on board
Stay ahead of the dreaded tax man


 Sales are vanity

 Profit is sanity

 Cash is reality

21 May 2012 45
Advisers www.aguerin.ie Phone 021-4840721

As outlined at the start of this presentation one of
the oldest proverbs in business is

“Cash is King”,

this is still very much the case and will be tested
to the limit over the next few days , weeks and
months.

21 May 2012 Phone 021-4840721 46

21 May 2012 Phone 021-4840721 47

Cash Flow Management

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