Improving Profits and Cash Flow Improving Profits & Cash Flow
Cash Flow Budgets
-
Upload
elton-bowman -
Category
Documents
-
view
29 -
download
0
description
Transcript of Cash Flow Budgets
![Page 1: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/1.jpg)
Budgeting in Tough Times:A Key Business Tool
Moderator: Arthur Sanders, CPASenior Partner: Israeloff, Trattner & Co.
![Page 2: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/2.jpg)
Cash Flow Budgets
How to Use this Effective Planning Tool
Presented by:
Michael Buoncore, CPA – CFO
Posillico Civil, Inc.
![Page 3: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/3.jpg)
Cash is KING
![Page 4: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/4.jpg)
Operating vs. Cash Flow BudgetsWhat’s the difference?
• Operating Budget – A detailed projection of all estimated income and expenses based on forecasted sales for a given period. The operating budget focuses only on the components of the Income Statement.
• Cash Flow Budget – A detailed estimate of the timing of cash inflows and outflows over a given period. The cash flow budget focuses on the sources and uses of cash, which includes components of both the Income Statement and Balance Sheet.
![Page 5: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/5.jpg)
Cash Flow BudgetsStatement of Cash Flows
Significant Sources of Cash
Cash sales Collection of accounts
receivable Loan proceeds Sales of FF&E Capital contributions
Significant Uses of Cash
Cash expenses Payment of accounts payable Loan repayments Purchases of FF&E Distributions / dividends Purchases of inventory/raw
materials
![Page 6: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/6.jpg)
Cash Flow BudgetsItems to Improve Collections
• Be selective in choosing customers (KYC to CYA)• Use credit application• D&B report analysis• References (new, established and lost)• Better Business Bureau
• Know your customer’s accounts payable process• Flowchart their payment process• Payment cutoff dates• Personnel in process
• Accept credit/debit cards• Negotiate discounts for faster payment
![Page 7: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/7.jpg)
Cash Flow BudgetsItems to Improve Payments
• Offer discounts for early payment
• Set specific day(s) that you cut checks• Keep the process in line with industry benchmarks• Eliminate late charges & penalties• Don’t pay vendors early due to personal relationships
• Wherever possible, match vendor payments with related cash collections
![Page 8: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/8.jpg)
Cash Flow BudgetsThe Pains of Growth
Week Month 1 Month 2 Month 3 Month 4
Number Costs Billings Cash in Net cash Costs Billings Cash in Net cash Costs Billings Cash in Net cash Costs Billings Cash in Net cash
1 (1,350) (1,350) (1,350) (1,350) (1,350) (1,350) (1,350) (1,350)
2 (1,350) (1,350) (1,350) (1,350) (1,350) (1,350) (1,350) - (1,350)
3 (1,350) (1,350) (1,350) (1,350) (1,350) (1,350) (1,350) (1,350)
4 (1,350) 7,715 (1,350) (1,350) 7,715 (1,350) (1,350) 7,715 7,715 6,365 (1,350) 7,715 7,715 6,365
Monthly (5,400) 7,715 - (5,400) (5,400) 7,715 - (5,400) (5,400) 7,715 7,715 2,315 (5,400) 7,715 7,715 2,315
Cumulative (5,400) (10,800) (8,485) (6,170)
Mth 1 YTD Mth 2 YTD Mth 3 YTD Mth 4 YTD
Revenue 7,715 7,715 7,715 15,430 7,715 23,145 7,715 30,860
Cost of sales 5,400 5,400 5,400 10,800 5,400 16,200 5,400 21,600
Gross profit 2,315 2,315 2,315 4,630 2,315 6,945 2,315 9,260
Overhead 675 675 675 1,350 675 2,025 675 2,700
Profit 1,640 1,640 1,640 3,280 1,640 4,920 1,640 6,560
21%
Assumptions: Salary: $1,000/wk; Benefits: $350/wk (35%); Profit Margin: 30%; Overhead Costs: $675/month; Client pays in 60 days
![Page 9: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/9.jpg)
Cash Flow BudgetsHow Does the Bank Fit In?
• Your bank is not a vendor, but an critical partner in the cash flow equation.
• Debt options– Line of credit (fund working capital)– Fixed rate term debt (long term purchases)– Variable rate term debt (long term purchases)– Leases
![Page 10: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/10.jpg)
Cash Flow BudgetsMeasurement Tools
• Every company is leveraged• A/P, Accrued expenses, Formal debt, commitments
• Working Capital (current assets – current liabilities)
• Current Ratio (current assets/current liabilities)
• Acid Test (Liquid) Ratio (Cash, A/R & investments/current liabilities)
• Days Cash (cash/daily cash expenses)
• Days Sales Outstanding (A/R / daily sales)
• Days Payable Outstanding (A/P / daily expenses)
![Page 11: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/11.jpg)
OPERATING BUDGETS
IT IS HOW YOUR BUSINESS RUNS
Presented by: Marc P Palker, CMA
Managing Director-Madison Davis Professional Services, LLC
![Page 12: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/12.jpg)
HOW IMPORTANT ARE BUDGETS?
• They make you think ahead
![Page 13: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/13.jpg)
HOW IMPORTANT ARE BUDGETS?
• They make you think ahead
• They make you think about how your business runs
![Page 14: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/14.jpg)
HOW IMPORTANT ARE BUDGETS?
• They make you think ahead
• They make you think about how your business runs
• They engage all levels of management
![Page 15: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/15.jpg)
HOW IMPORTANT ARE BUDGETS?
• They make you think ahead
• They make you think about how your business runs
• They engage all levels of management
• They provide measurements to compare results
![Page 16: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/16.jpg)
HOW IMPORTANT ARE BUDGETS?
• They make you think ahead
• They make you think about how your business runs
• They engage all levels of management
• They provide measurements to compare results
• They allow for new products, services, and divisions to be tracked
![Page 17: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/17.jpg)
HOW CAN BUDGETS BE ORGANIZED?
• Product
![Page 18: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/18.jpg)
HOW CAN BUDGETS BE ORGANIZED?
• Product
• Service
![Page 19: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/19.jpg)
HOW CAN BUDGETS BE ORGANIZED?
• Product
• Service
• Division
![Page 20: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/20.jpg)
HOW CAN BUDGETS BE ORGANIZED?
• Product
• Service
• Division
• Location (state, region, country)
![Page 21: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/21.jpg)
HOW CAN BUDGETS BE ORGANIZED?
• Product
• Service
• Division
• Location (state, region, country)
• Sales executives
![Page 22: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/22.jpg)
HOW CAN BUDGETS BE ORGANIZED?
• Product
• Service
• Division
• Location (state, region, country)
• Sales executives
• Any combination of the above
![Page 23: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/23.jpg)
How do you want to measure your business?
• Key Performance Indicators» Total Sales» Unit Sales» Gross Margin» Expense Ratios» Pretax Income» Net Income» Cash Flow» Non GAAP Measures
![Page 24: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/24.jpg)
Types of Budgets
• Budgets can be prepared based on the previous year or years.
![Page 25: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/25.jpg)
Types of Budgets
• Budgets can be prepared based on the previous year or years.
• Zero based budgeting.
![Page 26: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/26.jpg)
Types of Budgets
• Budgets can be prepared based on the previous year or years.
• Zero based budgeting.
• Rolling budgets.
![Page 27: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/27.jpg)
Types of Budgets
• Budgets can be prepared based on the previous year or years.
• Zero based budgeting.
• Rolling budgets.
• Periodic updating.
![Page 28: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/28.jpg)
Management Involvement
• The more departments that are involved in the budgeting process the better the ownership in the process. When results are reported you really do not want to hear,
• “It is not my budget, it’s your budget”
![Page 29: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/29.jpg)
Budget Cycle(assumes December 31, year end)
September 30(9 months results)
![Page 30: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/30.jpg)
Budget Cycle(assumes December 31, year end)
September 30(9 months results)
Templates Distributed
![Page 31: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/31.jpg)
Budget Cycle(assumes December 31, year end)
September 30(9 months results)
Templates Distributed
Preliminary Budget
![Page 32: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/32.jpg)
Budget Cycle(assumes December 31, year end)
September 30(9 months results)
Templates Distributed
Preliminary Budget
Revised Budget
![Page 33: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/33.jpg)
Budget Cycle(assumes December 31, year end)
September 30(9 months results)
Templates Distributed
Preliminary Budget
Revised Budget
Final Budget
![Page 34: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/34.jpg)
Budget Templates
• When designing budget templates you first must decide the level of detail you want.
• Based on that decision, you must provide that level of detail in the historical information.
• Information needed to make intricate calculations should be programmed and locked in the spreadsheets.
![Page 35: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/35.jpg)
Analysis
• Why do I need to look at the comparison to the previous year?
![Page 36: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/36.jpg)
Analysis
• Why do I need to look at the comparison to the previous year?
• What is the relationship to that comparison and the comparison to the budget?
![Page 37: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/37.jpg)
Analysis
• Why do I need to look at the comparison to the previous year?
• What is the relationship to that comparison and the comparison to the budget?
• Who should these reports be distributed to?
![Page 38: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/38.jpg)
Analysis
• Why do I need to look at the comparison to the previous year?
• What is the relationship to that comparison and the comparison to the budget?
• Who should these reports be distributed to?
• Should meetings be held in conjunction with the issuance of these reports?
![Page 39: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/39.jpg)
Monitoring Your Business
Presented by:
Manny Cafiero, CPA – CFO
Scales Industrial Technologies, Inc.
![Page 40: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/40.jpg)
Understanding Your Business
Understanding Your Changing Environment
![Page 41: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/41.jpg)
Questions You Need To Answer
1) What issues keep you up at night?
2) Does your business have stated goals and objectives?
3) Do you have effective leaders and management?
4) Are people willing to change? (especially leaders)
5) Are there pressures on the business? (Ex: Make more money)
![Page 42: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/42.jpg)
Is Your Company Focus Still Relevant?
What New Factors Should We Consider?
External
Internal
![Page 43: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/43.jpg)
Developing Your Critical Success Factors(CSF’s)
CSF’s are what your business MUST get right to be successful
![Page 44: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/44.jpg)
CSF’s cover Financial & Non-Financial Areas
• Cash Levels
• Management Succession
• Customer Satisfaction
• Employee Retention
• A/R Collection
• Inventory Turns
• Profitability
• Billing per Employee
![Page 45: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/45.jpg)
Monitoring• How do you know if you are successful and
meeting our objectives?• You must have Key Performance Indicators
(KPI’s) to measure your progress.• KPI’s are:
– Financial & Non-Financial– Have little chance of producing erroneous
results– Timely and easy to obtain
![Page 46: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/46.jpg)
Areas to Monitor
• Cash– Daily Cash Level– Cash Projections – A/R Aging & DSO– Inventory Levels & Turns– A/P Terms
“Cash Is King”
![Page 47: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/47.jpg)
Revenue• Sales
– Backlog Reports– Bookings– Billings
• Service operations– Hours Billed vs. Hours Paid – Open Calls– Covered Calls– Repeat Calls– Over Time Reports
![Page 48: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/48.jpg)
Financial Statements
• Comparisons– Year to Year– As a % of Sales– Actual to Budget
• Ratios– Gross Profit Analysis– Gross Profit Divided by Employment– Contribution Margins– Profit as % of Sales
![Page 49: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/49.jpg)
YTD
![Page 50: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/50.jpg)
Non-Financial Areas
• Customer Satisfaction• Warrantees• Repeat Calls• Lost Sales• Vendor Relationships• Employee Communication• Employee Satisfaction• Employee Rewards vs. Company Goals
![Page 51: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/51.jpg)
Actions
• Some indicators require a limited action
• Some are more predictive in nature
• Some require immediate action
• Some are life threatening
What Do the Indicators Mean
![Page 52: Cash Flow Budgets](https://reader037.fdocuments.us/reader037/viewer/2022103100/56813711550346895d9e99d1/html5/thumbnails/52.jpg)
Focus – It’s a Balance
ProfitsProfits Customer Customer ServiceService
• Gross ProfitGross Profit
• Inventory TurnsInventory Turns
• Labor EfficiencyLabor Efficiency
• Better PurchasingBetter Purchasing
• Maximize Sales PriceMaximize Sales Price
• CollectionsCollections
• QualityQuality
• Response TimeResponse Time
• Availability of Parts and LaborAvailability of Parts and Labor
• Technical AbilityTechnical Ability
• Exceed ExpectationsExceed Expectations