Money Day

From Profit to Cash: Over the River and Through the Woods

Session Objectives

After completing this session, you will be able to:

• Define the four forces that affect your cash flow

• Apply a cash flow model to your business and analyze the results

• Develop a cash flow management plan that works for you

From Profit to Cash…

The problem with cash flow is that it lags behind profit for most businesses.

Activity #1

Populating the Cash Flow Model

• Forecast profitability first, then the cash flow impacts of that profitability second.

• Once you forecast cash flow, you can begin to manage it.

• Use the levers in the model to see future growth.

Activity #1 Summary

• 10 Minutes

Break

Cash Flow Force # 1: Pay Taxes

Cash Flow Force # 2: Pay Down Debt

Cash Flow Force # 3: Build to a Core Capital Target

Cash Flow Force # 4: Pay Profit Distributions

The Four Forces of Cash Flow

Ka-Ching!

Activity #2

Forecasting Cash Flow

• Impact of Terms

• Impact of increasing / decreasing margin

• Increasing LER

• Eliminating Non-value added expenses

• Discuss Value vs. Non-Value added spreadsheet

Maximizing Cash Flow

• The Four Forces of Cash Flow drive the priorities for your available cash

• Constantly re-forecast

Activity #2 Summary

• Mishandling Deposits

• Trying to “Bully” the Big Guys

• Focusing on CF to the detriment of profit

• Not tracking leading indicators

Common Cash Flow Mistakes

• A good example of a good example

• Employee-owned

• Culture of ownership: everyone knows and understands the company’s financials

Case Study: Springfield ReManufacturing Corporation

• A good example of a bad example

• High-risk cash flow management

• Lacks culture and cash

Case Study: Groupon

• Profitability and cash are in two different time cycles

• Leaving cash in the business is a choice

• Bow to the Four Forces of Cash Flow

Session Wrap-Up