Cash Flow Webinar
April 25, 2012
11:00 a.m. – 12:00 p.m. EST
Developed by:
Charles R. Chambers, MBA, CPA, CMA
President
419-304-0285
www.crc@consultacfo.com
Heather Bradley ORSCC
President & CEO
419-309-4252
www.TheFlourshingCompany.com
Presenter:
Charlie Chambers
•
•
•
•
•
Full-time SBDC Counselor since 2010
Consulting business since 2008
CFO and Controller for a number of companies
Adjunct faculty for graduate school University of Toledo
Past President of Toledo Chapter of FEI (Financial
Executives International
• CPA and CMA; MBA from University of Toledo
Learning Objectives:
• Understand the concept of cash flow.
• Understand the impact cash flow has on
your business.
• Identify tools you can use immediately.
• Become aware of the need for a Cash
Flow Statement and Cash Flow Forecast.
Cash Flow
The Real Engine of Your Business
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Company XYZ
Cash Flow Statement
Net Income
Depreciation
Deferred Taxes
Non-Cash Items
Accounts Receivable
Inventories
Prepaid Expenses
Other Assets
Accounts Payable
Payable / Accrued
39.57
36.02
16.43
-10.71
-15.26
32.23
62.24
2.21
18.09
-0.57
Cash from Operating Activities
180.25
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Company XYZ
Cash Flow Statement
Capital Expenditures
Acquisition of Business
Sale of Fixed Assets
Purchase of Investments
-41.53
-30.48
9.8
-1.2
Cash from Investing Activities
-63.41
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Company XYZ
Cash Flow Statement
Financing Cash Flow Items
Cash Dividends Paid - Common
Issuance (Retirement) of Stock, Net
Long Term Debt, Net
-3.93
-6.35
0.52
-42.83
Cash from Financing Activities
-52.59
Net Change in Cash
Net Cash - Beginning Balance
Net Cash - Ending Balance
64.25
81.68
145.93
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Understanding Cash Flow
• Will help you manage your business for profitability.
• Will help you meet the needs of lenders, suppliers and
investors.
• Will help you pay your suppliers on time.
• Will help you pay your taxes and your bank on time.
• Will help you pay your employee withholding and sales
taxes on time.
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
The Cash Flow Puzzler
How can my Profit and
Loss Statement say I
made money BUT……
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
The Cash Flow Puzzler
How can my Profit and
Loss Statement say I
made money BUT……
I can’t pay my bills?
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
The Cash Flow Puzzler
How can my Profit and
Loss Statement say I
made money BUT……
I can’t pay my bills?
Answer: Cash Flow is
the forgotten statement
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
The Cash Flow Puzzler
Cash flow is NOT profit!
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
What is Cash Flow?
Inflow
Outflow
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
It’s Cash That Counts
Inflow
•
•
•
•
•
Cash sales
Collections on accounts receivable
Borrowed funds
Investment or interest income
Invested cash by you or other investors
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
It’s Cash That Counts!
Outflow
Daily
Monthly
•
•
•
•
•
•
•
Purchasing inventory or raw materials
Paying wages to employees
Funding benefit plans (i. e. 401K’s)
Paying general suppliers
Paying on loans (principal and interest)
Owner distributions
ACH scheduled payments
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
It’s Cash That Counts!
Outflow
•
•
•
•
•
Workers Compensation Bureau
Property Taxes
Estimated quarterly tax payments
Sales tax remittance
Withholding payments
Quarterly
Annually
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Definition of Cash Flow and Profit
Cash Flow
When the movement of
money takes place
Profit
Revenues and expenses
over a period of time (i.e.
month, quarter, or year)
A much more dynamic
tool focusing on the day
to day business
operations
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Profitable Companies
Can Go Bankrupt!
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Profit Statement
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Profit Statement
Purchase inventory on account
$1,500
(Cost of Goods)
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Profit Statement
Purchase inventory on account
$1,500
(Cost of Goods)
Sell inventory on account
$4,000
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Profit Statement
Purchase inventory on account
$1,500
(Cost of Goods)
Sell inventory on account
$4,000
Profit
$2,500
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
• Borrow and create debt
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
• Borrow and create debt
IMPACT
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
• Borrow and create debt
IMPACT
• Interest expense increases
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
• Borrow and create debt
IMPACT
• Interest expense increases
• Profit decreases
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
• Borrow and create debt
IMPACT
• Interest expense increases
• Profit decreases
• Further strain on cash flow
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow GAP!
SOLUTION
• Borrow and create debt
IMPACT
• Interest expense increases
• Profit decreases
• Further strain on cash flow
• Reduced credit rating
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
$4,000
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
$4,000
$1,500
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
Operating Expenses
$4,000
$1,500
$1,000
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
$4,000
$1,500
$1,000
$ 900
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
$4,000
$1,500
$1,000
$ 900
$ 100
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
Total Expenses
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
- $3,800
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income Statement
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
Total Expenses
Profit Before Tax
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
- $3,800
$ 200
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
$4,000
Cash Flow
--
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Cash Flow
$4,000
$1,500
--
$1,500
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Operating Expenses
Cash Flow
$4,000
$1,500
$1,000
--
$1,500
$1,000
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Cash Flow
$4,000
$1,500
$1,000
$ 900
--
$1,500
$1,000
$ 900
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Cash Flow
$4,000
$1,500
$1,000
$ 900
$ 100
--
$1,500
$1,000
$ 900
--
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
Cash Flow
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
--
$1,500
$1,000
$ 900
-$ 300
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
Total Expenses
Cash Flow
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
-$1,500
$1,000
$ 900
-$ 300
-$3,800
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
-$3,700
Income vs. Cash Flow
Income
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
Cash Flow
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
-$1,500
$1,000
$ 900
-$ 300
Total Expenses
-$3,800
Profit Before Tax
$
200
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
-$3,700
Income vs. Cash Flow
Revenue
Cost of Goods
Operating Expenses
Payroll Expenses
Depreciation
Medical Insurance
Income
$4,000
$1,500
$1,000
$ 900
$ 100
$ 300
Total Expenses
-$3,800
Profit Before Tax
$
Cash Flow
-$1,500
$1,000
$ 900
-$ 300
-$3,700
200
Cash Flow
-$3,700
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Analyzing Your Cash Flow
Step 1 - Review Terms
•
•
•
•
•
Accounts Receivable
Credit Terms
Credit Policy
Inventory
Accounts Payable
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Analyzing Your Cash Flow
Step 2 - Implement Internal Controls
• Hand sign all checks
• Use a payroll service
• Open and review monthly bank statements
personally
• Keep personal and business accounts or
expenses separate
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Analyzing Your Cash Flow
Step 3 – Cash Flow Projections
• Prepare a weekly or monthly cash flow
projection (banks often want 13 weeks)
• Review daily cash balance after
outstanding checks
• Calendar tracking quarterly, annual and
irregular payments
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow
Projections
Week Beginning Date
1/18/2010
Week Ending Date
1/24/2010
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Actual
Cash Flow
Projections
Week Beginning Date
1/18/2010
Week Ending Date
1/24/2010
Actual
Beg. Line Balance
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
$325,000
Cash Flow
Projections
Week Beginning Date
1/18/2010
Week Ending Date
1/24/2010
Actual
Beg. Line Balance
$325,000
Beg. Cash Balance
$50,000
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow
Projections
Week Beginning Date
1/18/2010
Week Ending Date
1/24/2010
Actual
Beg. Line Balance
$325,000
Beg. Cash Balance
$50,000
Cash Receipts
A/R Receipts
$1,500
Total Cash Receipts
$1,500
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow
Projections
Week Beginning Date
Week Ending Date
Beg. Line Balance
1/18/2010
1/24/2010
Actual
$325,000
Beg. Cash Balance
$50,000
Cash Receipts
A/R Receipts
Total Cash Receipts
$1,500
$1,500
Cash Uses
Payroll
Federal Withholding Taxes
State & School
Other Payroll Taxes
Medical & Life Insurance
Business Insurance
Business Expenses
LOC/Other Interest
Office Expenses
Utilities
Rent
Other Payables
Total Cash Uses
$12,559
$0
$0
$0
$0
$0
$0
$0
$0
$166
$0
$0
$12,891
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow
Projections
Week Beginning Date
Week Ending Date
Beg. Line Balance
1/18/2010
1/24/2010
Actual
$325,000
Beg. Cash Balance
$50,000
Cash Receipts
A/R Receipts
Total Cash Receipts
$1,500
$1,500
Cash Uses
Payroll
Federal Withholding Taxes
State & School
Other Payroll Taxes
Medical & Life Insurance
Business Insurance
Business Expenses
LOC/Other Interest
Office Expenses
Utilities
Rent
Other Payables
Total Cash Uses
$12,559
$0
$0
$0
$0
$0
$0
$0
$0
$166
$0
$0
$12,891
End. Cash Balance
$38,609
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow
Projections
Week Beginning Date
Week Ending Date
Beg. Line Balance
1/18/2010
1/24/2010
Actual
$325,000
Beg. Cash Balance
$50,000
Cash Receipts
A/R Receipts
Total Cash Receipts
$1,500
$1,500
Cash Uses
Payroll
Federal Withholding Taxes
State & School
Other Payroll Taxes
Medical & Life Insurance
Business Insurance
Business Expenses
LOC/Other Interest
Office Expenses
Utilities
Rent
Other Payables
Total Cash Uses
$12,559
$0
$0
$0
$0
$0
$0
$0
$0
$166
$0
$0
$12,891
End. Cash Balance
$38,609
Additional Financing Needed
$11,391
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Cash Flow
Projections
Week Beginning Date
Week Ending Date
Beg. Line Balance
1/18/2010
1/24/2010
Actual
$325,000
Beg. Cash Balance
$50,000
Cash Receipts
A/R Receipts
Total Cash Receipts
$1,500
$1,500
Cash Uses
Payroll
Federal Withholding Taxes
State & School
Other Payroll Taxes
Medical & Life Insurance
Business Insurance
Business Expenses
LOC/Other Interest
Office Expenses
Utilities
Rent
Other Payables
Total Cash Uses
$12,559
$0
$0
$0
$0
$0
$0
$0
$0
$166
$0
$0
$12,891
End. Cash Balance
$38,609
Additional Financing Needed
$11,391
Cumulative Line Balance
$336,391
Cash Flow
Projections
Week Beginning Date
Week Ending Date
1/25/2010
1/31/2010
Forecast
Beg. Line Balance
1/18/2010
1/24/2010
Actual
$325,000
Beg. Cash Balance
$50,000
$50,000
Cash Receipts
A/R Receipts
Total Cash Receipts
$1,500
$1,500
$8,000
$8,000
Cash Uses
Payroll
Federal Withholding Taxes
State & School
Other Payroll Taxes
Medical & Life Insurance
Business Insurance
Business Expenses
LOC/Other Interest
Office Expenses
Utilities
Rent
Other Payables
Total Cash Uses
$12,559
$0
$0
$0
$0
$0
$0
$0
$0
$166
$0
$0
$12,891
$0
$7,000
$0
$0
$1,108
$0
$0
$0
$203
$0
$1,633
$0
$11,255
End. Cash Balance
$38,609
$46,745
Additional Financing Needed
$11,391
$3,255
$336,391
$339,646
Cumulative Line Balance
Week Beginning Date
Week Ending Date
1/25/2010
1/31/2010
Forecast
2/1/2010
2/7/2010
Forecast
2/8/2010
2/14/2010
Forecast
2/15/2010
2/21/2010
Forecast
Beg. Line Balance
1/18/2010
1/24/2010
Actual
$325,000
Beg. Cash Balance
$50,000
$50,000
$50,000
$50,000
$50,000
Cash Receipts
A/R Receipts
Total Cash Receipts
$1,500
$1,500
$8,000
$8,000
$12,800
$12,800
$2,077
$2,077
$9,043
$9,043
Cash Uses
Payroll
Federal Withholding Taxes
State & School
Other Payroll Taxes
Medical & Life Insurance
Business Insurance
Business Expenses
LOC/Other Interest
Office Expenses
Utilities
Rent
Other Payables
Total Cash Uses
$12,559
$0
$0
$0
$0
$0
$0
$0
$0
$166
$0
$0
$12,891
$0
$7,000
$0
$0
$1,108
$0
$0
$0
$203
$0
$1,633
$0
$11,255
$12,559
$0
$0
$0
$228
$0
$0
$0
$0
$0
$4,001
$0
$17,016
$0
$7,000
$0
$0
$0
$0
$0
$0
$607
$302
$12,005
$0
$20,823
$2,559
$0
$131
$7
$0
$0
$295
$0
$173
$1,211
$0
$0
$6,064
End. Cash Balance
$38,609
$46,745
$45,784
$31,254
$52,979
Additional Financing Needed
$11,391
$3,255
$4,216
$18,746
($2,979)
$336,391
$339,646
$343,862
$362,608
$359,628
Cumulative Line Balance
Cash Flow is King!
Copyright 2010 Toledo Chamber Small Business Development Center. All Rights Reserved.
Ohio Small Business Development Centers
Providing expertise and resources for businesses to succeed.
The Small Business Development Centers provide free one-on-one
counseling centered around the business planning process, including
financing, market research, marketing strategies, management and cash
flow analysis. Chamber membership is not required to utilize these services.
For More Information
Charlie Chambers, Director
MTSBDC at the Toledo Regional Chamber of Commerce
300 Madison Avenue, Enterprise Suite 200
Toledo, Ohio 43604-1575
419/243-8191
Charlie.Chambers@toledochamber.com
