Presented by Naomi Nicholson

We will cover: What goes into Cash Flow Statement Operating cost forecasts Completing a draft Cash Flow

Understanding Cash Flow

Need to know how many employees you will need

Need to make promotional decisions

Need to plan what will be needed to make it happen◦ Ie; amount of product to make, equipment needed,

etc.

Why?

Know everything you can about them

Focus on customers that will bring you the MOST money (80/20Rule)

Understand their demographics, income levels, buying habits, hobbies and interests, age group, education and employment categories, etc.

Not everybody is your target customer!

It All Starts With Your Customer

How does your product assist in solving your customers’ problems or needs?

When does your customer decide they want your product?

When does your customer order/pay for their product? How?

Customer and Your Product

Develop your customer profile & list of industry trends

Analyze your market: establish the approximate size & location of your trading (selling) area and outline their characteristics for purchasing your type of product

Analyze competitors: list, profile and study their businesses

Make an educated guess on a month to month basis.1. Worst Case Scenario2. Realistic Scenario3. Best Case Scenario

How to Project Sales

How much will we sell in the future?

Organize & analyze information to estimate what your sales will be

Prepare a separate sales forecast for each service or product group and them compile them into one.

Sales Forecasting

Factors that affect SalesExternal• Seasons & holidays• Special events• Competition: direct &

indirect• External labour events• Productivity changes• Family formations• Births and deaths• Fashions or styles• Population changes• Consumer earnings• Political events• Weather

Internal• Product or service changes

style/type, quality• Shortages , production

capability• Promotional effort changes• Sales Motivation plans• Price changes• Inventory or working capital

shortages• Distribution methods used• Credit policy changes• Labour problems

1 Month Cash Flow Example

  Jan

Cash In $ 

Cash Sales 750

A/R* collected 0

Total Cash In 750

   

Cash Out  

Raw Materials 800

Wages 1000

Hydro  220

Telephone 40

Website 500

Marketing Materials 300

Travel Expenses 0

Exhibition Charges 0

Total Cash Out 2860

   

Net Cash Flow (2110)

   

Opening Balance 1000

Net Cash Flow (2110)

Closing Balance (1110)

CASH FLOW PROJECTIONS WORKSHEET  

  Start-up Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 12 Month

Name of Month                          TOTAL

  $ $ $ $ $ $ $ $ $ $ $ $ $ $

CASH IN:  

Sales                           -

Loan                           -

Line of Credit                           -

Receivables Collected                           -

Owners Contribution                           -

TOTAL CASH IN (A) - - - - - - - - - - - - - -

   

CASH OUT:  

   

Advertising                           -

Accounting                           -

Legal Fees                           -

Bank Charges                           -

Equipment                           -

Vehicle - fuel                           -

Vehicle - Maintenance                           -

Insurance                           -

License                           -

Rent                           -

Lease - Office Equipment                           -

Office Supplies                           -

Repairs & Maintenance                           -

Telephone/Utilities                           -

Wages - Owner                           -

Wages - Other                           -

Travel                           -

Training & Development                           -

Miscellaneous                           -

Startup Costs (attach detailed list)                           -

TOTAL CASH OUT (B) - - - - - - - - - - - - - -

   

NET CASH (C=(A-B) ) - - - - - - - - - - - - - -

   

Term Debt: ( loan payments)  

Loan 1 (NEDC)                         -

Loan 2 (Line of Credit)                         -

   

TOTAL TERM DEBT (D) - - - - - - - - - - - - -

   

+ Incr./ - Decr. in Cash (E=(C-D) ) - - - - - - - - - - - - -

 

Cash - Beginning of Month (F)  - - - - - - - - - - - -

 

Cash - End of Month (G=(E+F) ) - - - - - - - - - - - - -

CASH FLOW PROJECTIONS WORKSHEET SAMPLE  

  Start-up Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12  

Name of Month  April May June July August September October November December January February March TOTAL

  $ $ $ $ $ $ $ $ $ $ $ $ $ $

CASH IN:  

Sales   - - 4,000 6,000 10,000 8,000 6,000 4,000 3,000 3,000 3,000 5,000 52,000

Loan 40,000                         40,000

Line of Credit   5,000 3,000 1,500                   9,500

Receivables Collected         1,500   2,000   2,000   2,000   2,000 9,500

Owners Contribution 6,000                         6,000

TOTAL CASH IN (A) 46,000 5,000 3,000 5,500 7,500 10,000 10,000 6,000 6,000 3,000 5,000 3,000 7,000 117,000

 

SAMPLE  

CASH OUT:  

   

Advertising 4,500 100 100 250 250 250 150 100 100 100 100 100 100 6,200

Accounting 1,000 50 50 100 100 100 100 100 100 100 100 100 300 2,300

Legal Fees 1,500 - - - - - - - - - - - - 1,500

Bank Charges   20 20 20 20 20 20 20 20 20 20 20 20 240

Equipment 30,000 - - - - 1,000 - - - - - - - 31,000

Vehicle - fuel 1,000 400 400 500 600 600 500 400 200 200 200 200 200 5,400

Vehicle - Maintenance   100 100 150 150 150 100 100 100 100 100 100 100 1,350

Insurance 1,200 - - - - 250 - - - - - - - 1,450

License 250 - - - - - - - - - - - - 250

Rent 200 200 200 200 200 200 200 200 200 200 200 200 200 2,600

Lease - Office Equipment 250 50 50 50 50 50 50 50 50 50 50 50 50 850 Office Supplies 500 150 150 150 150 150 100 50 50 50 50 50 50 1,650

Repairs & Maintenance 3,000 200 200 200 300 300 300 200 200 200 200 200 200 5,700

Telephone/Utilities 1,000 300 300 400 400 300 300 300 300 300 300 300 300 4,800

Wages - Owner   1,000 1,000 1,000 2,500 2,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,500

Wages - Other   - - 500 1,000 500 300 - - - - - - 2,300

Travel 1,000 - - - 200 - - - - - - - - 1,200

Training & Development 500 - - - - - - - - - - - - 500

Miscellaneous 100 100 100 100 100 100 100 100 50 50 50 50 50 1,050

                             

TOTAL CASH OUT (B) 46,000 2,670 2,670 3,620 6,020 6,470 3,720 3,120 2,870 2,870 2,870 2,870 3,070 88,840

   

NET CASH (C=(A-B) ) - 2,330 330 1,880 1,480 3,530 6,280 2,880 3,130 130 2,130 130 3,930 28,160

   

Term Debt: ( loan payments)  

Loan 1 (NEDC)   890 890 890 890 890 890 890 890 890 890 890 890 10,680

Loan 2 (Line of Credit)     500 800 900 2,000 4,000 2,100           10,300

   

TOTAL TERM DEBT (D) - 890 1,390 1,690 1,790 2,890 4,890 2,990 890 890 890 890 890 20,980

   

+ Incr./ - Decr. in Cash (E=(C-D) ) - 1,440 (1,060) 190 (310) 640 1,390 (110) 2,240 (760) 1,240 (760) 3,040 7,180

   

Cash - Beginning of Month (F) - - 1,440 380 570 260 900 2,290 2,180 4,420 3,660 4,900 4,140

   

Cash - End of Month (G=(E+F) ) - 1,440 380 570 260 900 2,290 2,180 4,420 3,660 4,900 4,140 7,180

Industry Canada Benchmarking

Based on your business idea what down as many things you can think of ?

Remember to add realistic bank fees/debit or credit fees as these are per item charges

What Needs to go in Your Cashflow?

Sales doesn’t mean cash in all businesses

If you make a sale you may sell on credit although you have to record when the sale was made◦ Contractors; take deposits and partial payments◦ Gift Cards◦ Personal Equity deposits◦ Lines of Credit◦ Credit Cards

Sources of Cash

What is Outgoing or Cash Expenditures

Payment of cash or cash equivalent for goods or services, charge against

available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher, or other such document.

 http://www.businessdictionary.com/definition/expenditure.html#ixzz3gT099lmf

Cash

Research buying or leasing-either isn’t always better

Check around for pricing and don’t be scared to tell them that you are shopping around for best price

Know your costs-research and print items

How to Reduce Costs

Income Statement will show the same insurance expense every month although you paid it all at once

Cash flow will show the lump sum amount paid

Income Statement vs Cash Flow

To drag a number in a cell across the whole row grab the bottom left of the cell and drag

Linking cells: on the empty row hit ‘=‘ and go the information you want to link and click enter

Writing formulas: always start with ‘=‘

When adding cells you can either 1) highlight the column or row and hit autosum or 2) in the cell write a formula by typing =sum and clicking on cell

ie. =sum(A2+B36+C17+T2) or =(2*A1)+A4-A61

Can rename pages by left clicking on tab

Excel Tricks

Keep it easy to follow

Loan Officers will not have you there to explain them so you will have to make sure you answer questions in your documents.

Be able to answer how you came up with that number

Show your calculations.◦ Don’t leave the readers guessing how you came up with

your figures!

Finally..