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    Cash Flow

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    lonneartist
    Accounting cahs flows

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    Cash Flow

    Uploaded by

    lonneartist
    5 views18 pages
    Accounting cahs flows

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    Accounting cahs flows

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    5 views18 pages

    Cash Flow

    Uploaded by

    lonneartist
    Accounting cahs flows

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
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    Cash Flow

    Stephen Daze
    Dom Herrick Entrepreneur in Residence
    daze@telfer.uottawa.ca
    OBJECTIVES
    1. Understanding the fundamentals of your cash
    flow statement.
    2. Determine how your cash flow relates to the
    remainder of your Business Plan.
    3. Complete a 12 month cash flow for a new
    business.
    WHAT IS A CASH FLOW STATEMENT?
    - It’s not a “statement of cash flows.”
    - It is a projected financial statement.
    - Likely similar to an individual “budget.”
    YOUR CASH FLOW HELPS YOU:
     Determine when you can afford to take a draw out
    of the business.
     Determine whether or not you can pay your bills
    each month.
     Determine how much financing you need to run
    your business properly.
     Determine when you can afford to grow your
    business through hiring staff, expanding your
    location or by purchasing capital equipment.
     Determines how much money you have in the bank
    at the end of each month, it is not your profit.
    Cash Flow
    Forecasting:
    … simply taking the words of the business plan
    and translating them into numbers.

    Actual money that is collected


    from sales and actual money that is
    paid out for expenses
    on a monthly basis.
    THE CASH FLOW STATEMENT

    There are three main sections in a cash flow


    statement:
    1. Sources of Cash (Cash Receipts/Revenues)
    • Cash revenues
    • Loans
    • Equity Investment (Personal or Outside Source)
    2. Uses of Cash (Expenses or Disbursements)
    • Actual Expenses that will be paid in that month
    • Start-up Costs

    3. Monthly Balance
    • You can calculate how much cash you have left at the end
    of each month
    • Revenue – Disbursements = Cash balance (monthly)
    • Add your month end cash balances together to get a
    cumulative monthly total
    PLUS

    Justification of your Revenue & Expenses Projections


    How did you come up with the numbers?
    Include a page of assumptions/footnotes.
    Be able to explain each account line in your cash flow.
    PROJECTING DISBURSEMENTS
    Consider the following factors when you are compiling
    your numbers:
    1.. Include all your start-up costs
    2. Promotional Mix Activities– will cause changes in your monthly
    expenses and sales.
    3. Straight line approach – Your busy or slow periods should be
    reflected in your increasing or decreasing costs for those
    periods: avoid straight line/flat line of your expenses. Most of
    your costs are rarely the same every month.
    PROJECTING REVENUE

    Your revenue projections are probably the most critical, yet


    difficult, aspects of completing an accurate cash flow
    statement. Consider the following factors when putting your
    numbers together:
    h If you have a sales history, go back and use those figures to
    help guide your projections.
    h Your promotional mix activities can have a direct impact on
    your revenues.
    h Seasonality factors may influence the increase or decrease of
    revenues.
    h Ensure that your projected growth rate is realistic for a new
    business entering the market place.
    h Monitor the competition- your revenues maybe influenced by
    their activity.
    h Continuously monitor current market conditions so you may
    react to changes in the industry (trends, gaps/needs, target
    market, competition)
    FACTORS INFLUENCING YOUR REVENUE COLLECTION

    q What percentage of your sales will be cash?

     What percentage of your sales will be by credit?

    q Will you take deposits on orders?


    ü Customer Credit Rating
    ü New customers must make a deposit
    ü Amount ($) of the order
    ü Customers payment history with my company
    CALCULATING YOUR REVENUES
    Generally, revenue projections are calculated from sourcing
    information from many places. Consider the following
    methods:

    q Market Research
    q Maximum Sales
    q Industry Projections
    q Historical Plus Projections – Monthly basis
    USEFUL STARTING POINT
    Industry Canada’s Small Business Profiles
    - https://www.ic.gc.ca/eic/site/pp-pp.nsf/eng/home
    ABOUT ENTREPRENEURSHIP
    (Kruger and Dickenson 1994; Morris Schindehutte, Kuratko and
    Spivack 2012)

    Entrepreneurship is about operating in a context that


    can be:
    Ambiguous
    Uncertain
    Stressful
    Intense
    Frustrating
    Exhilarating

    16
    CASH FLOW EXERCISE
    Cash in bank - $3,790
    Received loan - $5,000
    Sales are already recorded
    You must fill out expenses section and determine
    monthly and cumulative totals
    Use Excel Spreadsheet on Brightspace; exercise
    details to be handed out in class

    Highest, realistic ending cash balance wins.


    daze@telfer.uottawa.ca

    CONCLUDING THOUGHTS?

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