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Cash Flow Budgets

Budgeting in Tough Times: A Key Business Tool Moderator: Arthur Sanders, CPA Senior Partner: Israeloff, Trattner & Co. Cash Flow Budgets. How to Use this Effective Planning Tool Presented by: Michael Buoncore, CPA – CFO Posillico Civil, Inc. Cash is KING.

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Cash Flow Budgets

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  1. Budgeting in Tough Times:A Key Business ToolModerator: Arthur Sanders, CPASenior Partner: Israeloff, Trattner & Co.

  2. Cash Flow Budgets How to Use this Effective Planning Tool Presented by: Michael Buoncore, CPA – CFO Posillico Civil, Inc.

  3. Cash is KING

  4. 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.

  5. Cash Flow BudgetsStatement of Cash Flows Significant Sources of Cash Significant Uses of Cash Cash expenses Payment of accounts payable Loan repayments Purchases of FF&E Distributions / dividends Purchases of inventory/raw materials • Cash sales • Collection of accounts receivable • Loan proceeds • Sales of FF&E • Capital contributions

  6. 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

  7. 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

  8. Cash Flow BudgetsThe Pains of Growth

  9. 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

  10. 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)

  11. OPERATING BUDGETS IT IS HOW YOUR BUSINESS RUNS Presented by: Marc P Palker, CMA Managing Director-Madison Davis Professional Services, LLC

  12. HOW IMPORTANT ARE BUDGETS? • They make you think ahead

  13. HOW IMPORTANT ARE BUDGETS? • They make you think ahead • They make you think about how your business runs

  14. HOW IMPORTANT ARE BUDGETS? • They make you think ahead • They make you think about how your business runs • They engage all levels of management

  15. 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

  16. 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

  17. HOW CAN BUDGETS BE ORGANIZED? • Product

  18. HOW CAN BUDGETS BE ORGANIZED? • Product • Service

  19. HOW CAN BUDGETS BE ORGANIZED? • Product • Service • Division

  20. HOW CAN BUDGETS BE ORGANIZED? • Product • Service • Division • Location (state, region, country)

  21. HOW CAN BUDGETS BE ORGANIZED? • Product • Service • Division • Location (state, region, country) • Sales executives

  22. HOW CAN BUDGETS BE ORGANIZED? • Product • Service • Division • Location (state, region, country) • Sales executives • Any combination of the above

  23. 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

  24. Types of Budgets • Budgets can be prepared based on the previous year or years.

  25. Types of Budgets • Budgets can be prepared based on the previous year or years. • Zero based budgeting.

  26. Types of Budgets • Budgets can be prepared based on the previous year or years. • Zero based budgeting. • Rolling budgets.

  27. Types of Budgets • Budgets can be prepared based on the previous year or years. • Zero based budgeting. • Rolling budgets. • Periodic updating.

  28. 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”

  29. Budget Cycle(assumes December 31, year end) September 30 (9 months results)

  30. Budget Cycle(assumes December 31, year end) September 30 (9 months results) Templates Distributed

  31. Budget Cycle(assumes December 31, year end) September 30 (9 months results) Templates Distributed Preliminary Budget

  32. Budget Cycle(assumes December 31, year end) September 30 (9 months results) Templates Distributed Preliminary Budget Revised Budget

  33. Budget Cycle(assumes December 31, year end) September 30 (9 months results) Templates Distributed Preliminary Budget Revised Budget Final Budget

  34. 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.

  35. Analysis • Why do I need to look at the comparison to the previous year?

  36. 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?

  37. 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?

  38. 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?

  39. Monitoring Your Business Presented by: Manny Cafiero, CPA – CFO Scales Industrial Technologies, Inc.

  40. Understanding Your Business Understanding Your Changing Environment

  41. Questions You Need To Answer • What issues keep you up at night? • Does your business have stated goals and objectives? • Do you have effective leaders and management? • Are people willing to change? (especially leaders) • Are there pressures on the business? (Ex: Make more money)

  42. Is Your Company Focus Still Relevant? What New Factors Should We Consider? • External • Internal

  43. Developing Your Critical Success Factors(CSF’s) CSF’s are what your business MUST get right to be successful

  44. CSF’s cover Financial & Non-Financial Areas • Cash Levels • Management Succession • Customer Satisfaction • Employee Retention • A/R Collection • Inventory Turns • Profitability • Billing per Employee

  45. 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

  46. Areas to Monitor • Cash • Daily Cash Level • Cash Projections • A/R Aging & DSO • Inventory Levels & Turns • A/P Terms “Cash Is King”

  47. Revenue • Sales • Backlog Reports • Bookings • Billings • Service operations • Hours Billed vs. Hours Paid • Open Calls • Covered Calls • Repeat Calls • Over Time Reports

  48. 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

  49. YTD

  50. Non-Financial Areas • Customer Satisfaction • Warrantees • Repeat Calls • Lost Sales • Vendor Relationships • Employee Communication • Employee Satisfaction • Employee Rewards vs. Company Goals

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