Cash Flow Forecasting

David J. Housey

Businesses fail because events occurred just as planned.

•  Capitalization

•  Expansion

•  Strategy Change 1 of 13

Cash Flow is #1!

2 of 13

To forecast the end… 3 of 13

…forecast all that proceeds it

4 of 10

Profit and Loss Statement

Jan

Profit and Loss Statement

….

Profit and Loss Statement

Dec FYE13

Revenue 91,200 729,600 2,827,200

Cost of Sales 24,990 199,920 774,690

Gross Margin 66,210 529,680 2,052,510

Operating Exenses 14,102 62,866 361,972

Net Income 920 401,734 1,007,298

Cash Flow

5 of 13

Is Not

Net Income

Enough Rope to Hang Himself

Case: beverage manufacturer

– I need $250,000 – NO

– I earned half a million dollars but don’t

have any cash? – YES

– Go as far as you can see and from there

you will see further.

6 of 13

7 of 10

BALANCE SHEET

Jan

ASSETSCurrent Assets

Cash (114,470)Accounts Receivable 45,600Inventory 24,990Deposits on Production 56,228Other Current Assets 8,800

Total Current Assets 21,148

Non Current AssetsFixed Assets 255,572

BALANCE SHEET

….

BALANCE SHEET

Dec

(472,872)364,800199,920149,94035,200

276,988

989,444Total Non Current Assets 255,572

TOTAL ASSETS 276,720

989,444

1,266,432

8 of 13

Growing to Bankruptcy

Case: technology developer / manufacturer

– Long cash conversion cycle

– Insufficient capitalization

– You cannot wake a person who is

pretending to be asleep.

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10 of 10

CASH FLOW STATEMENT

Jan

Operating Activities:Net Income 920Adjustments:

Depreciation and Amortization 1,428Inventories (19,990)Deposits on Production (56,228)Accounts Receivable (45,600)Other current assets 0

CASH FLOW STATEMENT

….

CASH FLOW STATEMENT

Dec

401,734

5,71200

(159,600)(8,800)

Net cash provided by operating activities (119,470)

Investing Activities:Capital Expenditures 0

239,046

(257,000)Net cash provided by investing activities 0

Financing Activities:

(257,000)

Proceeds from debt issuance 0 (16,667)Net cash provided by financing activities 0

Change in cash and equivalents (119,470)

Beginning Cash 5,000

Ending Cash (114,470)

(16,667)

(34,621)

(438,251)

(472,872)

11 of 13

Of

“Cheap” Supply Chain

Case: importer / exporter

– Terms 2/10, net 30

– ½ COGS 90 days, ½ 150 days

– A wealth of information creates a

poverty of attention.

12 of 13

13 of 13

What is

Measured is

Managed

(702) 785-4494

Twitter: @DavidHousey

dhousey@PolyVistaLLC.com