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Entrepreneurship Development
Case Study
You Be the Consultant:
In search of a Cash Flow Forecast
Prepared By
MD. ZABER TAUHID ABIR
Faculty of Business Administration
American International University-Bangladesh
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Answer To the Question No 01:
Assuming SBDC Consultant the following Cash Budget is prepared
for Martinez-
Cash Budget Most Likely Sales Forecast (For Six Months)
Particulars July August September October November December
January February March
Cash Receipts:
Sales
Credit Sales (71%)
Collections:
68% in the same month
19% in the first month
7% in the second month
Cash Sales (29%)
Total Cash receipt
Cash Disbursement:
Cost of Inventory (63%)
Wages and Salaries
Tax Payment Due
Utilities Expenses
Rent
18,750
13,313
19,200
13,623
17,840
12,666
17,500
12,425
8,449
2,407
954
5,075
16,500
11,715
7,966
2,361
887
4,785
13,000
9,230
6,276
2,226
870
3,770
12,500
8,875
6,035
1,754
820
3,625
13,800
9,798
6,663
1,686
646
4,002
17,500
12,425
8,449
1,862
621
5,075
16,885
11,239
2,050
0
800
1,200
15,999
11,025
1,825
0
800
1,200
13,142
10,395
1,725
1,400
800
1,200
12,234
8,190
1,725
0
800
1,200
12,997
7,875
1,950
0
800
1,200
16,007
8,694
2,425
0
800
1,200
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Truck Loan
Insurance Premiums
Office Supplies
Maintenance
Computer Supplies
Advertising
Legal and Accounting fees
Miscellaneous Expenses
Total Cash Disbursements
317
0
95
75
75
550
250
60
317
0
95
75
75
550
250
60
317
0
95
75
75
550
250
60
317
0
95
75
75
550
250
60
317
1,200
95
75
75
550
250
60
317
0
95
75
75
550
250
60
16,711 16,272 16,942 13,337 14,447 14,541
End-of-Month Balance
Particulars July August September October November December
January February March
Beginning Cash Balance
Add: Cash Receipt
Less: Cash Disbursement
Cash Surplus
8,750
16,885
8,924
15,999
8,651
13,142
4,851
12,234
3,748
12,997
2,298
16,007
25,635
16,711
24,923
16,272
21,793
16,942
17,085
13,337
16,745
14,447
18,305
14,541
8,924 8,651 4,851 3,748 2,298 3,764
** Minimum Cash Balance or Safety Stock is 2,000; which is
maintained throughout the periodic chart.
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Answer To the Question No 02:
A company needs to produce a cash budget in order to ensure that
there is enough cash within the
business to achieve the operational levels set by the functional
budgets. Its an estimation of the
cash inflows and outflows for a business or individual for a
specific period of time. Cash budgets are
often used to assess whether the entity has sufficient cash to
fulfill regular operations and/or
whether too much cash is being left in unproductive
capacities.
In Martinez Cash Budget, they had $2,000 of Minimum Cash Balance
or Safety Stock. The have
successfully maintained the desired cash flow, but as a
consultant, I see, month buy month they are
losing their surplus cash. In October, they had $8,924 Cash
Surplus, which is far more than their
minimum expected balance. But time to time their surplus is
losing which is not a good sign for theinternal as well as
liquidity. In few months they might have a liquidity crisis for
below expected cash
balance or cash deficit.
Answer To the Question No 03:
As a Consultant, I can make few points to improve the cash flow
of Martinez-
Not selling anymore products to the bad-debt producing
customers. Credit history should be judged before credit sales.
Review Expense Account, whether they are costing more than
required. Invoice promptly to collect money early. Offer Trade
Discounts (5%-7%) to encourage customers to pay debts. Follow up on
Default Payments. Deposit Payments Promptly. Manage Inventory
Efficiently. Take fair time as possible to pay, but not cracking
the goodwill of the organization.
I hope by following these instructions, Martinez can improve
their Cash Flow.
