Taking control of your business what you need to know about cashflow

“Taking charge of your

business …what you need

to know about cash-flow …”

…cash-flow …

Symptoms … causes

Sales

&Other

Inflows

Suppliers

Payroll

Overheads

Taxes

Interest

Loans & Leases

Stark situation...

• 72

• 122,000

• 38%

• € 29bn

Stark situation...

• Getting paid

• Getting access to bank facilities

• PPL – a sham

• You MUST plan

Proposed headings ...

• Symptoms – Counting the beans

• Quicksand – Breakeven

• Friend or foe – The Revenue

• Clearing House – Banks

• Kingmaker – Cash Flow

• The Ace – Communications

• Winner – Pragmatism

Counting The Beans

Symptoms

Can you tell? ...

FACT ...

Most businesses make money

on some activates, lose on

others and many businesses

are unaware of where in their

business this happens ...

FACT ...

All businesses have all the

data they need to answer all of

these questions ...

FACT ...

Few businesses „manage‟ or

process their data input so as

to provide the above

information, yet most do ALL

the work necessary to have it

available ...

FACT ...

Most businesses rely on the

„accountant‟s annual accounts‟

as a key source of information

– yet these accounts provide

one historical figure each for

Sales and Cost of Sales ...

Define your needs ...

• „Core’ accounting system

– Sales

– Receipts

– Purchases

– Payments

– VAT calculation

– Bank reconciliations

Define your needs ...

• „Bells’ & ‘Whistles’

– Departmental analysis

– Job analysis

– Contract analysis

– Fixed costs

– Variable costs

– Wages analysis

Numbers ‘visibility’...

Sales SalesSales

minus minusminus


Sales

Variable Costs

Sales

Variable Costs

Sales

Variable Costs

minus minusminus

gives

gives

gives


Sales

Variable Costs

Contribution

Sales

Variable Costs

Loss

Sales

Variable Costs

Contribution

minus minusminus

gives

gives

gives

pays

pays

pays

FIXED OVERHEADS

PROFIT

Maximise ...

Sales

Variable Costs

Contribution

Sales

Variable Costs

Loss

Sales

Variable Costs

Contribution

minus minusminus

gives

gives

gives

pays

pays

pays

FIXED OVERHEADS

PROFIT

1

2

Minimise ...

Sales

Variable Costs

Contribution

Sales

Variable Costs

Loss

Sales

Variable Costs

Contribution

minus minusminus

gives

gives

gives

pays

pays

pays

FIXED OVERHEADS

PROFIT

2

1

Breakeven

Quicksand

Break-even Analysis ...

Information needed to

determine Operating Break-

even &

Cash-flow Breakeven ...

Breakeven Analysis ...

If you change selling price, what

happens to profits?

If you reduce costs or expenses, how

much more profit will you earn?

At a given sales volume, what will the

profit be?

If you intend to earn a certain profit, how

much will you have to sell to

achieve your goal?

What happens if you ...

Hire another employee?

Start using cheaper materials?

Buy a more efficient machine?

Seek a general wage reduction?

Translate B/E into ...

What sales do I need each week to

break-even?

How many units must I sell every day?

How many chargeable hours do I need

per month to cover all costs?

The Revenue

Friend or Foe

Revenue smart ...

• Stay up-to-date with returns

• VAT – Separate Bank Account

• Wages – Separate Bank Account

Banks

Clearing House

Banks ...

• Account in second bank … NOW

• Transfer regularly … however little

• Overdraft – live under the rafters

• Keep talking – saying little

• Cannot get a ‘quart’ from a ‘pint’

glass

Cash-flow

Kingmaker

Inflows ...

Outflows ...

Cash Flow Forecast ...


Cash Flow 06-Mar 13-Mar 20-Mar 27-Mar 03-Apr 10-Apr 17-Apr

Inflows

Debtors 7,872 8,338 8,256 6,118 9,368 8,500 9,000

VAT Refund 3,271

Total Inflows 7,872 8,338 8,256 9,389 9,368 8,500 9,000

Outflows

Creditors 3,150 3,122 4,860 3,688 3,750 3,500 3,500

Wages 3,608 3,608 3,608 5,912 3,608 3,608 5,912

PAYE / PRSI 2,811 2,811

Leases 868 1,018 868 1,018

Total Outflows 6,758 10,409 9,486 9,600 7,358 7,976 13,241

Net Cash Flow 1,114 (2,071) (1,230) (211) 2,010 524 (4,241)

Overdraft - Opening (17,105) (15,991) (18,062) (19,292) (19,503) (17,493) (16,969)

Overdraft - Closing (15,991) (18,062) (19,292) (19,503) (17,493) (16,969) (21,210)

Stress Testing ...



Inflows

Debtors 6,872 7,338 8,256 6,118 9,368 8,500 9,000

VAT Refund 3,271

Total Inflows 6,872 7,338 8,256 9,389 9,368 8,500 9,000

Outflows

Creditors 3,150 3,122 4,860 3,688 3,750 3,500 3,500

Wages 3,608 3,608 3,608 5,912 3,608 3,608 5,912

PAYE / PRSI 2,811 2,811

Leases 868 1,018 868 1,018

Total Outflows 6,758 10,409 9,486 9,600 7,358 7,976 13,241

Net Cash Flow 114 (3,071) (1,230) (211) 2,010 524 (4,241)





Inflows

Debtors 7,872 8,338 8,256 6,118 9,368 8,500

VAT Refund 3,271

Total Inflows - 7,872 8,338 11,527 6,118 9,368 8,500

Outflows

Creditors 3,150 3,122 4,860 3,688 3,750 3,500

Wages 3,608 3,608 3,608 5,912 3,608 3,608 5,912

PAYE / PRSI 2,811 2,811

Leases 868 1,018 868 1,018

Total Outflows 3,608 10,437 7,748 10,772 7,296 8,226 13,241

Net Cash Flow (3,608) (2,565) 590 755 (1,178) 1,142 (4,741)



Cash Cycle ...

Cash Conversion Cycle ...

Days Inventory

Outstanding

Days Sales

OutstandingDays Payables

Outstanding

Buying ...

Take a closer look ...

Printing Costs

Current Supplier My Current Printers Limited Price

Comparison

Quality

Comparison

Service Level

Comparison

Advice

Offered

Alternative 1 Mountain Top Print & Design Limited

Better Worse Equal None

6% Inferior Paper

Alternative 2

Toureendaheny Beg

Print Services

Equal Worse Worse Equal

Inferior Paper Turnaround

Alternative 3

Ballyloughlaidirabu

Print Limited

Worse Equal Equal Better

-8%

Cost reduction ...

Cost reduction ...

or

2012 ...

Communications

The Ace

Communications ...

• Customers

• Suppliers

• Revenue

• Banks

• Staff

Pragmatism

The Winner

Pragmatism ...

• Diagnose the symptoms …

• Treat the causes …

• Don’t throw money at it …

• Protect yourself …

• Deals will be done …

Economy & Finance

Taking control of your business what you need to know about cashflow