CASH FLOW
Tim O’Neil, J.D., CPA Entrepreneur
Agenda
1. 2. 3. 4. 5. 6. 7. 8. Define “Cash Flow” Three Uses of Cash Three Sources of Cash Cash Flow Budget Define “Burn Rate” Avoiding the Cash Wall Simple Cash Flow Worksheet Be My Financial Advisor
What is “Cash Flow”
The movement and availability of LIQUID FUNDS in any business at a certain time The ABILITY of a business to pay its current obligations and bills The PRIMARY RESOURCE needed to SUSTAIN a business in tough times, and GROW it over time.
Three Uses Of Cash
Operations
• Cash necessary to operate
Capacity Building
• Cash necessary to build the platform
Pay Back
• Cash necessary to pay lenders, investors and owners
Three Sources of Cash
Operations
• Cash Income less Cash Expenses • Timing Issues (Receivables/Payables/Inventory)
Investments
• Sale of Long-term Assets
Financing
• Loans, Outside Investors, Owner’s Pocket
CASH FLOW BUDGET
+
-
= + =
Revenues Cost of Goods Operating Expenses Cash Flow From Operations Investment Income *Sale of Long Term Assets Acquisition of Long-term Investment
*Purchase of Space, Equipment, R & D
Cash Flow From Investments
+ +
-
Equity Investment Loans Repayments Dividends (Owner Withdrawals)
Cash Flow From Financing
=
“Burn Rate”
Must master or business will die! “Burn Rate” is the rate a company literally “burns” through its cash before it becomes a positive producer of cash Must have adequate starting cash and/or access to additional cash until time at which business turns profitable Budget Accurately or Fail!
Avoiding the “Cash Wall”
Prepare Detailed Projections Carefully Monitor Calculate Burn Rate Work on Timing Issues Manage Expectations
Simple Cash Flow Worksheet
Starting Cash Plus: Sources (Loans, etc.) Sources of Cash (Add) 1. Cash Revenues Uses of Cash (Subtract) 1. Inventory 2. Salaries 3. Advertising Expenses 4. Equipment 5. Computer 6. Office Supplies Ending Cash __________ __________ __________ __________ __________ __________ __________ __________ __________ __________
Summary
CASH IS KING!