Personal Cash Flow and Balance Sheet Templates

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					   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
 Operating vs. Cash Flow Budgets
              What’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.
               Cash Flow Budgets
              Statement of Cash Flows
  Significant Sources of Cash       Significant Uses of Cash
 Cash sales                       Cash expenses
 Collection of accounts           Payment of accounts payable
  receivable                       Loan repayments
 Loan proceeds                    Purchases of FF&E
 Sales of FF&E                    Distributions / dividends
 Capital contributions            Purchases of inventory/raw
                                    materials
               Cash Flow Budgets
            Items 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
              Cash Flow Budgets
           Items 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
                                               Cash Flow Budgets
                                                    The Pains of Growth
         Week                     Month 1                                     Month 2                                     Month 3                                      Month 4

     Number      Costs    Billings   Cash in   Net cash      Costs     Billings   Cash in    Net cash    Costs    Billings   Cash in   Net cash     Costs      Billings   Cash in   Net cash

          1     (1,350)                         (1,350)    (1,350)                           (1,350)    (1,350)                        (1,350)    (1,350)                           (1,350)

          2     (1,350)                         (1,350)    (1,350)                           (1,350)    (1,350)                        (1,350)    (1,350)                    -      (1,350)

          3     (1,350)                         (1,350)    (1,350)                           (1,350)    (1,350)                        (1,350)    (1,350)                           (1,350)

          4     (1,350)   7,715                 (1,350)    (1,350)    7,715                  (1,350)    (1,350)   7,715       7,715     6,365     (1,350)      7,715       7,715    6,365

Monthly         (5,400)   7,715         -       (5,400)    (5,400)    7,715          -       (5,400)    (5,400)   7,715       7,715     2,315     (5,400)      7,715       7,715    2,315


Cumulative                                      (5,400)                                     (10,800)                                   (8,485)                                      (6,170)



                          Mth 1       YTD                              Mth 2        YTD                            Mth 3       YTD                             Mth 4        YTD

Revenue                   7,715      7,715                            7,715       15,430                          7,715      23,145                            7,715      30,860

Cost of sales             5,400      5,400                            5,400       10,800                          5,400      16,200                            5,400      21,600

Gross profit              2,315      2,315                            2,315        4,630                          2,315       6,945                            2,315       9,260

Overhead                    675       675                               675        1,350                           675        2,025                             675        2,700

Profit                    1,640      1,640                            1,640        3,280                          1,640       4,920                            1,640       6,560

                               21%



                             Assumptions: Salary: $1,000/wk; Benefits: $350/wk (35%); Profit Margin: 30%; Overhead Costs: $675/month; Client pays in 60 days
          Cash Flow Budgets
           How 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
                 Cash Flow Budgets
                 Measurement 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)
      OPERATING BUDGETS

IT IS HOW YOUR BUSINESS RUNS

Presented by: Marc P Palker, CMA
Managing Director-Madison Davis
   Professional Services, LLC
     HOW IMPORTANT ARE BUDGETS?

• They make you think ahead
     HOW IMPORTANT ARE BUDGETS?

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

• They make you think ahead
• They make you think about how your
  business runs
• They engage all levels of management
     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
     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
     HOW CAN BUDGETS BE
        ORGANIZED?
• Product
     HOW CAN BUDGETS BE
        ORGANIZED?
• Product
• Service
      HOW CAN BUDGETS BE
         ORGANIZED?
• Product
• Service
• Division
        HOW CAN BUDGETS BE
           ORGANIZED?
•   Product
•   Service
•   Division
•   Location (state, region, country)
        HOW CAN BUDGETS BE
           ORGANIZED?
•   Product
•   Service
•   Division
•   Location (state, region, country)
•   Sales executives
        HOW CAN BUDGETS BE
           ORGANIZED?
•   Product
•   Service
•   Division
•   Location (state, region, country)
•   Sales executives
•   Any combination of the above
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
         Types of Budgets
• Budgets can be prepared based on the
  previous year or years.
         Types of Budgets
• Budgets can be prepared based on the
  previous year or years.

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

• Zero based budgeting.

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

• Zero based budgeting.

• Rolling budgets.

• Periodic updating.
    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”
     Budget Cycle
(assumes December 31, year end)

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

         September 30
         (9 months results)



        Templates Distributed
     Budget Cycle
(assumes December 31, year end)

         September 30
         (9 months results)



        Templates Distributed



          Preliminary Budget
     Budget Cycle
(assumes December 31, year end)

         September 30
         (9 months results)



        Templates Distributed



          Preliminary Budget



            Revised Budget
     Budget Cycle
(assumes December 31, year end)

         September 30
         (9 months results)



        Templates Distributed



          Preliminary Budget



            Revised Budget



             Final Budget
         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.
                Analysis
• Why do I need to look at the comparison
  to the previous year?
                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?
                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?
                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?
Monitoring Your Business

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



 Understanding Your Changing
        Environment
Questions You Need To Answer
1) What issues keep you up at night?
2) Does your business have stated goals and
   objectives?
3) Do you have effective leaders and
   management?
4) Are people willing to change? (especially
   leaders)
5) Are there pressures on the business? (Ex:
   Make more money)
    Is Your Company Focus Still
             Relevant?

What New Factors Should We Consider?

               External

               Internal
Developing Your Critical Success
            Factors
            (CSF’s)


  CSF’s are what your business
 MUST get right to be successful
CSF’s cover Financial & Non-Financial
               Areas
•   Cash Levels
•   Management Succession
•   Customer Satisfaction
•   Employee Retention
•   A/R Collection
•   Inventory Turns
•   Profitability
•   Billing per Employee
                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
           Areas to Monitor
• Cash
  – Daily Cash Level
  – Cash Projections
  – A/R Aging & DSO
  – Inventory Levels & Turns
  – A/P Terms


            “Cash Is King”
                 Revenue
• Sales
  – Backlog Reports
  – Bookings
  – Billings
• Service operations
  – Hours Billed vs. Hours Paid
  – Open Calls
  – Covered Calls
  – Repeat Calls
  – Over Time Reports
       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
                                         YTD
                                2009                                            2008
                 G&A     NIBT                                    G&A     NIBT
                7.35%   3.74%                                   6.49%   6.28%
 DEPRECIATION                                    DEPRECIATION
    1.10%                                           0.94%

  FACILITY                                          FACILITY
   3.31%                                             2.62%
                                                 SELLING
SELLING
                                                  3.91%
 3.05%
                                        COGS
                                       48.90%                                           COGS
                                                                                       49.32%




                                                EMPLOYMENT
 EMPLOYMENT                                       30.44%
   32.54%
         Non-Financial Areas
•   Customer Satisfaction
•   Warrantees
•   Repeat Calls
•   Lost Sales
•   Vendor Relationships
•   Employee Communication
•   Employee Satisfaction
•   Employee Rewards vs. Company Goals
                   Actions
         What Do the Indicators Mean

•   Some indicators require a limited action
•   Some are more predictive in nature
•   Some require immediate action
•   Some are life threatening
                Focus – It’s a Balance

                                             Customer
        Profits
                                              Service


• Gross Profit                • Quality
• Inventory Turns             • Response Time
• Labor Efficiency            • Availability of Parts and Labor
• Better Purchasing           • Technical Ability
• Maximize Sales Price        • Exceed Expectations
• Collections

				
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