Managing Cash Flow

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Cash Flow Projections: Methodology 291 Other receipts from investment activities t Total Receipts from Investing Activities 10 0 Cash Disbursements from Investment Activities Fixed-asset purchases (150) (25) Other investment purchases _____ (5) _____ (5) Total Disbursements from Investing Activities _____ (155) _____ (30) NET CASH FLOW FROM (FOR) INVESTING ACTIVITIES (145) (30) e CASH FLOW FROM FINANCING ACTIVITIES Cash Receipts from Financing Activities Loan receipts Other financing activity receipts Total Receipts from Financing Activities 0 0 Cash Disbursements from Financing Activities r Debt repayment (10) (10) Dividend payments _____ (55) 0 Other financing activity disbursements _____ (25) Total Disbursements from Financing Activities _____ (65) _____ (35) NET CASH FLOW FROM (FOR) FINANCING ACTIVITIES _____ (65) _____ (35) NET CASH FLOW—current month (15) 90 a NET CASH FLOW—cumulative (15) 75 Cash Available—beginning balance _____ 1,665 _____ 1,650 ENDING CASH BALANCE $1,650 _____ $1,740 _____ Exhibit 9.1 The Typical Manufacturing Company: Receipts and Disbursements Cash Flow Forecasting Method
292 Controlling and Analyzing Cash Flow cause of the cash outflow has been incurred. The fact that last month’s expenses are paid for this month and this month’s expenses paid next month can most easily be dealt with by calculating and recording the amount of the change in accounts payable. For planning purposes, it often makes sense to project a zero change in accounts payable on the assumption that the accounts payable pipeline will be reasonably constant over time, and trying to project its monthly changes becomes pure speculation. The “other” categories that appear throughout the example shown in Exhibit 9.1 are intended to make the company think about any other significant categories of cash flow receipts or disbursements that may occur. These will vary from company to company, but operations must be reviewed carefully to accurately identify and account for special requirements, or cash projections may be seriously wrong. Additionally it is useful to include a general miscellaneous category to cover all those small items of cash flow that do not justify a separate line on the cash flow report but constitute an amount that in total should be recorded. A review of a year of actual cash flow history is typically all that is needed to determine an appropriate amount for this catch-all item. Another example of a cash flow projection showing a completed 12 month cash flow forecast is shown in Exhibit 9.2. While this particular format does not meet FASB 95 standards (principally because of no separation of operating, investing, and financing activities), it lists the significant sources of and requirements for funds for this particular organization. It is this kind of adaptation to meet the specific requirements of the company that will make the cash flow projection meaningful and useful to the company. THE CASH FLOW PROJECTION IS ONLY AS GOOD AS THE UNDERLYING ASSUMPTIONS. The second part of Exhibit 9.2 is a listing of the assumptions used to develop the line items of the forecast. Wherever there are references to estimates or supporting schedules, these will normally be part of the cash flow forecast package. Recognize also that the assumptions listed in this exhibit are applicable only to this distinct projection. Any assumptions that the company prepares will, of course, have to apply to that specific forecast. The preparation of assumptions is a good idea for every line item in any projection. There are two basic reasons for this: 1. If anyone asks the basis for a number in the projection, the assumptions will readily supply that information. 2. In preparing the next projection, having the basis for the prior calculation makes the preparation of the new projection much simpler. Rather than
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Managing Cash Flow An Operational F
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Contents About the Authors Acknowle
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ABOUT THE AUTHORS Rob Reider, CPA,
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About the Authors vii • Cash Flow
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INTRODUCTION CASH IS KING! Cash ava
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Why the Business Exists 3 • Custo
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Some Basic Business Principles 5
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Purpose of this Book 7 • Are sale
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CHAPTER 1 Understanding Cash Manage
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Understanding Cash Management 11 qu
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Cash Flow Basics 13 minimizing the
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Cash Flow Basics 15 FROM CASH TO CA
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Cash Flow Basics 17 • There needs
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Cash Flow Basics 19 The main reason
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History, the Fed, and Float 21 HIST
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History, the Fed, and Float 23 •
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History, the Fed, and Float 25 vers
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History, the Fed, and Float 27 Rece
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Bank Issues and Concerns 29 • Che
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Bank Issues and Concerns 31 or neve
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Conclusion 33 affects its relations
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CHAPTER 2 Managing Cash Flow—Rece
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Using the Balance Sheet 37 Change 2
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Cash Receipts 39 which could be use
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Cash Receipts 41 Sales per Day Avg.
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Cash Receipts 43 happening—would
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Cash Receipts 45 Invoicing The star
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Cash Receipts 47 earmark those for
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Cash Receipts 49 We can adjust the
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Cash Receipts 51 Finance Charges CA
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Cash Receipts 53 Standard sized env
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Cash Receipts 55 PAC Issuing Instit
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Cash Receipts 57 duction of about $
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Cash Disbursements 59 Sequence of A
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Cash Disbursements 61 determine whe
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Cash Disbursements 63 this system t
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Cash Disbursements 65 Estimated Fun
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Conclusion 67 Local Office #1 Sales
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CHAPTER 3 Planning and Budgeting PL
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Relationship Between Planning and B
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Relationship Between Planning and B
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Strategies for Competitive Advantag
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Strategic Planning Process 77 EXTER
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Strategic Planning Process 79 Once
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Short-Term Planning 81 D. PLANNING
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Short-Term Planning 83 TOP MANAGEME
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Short-Term Planning 85 Segment miss
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Short-Term Planning 87 Planning mis
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Short-Term Planning 89 limited in n
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Short-Term Planning 91 achievements
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Short-Term Planning 93 Credit/Colle
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CHAPTER 4 Analyzing the Sales Funct
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Purpose of the Sales Function 97 a
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Purpose of the Sales Function 99 1.
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Purpose of the Sales Function 101 L
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Purpose of the Sales Function 103 b
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Purpose of the Sales Function 105
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Purpose of the Sales Function 107 b
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Purpose of the Sales Function 111 S
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Purpose of the Sales Function 113 1
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Purpose of the Sales Function 115 t
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Purpose of the Sales Function 117 1
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Purpose of the Sales Function 119 r
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CHAPTER 5 Cost Reduction Analysis P
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Benchmarking Strategies 125 BENCHMA
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Benchmarking Strategies 127 determi
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Benchmarking Strategies 129 The ben
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Benchmarking Strategies 131 Product
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Benchmarking Strategies 133 Sales F
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Benchmarking Strategies 135 so that
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Benchmarking Strategies 137 To this
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Benchmarking Strategies 139 • Wha
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Benchmarking Strategies 141 increas
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Benchmarking Strategies 143 no ince
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Benchmarking Strategies 145 to eval
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Benchmarking Strategies 147 Accordi
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Benchmarking Strategies 149 Number
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Benchmarking Strategies 151 • Pur
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Activity Based Costing Principles 1
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Conclusion 175 the costs to particu
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Looking at the Accounting Function
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Choosing What to Analyze 179 expert
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Choosing What to Analyze 181 1. Def
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Identifying Goals and Basic Busines
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Financial Reporting 185 2. Accounts
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Financial Reporting 187 ASSETS Cash
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Compiling the Data 189 1. Organizat
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Compiling the Data 191 h. What is y
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Analyzing the Data 193 1. Organizat
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Analyzing the Data 195 e. Do you au
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Analyzing the Data 197 c. Can you p
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Organizational Issues 199 Controlle
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Budget Analysis 201 Budget Actual C
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Analysis of Functional Costs 203
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Analysis of Functional Costs 205 La
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Analysis of Accounting Operations 2
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Analysis of Accounting Operations 2
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Activity-Based Costing Applications
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Developing Recommendations 213 •
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Specific Recommendations 215 7. Per
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Specific Recommendations 217 ager a
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Specific Recommendations 219 figure
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Specific Recommendations 221 • Gr
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Specific Recommendations 223 • Sa
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Specific Recommendations 225 Curren
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Specific Recommendations 229 Based
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Organization Recommendations 233
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Other Areas for Review 235 • The
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Conclusion 237 must change its beli
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CHAPTER 7 Investing, Financing, and
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Page 274 and 275: Cash Flow Planning 265 or more futu
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Page 290 and 291: Cash Planning Approaches 281 Cash f
Page 292 and 293: Conclusion 283 Cash flows from oper
Page 294 and 295: CHAPTER 9 Controlling and Analyzing
Page 296 and 297: Cash Flow Projections: Methodology
Page 298 and 299: Cash Flow Projections: Methodology
Page 302 and 303: Cash Flow Reporting and Controls 29
Page 310 and 311: Interpretation and Analysis of Cash
Page 332 and 333: AFTERWORD The materials in this boo
Page 334 and 335: APPENDIX A Case Study: Managing Cas
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Page 346 and 347: Jack B. Nimble Company Suggested So
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APPENDIX B Cash Conservation Checkl
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Liabilities and Equity 343 ASSETS Y
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Income and Expenses 345 INCOME AND
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Index A ABC, see Activity based cos
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Index 349 traditional, 159-161 unit
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Index 351 P Payables, 16, 59 Paymen
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Managing Cash Flow

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