Managing Cash Flow

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Conclusion 67 Local Office #1 Sales Office #2 . . . Plant # n Collection account #1 Collection account #2 . . . Collection account # n C L E A R t o - 0 - Regional/Central concentration account F U N D a s R E Q U I R E D Disbursement account #1 Disbursement account #2 . . . Disbursement account # n Plant #1 Warehouse #2 . . . Sales Office # n Local Supplier Local Supplier Local Supplier Local Supplier Local Supplier Local Supplier Exhibit 2.12 Zero Balance Accounts CONCLUSION In order to be able to effectively manage the cash receipts and disbursements of the organization, it is necessary to fully understand what those receipts and disbursements are, where they come from, and how they affect and are affected by company operations. Since the company’s balance sheet and income statement both are intimately interwoven with the company’s cash flow, a review of these basic financial statements is a good place to start for this management process. Cash receipts primarily derive from collections from customers for sales made either from cash sales or accounts receivable collections. While we advocate
68 Managing Cash Flow—Receipts and Disbursements the desirability of cash sales, most businesses will incur at least some accounts receivable because of competitive necessities. Controlling those receivables and ensuring their timely collection is one of the most effective methods of assuring positive cash flow for the organization. Good record keeping, strong credit and collection policies, and effective follow-up on overdue accounts will help ensure that the money flows into the corporate coffers on a timely basis. Once the money is on the way or has been received, it then becomes necessary to utilize those funds appropriately, either by temporarily investing them for short-term earnings or by reinvesting them back into the business to secure long-term benefits for company stockholders. The other side of the cash flow coin is cash disbursements, and an effective cash management system will focus a lot of attention on keeping those disbursements under control. Paying only bills that are due when they are due is the most obvious and arguably most effective procedure to follow, but it is often short-circuited or overlooked. As in the case of cash receipts, understanding systems that are available to help manage those cash outflows are important as well, which requires a good working relationship with the company bank and awareness of the services the bank can offer the company. ACCOUNTS RECEIVABLE ARE NOT CASH RECEIPTS. ACCOUNTS PAYABLE ARE NOT CASH DISBURSEMENTS.
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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
Page 26 and 27: Cash Flow Basics 17 • There needs
Page 28 and 29: Cash Flow Basics 19 The main reason
Page 30 and 31: History, the Fed, and Float 21 HIST
Page 32 and 33: History, the Fed, and Float 23 •
Page 34 and 35: History, the Fed, and Float 25 vers
Page 36 and 37: History, the Fed, and Float 27 Rece
Page 38 and 39: Bank Issues and Concerns 29 • Che
Page 40 and 41: Bank Issues and Concerns 31 or neve
Page 42 and 43: Conclusion 33 affects its relations
Page 44 and 45: CHAPTER 2 Managing Cash Flow—Rece
Page 46 and 47: Using the Balance Sheet 37 Change 2
Page 48 and 49: Cash Receipts 39 which could be use
Page 50 and 51: Cash Receipts 41 Sales per Day Avg.
Page 52 and 53: Cash Receipts 43 happening—would
Page 54 and 55: Cash Receipts 45 Invoicing The star
Page 56 and 57: Cash Receipts 47 earmark those for
Page 58 and 59: Cash Receipts 49 We can adjust the
Page 60 and 61: Cash Receipts 51 Finance Charges CA
Page 62 and 63: Cash Receipts 53 Standard sized env
Page 64 and 65: Cash Receipts 55 PAC Issuing Instit
Page 66 and 67: Cash Receipts 57 duction of about $
Page 68 and 69: Cash Disbursements 59 Sequence of A
Page 70 and 71: Cash Disbursements 61 determine whe
Page 72 and 73: Cash Disbursements 63 this system t
Page 74 and 75: Cash Disbursements 65 Estimated Fun
Page 78 and 79: CHAPTER 3 Planning and Budgeting PL
Page 80 and 81: Relationship Between Planning and B
Page 82 and 83: Relationship Between Planning and B
Page 84 and 85: Strategies for Competitive Advantag
Page 86 and 87: Strategic Planning Process 77 EXTER
Page 88 and 89: Strategic Planning Process 79 Once
Page 90 and 91: Short-Term Planning 81 D. PLANNING
Page 92 and 93: Short-Term Planning 83 TOP MANAGEME
Page 94 and 95: Short-Term Planning 85 Segment miss
Page 96 and 97: Short-Term Planning 87 Planning mis
Page 98 and 99: Short-Term Planning 89 limited in n
Page 100 and 101: Short-Term Planning 91 achievements
Page 102 and 103: Short-Term Planning 93 Credit/Colle
Page 104 and 105: CHAPTER 4 Analyzing the Sales Funct
Page 106 and 107: Purpose of the Sales Function 97 a
Page 108 and 109: Purpose of the Sales Function 99 1.
Page 110 and 111: Purpose of the Sales Function 101 L
Page 112 and 113: Purpose of the Sales Function 103 b
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Page 120 and 121: Purpose of the Sales Function 111 S
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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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Purpose of the Sales Function 121
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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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Investing Excess Cash 241 puts upwa
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Investing Excess Cash 243 Instrumen
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Investing Excess Cash 245 • Depre
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Investing Excess Cash 247 Cash Outf
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Investing Excess Cash 249 Investmen
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Borrowing for Cash Shortfalls 251 t
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Borrowing for Cash Shortfalls 253 m
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Borrowing for Cash Shortfalls 255 t
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Borrowing for Cash Shortfalls 257 r
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Borrowing for Cash Shortfalls 259 I
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Borrowing for Cash Shortfalls 261 A
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CHAPTER 8 Planning Cash Flow MANAGI
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Cash Flow Planning 265 or more futu
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Cash Flow Planning 267 Cash Budgeti
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Cash Flow Planning 269 ACTUAL PROJE
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Cash Flow Planning 275 THE MORE VOL
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Managing Cash Balances 277 on its u
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Cash Planning Approaches 279 Dealin
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Cash Planning Approaches 281 Cash f
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Conclusion 283 Cash flows from oper
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CHAPTER 9 Controlling and Analyzing
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Cash Flow Projections: Methodology
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Cash Flow Reporting and Controls 29
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Interpretation and Analysis of Cash
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AFTERWORD The materials in this boo
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APPENDIX A Case Study: Managing Cas
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Jack B. Nimble Company 327 ($$ in 0
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Jack B. Nimble Company 329 ABC Mach
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Jan Feb Mar Apr May Jun Jul Aug Sep
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Cash Forecast Information 333 him,
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Jan Feb Mar Apr May Jun Jul Aug Sep
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Jack B. Nimble Company Suggested So
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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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