CASH FLOW FORECASTING

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CASH FLOW FORECASTING
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AGENDA

• INTRODUCTION
• CASH FLOW FORECASTING
• DEFINITION
• PURPOSE
• TIME HORIZON
• PREREQUISITES
• FORMAT
• ILLUSTRATIVE EXERCISE

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INTRODUCTION

• NATURE OF ENTREPRENEURSHIP
• PRODUCTS / SERVICES
• MARKETING
• FINANCE
• PROGRAM PURPOSE SCOPE

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CASH FLOW CYCLE
CASH
ACCOUNTS PAYABLE
ACCOUNTS RECEIVABLE
OPERATIONS
SALES
INVENTORY
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NATURE OF FINANCIAL REPORTING

• HISTORICAL RECORD KEEPING
• ACCRUAL CONCEPT
• FINANCIAL ACCTG vs MANAGEMENT ACCTG
• TIMELINESS
• ACCURACY
• FLEXIBILITY

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CASH FLOW FORECASTING

• DEFINITION
• PURPOSE
• TIME HORIZON
• PREREQUISITES
• FORMAT

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DEFINITION

• a written presentation of expected cash results
  based upon assumptions about actions planned to
  occur during a forecast period.

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DEFINITION ELEMENTS

• WRITTEN FORM
• ASSUMPTIONS
• TIME PERIOD
• ACTIVE MANAGEMENT

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PURPOSE

• PREDICT OPERATIONAL RESULTS
• ENSURE MINIMUM CASH BALANCE
• PLAN IDLE CASH INVESTMENT

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BENEFITS

• ANTICIPATE FINANCING NEEDS
• ENSURE TIMELY TAX PAYMENTS
• FORCE OPERATIONAL PLANNING
• SEASONAL FLUCTUATIONS
• CAPITAL EXPENDITURES
• INVENTORY LEVELS
• OVERHEAD EXPENSES
• HELP ESTABLISH OPERATIONAL POLICIES

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TIME HORIZON

• LONG TERM - 1 YEAR OR LONGER
• MEDIUM TERM - 1 MONTH TO 1 YEAR
• SHORT TERM - 1 WEEK TO 1 YEAR
• ROLLING FORECASTS

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PREREQUISITES

• FINANCIAL STATEMENTS
• SALES FORECAST
• A/R COLLECTION PATTERN
• A/P PAYMENT POLICY
• COST STRUCTURE INSIGHT

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FORMAT

• HISTORY VS. PROJECTIONS
• ACCOUNTING SYSTEMS REPORTS
• SBDC FORMAT

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CASH FLOW STATEMENT

• SOURCES
• SALES A/R COLLECTIONS
• EQUITY INJECTION
• DEBT
• USES
• OPERATING EXPENSES
• CAPITAL EQUIPMENT
• DEBT SERVICE
• TAXES

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CASH FLOW FORECASTING EXERCISE

• KANDU ENTERPRISES
• ASSUMPTIONS
• TRANSACTIONS
• SALES FORECAST
• PRO FORMA CASH FLOW FORECAST

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WHERE TO GET MORE HELP

• OTHER TRAINING PROGRAMS COURSES
• BOOKS, PERIODICALS, INTERNET
• CONSULTANTS
• SBDC COUNSELORS