1. Let’s Understand How Cash Flow Works!
Presented By Carl Kinker
The Controllership Group

2. Reasons For Business Failure
In his book Small Business Management, Michael Ames gives the following reasons for small business failure: 1:Lack of experience 2:Insufficient capital (money) 3:Poor location 4:Poor inventory management 5:Over-investment in fixed assets 6:Poor credit arrangements 7:Personal use of business funds 8:Unexpected growth Gustav Berle adds two more reasons in The Do It Yourself Business Book: 9:Competition 10:Low sales
Personal note in my opinion 6 out of the first 8 have direct tie to CASH

3. Cash Flow Basics Is cash flow my checkbook balance?
That is a start but cash flow is much more dynamic.
My definition for cash flow – Cash flow is the measurement of everything that either has or will turn into a cash inflow or outflow.
It can presented looking back in time or looking forward.

4. Ways To Improve Cash Flow
Customer invoicing must be a high priority
Weekly follow-up on collecting receivables
Maintain reasonable inventory levels – reevaluate what is reasonable often
If your competition is getting deposits or money up front. Are you?
Pay payables as due not as they come in

5. Ways To Improve Cash Flow
Try to finance fixed asset purchases
Be realistic in amounts you are taking out personally

6. Proper Use of Debt Versus Improper Use of Debt
Matching type of debt with its use
Short term money (line of credit and charge cards) should be matched to working capital needs short term in nature
Term loans should be matched to buying a business, equipment and permanent working capital. Long term in nature.

7. Why This Is Important!

8. Measurements Of Cash Flow
Start with your breakeven point. Formula is sales 1– variable cost as % divided into fixed costs = breakeven point in sales
Use numbers above with principal portion term loan for cash flow breakeven point in sales.
Any timeframe can be used for this

9. What Does All This Mean?
Cash flow is the life blood of your business. Just like our bodies cannot allow a loss of blood on an ongoing basis neither can your business.
You have to understand your cash flow or work with someone that can help you to understand it and make it work for you!