1. Big Brothers Big Sisters | Agency Resource Center Support Managing Working Capital in Today’s Economy for Small Market Agencies Mike Lewis, CPA VP Finance and Operations Sandy Maskell, MSW Agency Resource Center * 6 – Mute #6 - Unmute

2. Workshop Objectives $ $ Understanding Working Capital as a key financial indicator $ $ Forecasting Cash Flow as a tool for managing Working Capital $ $ Using Cash Flow Analysis to correct adverse financial trends

3. Agenda $ $ Working Capital: A key Indicator of Short-term Liquidity $ $ Cash Flow Forecast: A tool for Managing Working Capital $ $ Correcting Adverse Trends: Do’s and Don’t’s in Today’s Economy $ $ Communicating to Your Community $ $ Q & A

4. Key Financial Statement Definitions Assets are things that the agency owns (cash, securities, contributions receivable, long-term fixed assets) Liabilities are things that the agency owes (accounts payable, mortgages, notes payable) Net Assets are the difference between assets and liabilities. The Statement of Position, (Balance Sheet), contains assets, liabilities, and net assets (surplus). Statement of Position Definitions

5. A Current Asset Current Assets and Liabilities is a financial metric which represents operating liquidity available to a business. It is calculated as current assets minus current liabilities. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.operating liquiditycurrent assetscurrent liabilities are liabilities of the business that are to be settled in cash within one year.liabilities is an asset on the statement of position which is expected to be converted into cash or otherwise used up in the near future, usually within one year.asset Current liabilities Working Capital

6. Big Brothers Big Sisters Comparative Statement of Position AssetsDec. 31, 2008Dec. 31, 2007 Cash and Investments $ 25,000 $ 11,000 Contributions Receivable – Short-term 30,000 70,000 Total Current Assets 55,000 81,000 Property and Equipment 43,000 45,000 Total Assets $ 98,000 $ 126,000 Liabilities Accounts Payable, Accrued Expenses- Short-term $ 69,000 $ 62,000 Total Current Liabilities 69,000 62,000 Net Assets Unrestricted Net Assets $ 1,000 $ 7,000 Restricted Net Assets 28,000 57,000 Total Net Assets 29,000 64,000 Total Liabilities and Net Assets $ 98,000 $ 126,000 Note, the 2009 Expense Budget is $100,000

7. Big Brothers Big Sisters Comparative Statement of Position AssetsDec. 31, 2008Dec. 31, 2007 Cash and Investments $ 25,000 $ 11,000 Contributions Receivable – Short-term 30,000 70,000 Total Current Assets 55,000 81,000 Property and Equipment 43,000 45,000 Total Assets $ 98,000 $ 126,000 Liabilities Accounts Payable, Accrued Expenses- Short-term $ 75,000 $ 62,000 Total Current Liabilities 75,000 62,000 Net Assets Unrestricted Net Assets $ (5,000) $ 7,000 Restricted Net Assets 28,000 57,000 Total Net Assets 23,000 64,000 Total Liabilities and Net Assets $ 98,000 $ 126,000 Note, the 2009 Expense Budget is $100,000

8. Big Brothers Big Sisters Working Capital Calculation Dec 31 20082007 Total Current Assets 55,000 81,000 Total Current Liabilities 75,000 62,000 Working Capital: Current Assets - Current Liabilities 19,000 (20,000)

9. Big Brothers Big Sisters Working Capital Dec 31, 2008Dec 31, 2007 Working Capital: Current Assets - Current Liabilities(20,000)19,000 Difference between Working Capital (WC) and cash balances 2009 Annual Expense Budget $ 100,000 Monthly Expense Average 8,333 3 months of Annual Expenses 25,000 WC is negative: program is at risk of financial failure WC is trending in wrong direction: take stock WC can cover 3 months of expense budget: okay shape

10. $Accurate, Timely, Monthly $Accurate, Timely, Monthly Statement of Position, Statement of Activities and Cash Flow Statement $Working CapitalPerspective $Working Capital Perspective Cash alone is not enough Questions? Key Takeaways * 6 – Mute #6 - Unmute

11. 2009 Cash Flow Worksheet – Using Conservative Receipt Forecast in thousands Jan…OctNovDecTotal Beginning Cash Balance 25 4 3 (2) Cash Receipt Detail - Foundation 1 8 Foundation 2 1 6 Corporation 1 4 8 United Way 1 1 1 1 12 Event 1 2 16 Major Individual Giver 1 1 4 Other Individual Giving 1 4 4 Government 1 2 2 1 17 Fees, Investment Income, Other 1 1 1 8 Total Cash Receipts 3 8 4 11 83 Cash Disbursements Salary Related (3 pays in Dec.) 6 6 6 8 75 Professional Fees 1 11 8 Occupancy 1 1 1 1 15 Other Items 1 1 1 10 Total Cash Disbursements 9 8 9 10 108 Ending Cash Balance 19 4 (2) (1)

12. Senior Staff/Board must complete a CASH FLOW FORECAST and treat WORKING CAPITAL NEEDS with URGENCY Be CONSERVATIVE in forecasting Cash Receipts Keep Cash and Investments in a SAFE PLACE Have an Expense Reduction CONTINGENCY PLAN REDUCE EXPENSES quickly when necessary Correcting the Trend

13. $ $ Analyze accurate, timely financial information $ $ Manage working capital conservatively and securely $ $ Build contingency plans $ $ Act on contingency plans promptly Action Steps for the Board

14. Contingency Planning: Trimming Expenses Overhead Costs Leases Contractors Insurance

15. Manage your Risk –Don’t let insurance payment lapse –Don’t forget to pay your Payroll Taxes –Don’t stop conducting Background Checks Staffing / Match Support –Furloughs (check legal implications) –Lay-Offs (beware of associated costs) –Look at the # of staff managing matches; what about new matches? Be Careful! Watch What You Cut! * 6 – Mute #6 - Unmute

16. Target Audiences and Conversations Individual Donors Business / Corporate Donors Foundations Partners (schools, businesses, faith-based orgs) Potential volunteers, families Messages: A sound investment with proven returns Don’t create panic – no one wants to invest in a financially crippled agency Focus on your strengths and impact Focus on investment: how will their money help the community; how have you stewarded it in the past? Communicating your Financial Situation to the Community

17. Additional Resources www.Agency Connection.bbbs.org Financial Management Toolkit HR “People Pages”: Legal Compliance Leading in a Tough Economy: People Marketing Central: Media & Public Relations BBBS Learning Center New CEO Orientation: Financial Management (everyone welcome!)

18. Ask Us! After attempting a search to locate an answer, a new tab will appear labeled ‘Ask Us’ Note: you must try a search before you can ask a question Your User ID is First name.Last name (just like the Learning Center) For instance: Jen Smith’s Login would be Jen.Smith (please capitalize the first letter of each name) The password is xxxxTemp where xxx = your agency's 4- digit ID number (ie: 0230). If your agency number is 1234, then your password will be 1234Temp