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Business Finance Solutions: Creating Cash Flow for Small Businesses

Providing financial guidance with over $400 million loans originated, specializing in cash flow management strategies for small businesses. Learn EBITA insights, manage cash flow components, and spot warning signs to ensure financial stability.

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Business Finance Solutions: Creating Cash Flow for Small Businesses

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  1. Business Finance Solutions Creating Cash Flow for Small Businesses Cash Flow Management The man who does things makes many mistakes, but he never makes the biggest mistake of all – doing nothing. -Benjamin Franklin Sam Thacker512-697-9509 Officesam@lesliethacker.com

  2. About Business Finance Solutions • Financial consultants and brokers. • Over $400 million in loans originated. • Working Capital, Real Estate, Import-Export, Equipment, Governmental Contract Finance. • 20+ years business experience. Leslie Thacker Sam Thacker

  3. Sam Thacker – Business Articles Visit my small business finance articles on www.allbusiness.com, the Internet's #1 information resource for small business owners. 3 times a week Business finance articles are also appearing on the online websites for: The San Francisco ChronicleThe Washington PostCBS NewsBusiness Week

  4. Goal of Presentation • Provide a strong understanding of EBITA and cash flow and what components make up cash flow. • Have each participant leave today with knowledge of various ways of managing their cash on a day to day basis.

  5. Cash Flow Management • Three Basic Concepts • Cash = spending power • It is sometimes necessary to accelerate collection of receipts and decelerate payments • Minimize current assets and maximize current liabilities

  6. Cash Flow Warning Signs • Five Warning Signs of CF Trouble: • Decreased Liquidity • Missed Trade Discounts • Late Vendor Payments • Slow Collections • Less safety cash in bank

  7. CASH RECEIVABLES PURCHASES SALES INVENTORIES The Cash Flow Cycle

  8. EBITA EarningsBeforeInterestTaxAmortization

  9. EBITA Defined Sales - Cost of Goods Sold = Gross Margin - SG&A Expenses = EBITA

  10. Cash Flow Components EBITA, or earnings +/- Changes in A/R+/- Changes in Inventory+/- Changes in Net WIP+/- Changes in Fixed Assets+/- Changes in A/P+/- Changes in Accruals+/- Changes in Debt = CASH FLOW

  11. Real World Example Cash Flow 2 1 Cash = spending power

  12. A/R Turnover Calculation Total A/R / Average Daily Sales= A/R Turn in Days

  13. Increasing A/R Collections • Reduce the # of days A/R outstanding improves CF. • Ultimate risk of collection is decreased as days outstanding decrease.

  14. Lengthening A/P Average Time • Slow down payables, improve CF • Negotiate current liabilities into notes payable improves CF. • Increases risk of vender COD. • Decreases discount leverage with vendor.

  15. Communication with Key People • Make sure your critical vendors and key employees understand that cash flow is tight and you are working to improve it. Share your plan!

  16. Create a Cash Flow Forecast • A cash flow forecast will assist you managing through the period of tight cash. • A good (free) cash flow Excel based cash flow forecast with directions can be downloaded here: http://www.lesliethacker.com/resources.htm

  17. “Gottchas” to Remember • Make sure you know your true cost of sales or cost of goods sold (COGS) • Make sure you know what your true gross margin is • Try as hard as possible to pass along any supplier / vendor price increases to your customer

  18. “Gottchas” to Remember • Never, ever, ever use the IRS as an unauthorized lender • File 941 tax reports on time • Pay 941 taxes on time • Monetary penalties are very high for: • Failing to file 941 tax returns on time • Failing to pay tax on time

  19. “Gottchas” to Remember • If your business is subject to collecting sales tax • File quarterly sales tax reports timely • Do not fail to remit sales tax collected on time • Though the IRS is slower to catch you then the State sales tax collectors, the Comptroller’s actions are swift and sure

  20. “Gottchas” to Remember • Once a year, chartered entities must file a Public Information Report with the State Comptroller’s Office • It contains very basic information about the company • Failure to file this report on time will result in the forfeiture of your charter

  21. Questions and Answers Business Finance Solutions www.lesliethacker.com 800-492-8842 sam@lesliethacker.com

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