Webinar Small Business Playbook for Effective Cash Flow Forecasting Pretty Books Learning Lab 2 03/2020 Learning Lab Playbook // Cash flow management is vital to all companies, big or small. Establishing good Small Business cash flow forecasting practices provides you with clarity into your money and lets Playbook for Effective you stay ahead of the game. In this learning lab, you will learn the playbook for Cash Flow Forecasting managing cash flow forecasting. Pretty Books Before we begin. 3 03/2020 • Presentation is about 10 minutes. • Email questions after the webinar to: [email protected] • Free 30-Min Office Hour available . • Presentation will be emailed to you. • Cash Flow tool kit is available for download on the resources page of our website. Pretty Books Agenda 4 03/2020 Introduction The Financial ‘Fog‘? The Playbook Summary Questions & Answers Pretty Books Cash flow amidst uncertainty. 5 03/2020 01 How much money do I have? You are required to look Where did my money go? ahead to make decisions 02 now, however, looking out is not so easy. There are 03 How much money do I need? always more questions. Nothing is definite. 04 How long will my money last? Pretty Books Clear the fog! Know your numbers. 6 03/2020 Clear the fog! Know your numbers, get clear with your financials. // Clear the fog! Clearing the ‘fog‘ is something every business does, big or small, crisis or not. This is because the interplay of profit, cash in bank and investment is dynamic. Your goal is to clear out as much of this ‘fog‘ as possible, letting you plan better and make more informed decisions. Pretty Books Get your bookkeeping in order. 7 03/2020 Record Reconcile Record your income and expenses, Reconcile all your money to bank categorize your transactions and credit card statements monthly, accordingly, design a chart of watch out for uncleared accounts that is meaningful. transactions and double accounting. Generate Financials Stay up to date Run your financial report to see Keep your books up to date. You where your money is going and need to see and know where your what the trends of income and money is going and how much expenses are across time. money you are making now, not when you report taxes. Pretty Books Intrepret your financials. 8 03/2020 Look for trends. Scrutinze your numbers. You need to figure out your trends. Review Scrutinize those numbers left, right, up and how much money you made and how much down. You need to know every nook and money you spent every week, every month. cranny of those numbers. Click on those Run those numbers by month, by week, by totals, play detective. When, how, why, and day. how much? Favorite a set of reports. Explain your numbers. Favorite a set of reports. They are all numbers Explain those numbers. Do they make sense, on a page, but what does this report reveal is there a pattern? Is it trending positive or versus that report? Profit and Loss, Balance negative? Did I expect this or am I surprised? Sheet, Accounts Payable Aging, Accounts Receivable Aging. This month, this time last year, by month, by week. Accounts by total, accounts by detail, general ledger. Pretty Books Identify the flow of your money. 9 03/2020 Describe the nature of the Who do you owe money to and money. who owes you money? 01 What are my debt 02 obligations? What is my collection 03 process? Pretty Books Caluclate your cash flow 10 03/2020 runway. Future Today 01 Fixed Costs 02 Relevant Trends 03 Last 6 months of activity Assumptions Some History Today Forecast Iterations 01 Forecast general inflows and outflows 02 Make assumptions about collections, payments 03 Continuous weekly and monthly updates to forecast based on new information Accounting, Bookkeeping Pretty Books Confront your numbers weekly. 11 03/2020 Make it habit. • Look at those numbers often. • Ask questions. • Make a commitment. Commit to the details.// Cash flow management is a practice that requires discipline, accurate information and keen attention to changes that would impact your business. Pretty Books Get clear on your financials. Playbook. 12 03/2020 Get your bookkeeping in order. Identify the flow of your money. Confront your numbers weekly. Bookkeeping Money Flow Financial Habit 01 02 03 04 05 Playbook Financials Runway Interpret your financials. Calculate your cash flow runway. Pretty Books Toolkit - Cash flow management. 13 03/2020 Toolkit Ready to use cash flow templates. With this Cash Flow Tool Kit, you will be able to: 1. Track your daily / weekly / monthly cash flow 2. Predict upcoming cash inflow and cash outflow 3. Adjust your assumption 4. Review daily / weekly / monthly runway 5. Evaluate your future cash position Pretty Books Cash flow templates with instructions and samples. 14 03/2020 Pretty Books Frequenty asked questions. 15 03/2020 Q: Should the cash flow projection be trued up and adjusted before my cash flow meeting? Yes. Have your financial controller reconcile your previous week‘s projections before the meeting. If there is a delay in customer collection or payment to vendors, move those specific cash expectations to the week that you think is most realistic based on current notes and understandings. Q: How do I determine the increment of my cash flow breakdown – monthly, weekly or daily? Depends on how tight your cash situation is right now. Your cash flow acts as a plan for your team to decide what customer to call and who to pay, how much to pay and when to pay. If customer collection comes infrequently (such as in retail) and it is necessary to pay vendors often (to maintain inventory) and your liquidity is sensitive to depletion – then it is best to plan everything out on a daily basis. Q: How often should I double check the formulas in my cash flow spreadsheets. Weekly. It is important to review all the formulas used in the spreadsheet weekly. Errors do occur and you do not want to base your plans on numbers that did not add up correctly. Q: What do I do with miscellaneous expenses that are creating small variances in my cash flow ending? Determine the materiality of the variance of the cash ending projected last week. For small miscellaneous expenses, you can make adjustments to a miscellaneous line item on your cash flow projection in order to true up your numbers. For bigger variances, identify the source of the error and immediately revise your future expectations to avoid a similar false understanding about your cash position. Q: What if I have credit cards and/or line of credit? Depends what you want visibility in each week. If items charged to your credit card are important to see each week in its own line item, then you can add a line in your cash flow projection to account for the additional “money“ borrowed from your credit card or line (this will add back into your cash balance). You will need to project when you will actually pay your credit card (this would be a decrease in your bank balance). If individual items charged to your credit card are not important, then you can dedicate a line on the cash flow projection to input when and how much you plan to pay in the future against your credit card balance. Pretty Books 16 03/2020 Reach out if you need help. Pretty Books, LLC 200 1st Ave W, Suite 240 Seattle, WA 98119 Web: prettybooks.com Email: [email protected] Phone: 888-785-9580.