PowerPoint PresentationVice-Chancellor Designate Tangaza University College
Objectives:
Appreciate the role of Cash Management in your business operations.
Draw the relationship between profitability and management of Cash flow
Combine the short term asset decision with the short term financing.
Learn about the Cash Cycle: Gain an overview of what factors/areas are inputs to a working capital and how they affect the cash balance
Know the risks involved and how to manage them
Cash flow management is a problem for almost any firm, large or small.
The worst symptom of the problem: the business runs out of cash.
Watching a business struggling, running out of cash even as it makes great sales and profits is painful.
Painful though it may be, it is common and repeatedly the cause of business failure.
Why is cash flow important? Cash is the lifeblood of a business
Cash flow is the cycle of cash inflows and cash outflows that determine your business' solvency
Profit does not equal cash flow – cash, not profit, is required to pay off suppliers and creditors
Having a healthy cash reserve provides a buffer against unexpected competition or interruptions to the business
Tips for Cash flow management Start with self discipline in personal financial management
Pay yourself a regular salary
Forecast your cash flows and stick to it
Know your expenses and incomes (accounting system) and control them
Know your Customers/Debtors and collect on time
Have good controls on cash handling
Have a good relationship with your bank
The Owner Manager
Database Management Information System Accounting System
Borrowing Owner Capital
Cost of Borrowing
etc.
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Cash
Management
Firm's
(1)
(2)
(3)
Reasons Often Given to Avoid Writing a Budget
I don’t need one. I have one in my head.
I don’t know how to begin. I don’t have enough time. I’m not a numbers person.
Lots of famous entrepreneurs didn’t write one. I make more than enough money and am beautiful,
rich and immortal.
Benefits of Budgeting
helps managers evaluate performance
motivates employees to achieve company goals
Financial Planning 10 Must Answer Questions How much cash will we really need? What do the next year financials look like? What’s the path to profitability? What are the risks and rewards? How can these be managed successfully? How large is the addressable market? How fast is the market growing? Who’s the management team? What is the value of my company? What is the exit strategy?
CASH FLOW BUDGET Jan … Dec Total
CASH INFLOWS (receipts) 1. Operating income 2. Capital sales 3. Other receipts
CASH OUTFLOWS (expenditures) 1. Operating expenses 2. Capital purchases 3. Other expenditures
FINANCIAL SUMMARY 1. Money to borrow 2. Loan payments 3. Loan balances
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Jan Feb March April May June July August Sept Oct Nov Dec Total Cash bal B/F 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Cash Inflows Debtors Collections 0.00 Loan Proceeds 0.00 Sales & Receipts 0.00 Other: 0.00 Total Cash Inflows 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Advertising 0.00 Bank Charges 0.00 Creditors Payments 0.00 Insurance 0.00 Interest 0.00 Inventory Purchases 0.00 Office 0.00 Salaries & Wages 0.00 Professional Fees 0.00 Rent or Lease 0.00 Taxes & Licenses 0.00 Utilities & Telephone 0.00 Other: 0.00 Subtotal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Capital Purchases 0.00 Loan Principal 0.00 Owner's Drawings 0.00 Other: 0.00 Subtotal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Cash Outflow 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Mafuta Tamu Business Cashflow Projection 2020
Sheet1
Materials Payment for
Days’ Inventory
Managing your debtors
Objectives: Creating, preserving, and collecting debtors. Establishing and communicating credit policies. Evaluation of customers and setting credit lines. Ensuring prompt and accurate billing. Maintaining up-to-date records of accounts receivables. Initiating collection procedures on overdue accounts.
10 things you can do to increase your cash flow: 1. Organize your billing ( debtors) schedule and
enhance debt collection 2. Stretch out your payables 3. Take advantage of early payment incentives 4. Balance your client base 5. Check your pricing 6. Don't buy all in one place ( Always look out) 7. Form a buying cooperative ( can you) 8. Renegotiate your supplier policies 9. Tighten your inventory 10. Consider leasing /Asset financing
Cash Flow Punch List • Prepare monthly financial statements.
– Compare with prior periods. • Frequently update your projections and cash flow plan. • Keep track of key income statement percentages. • Maintain good internal controls to prevent dishonesty and shrinkage. • Careful on the authority to sign checks or purchase orders. • Don't use money that you have withheld for PAYE taxes or sales
taxes (VAT or Turnover Tax) for other purposes. • Liquidity is not the same as making money.
– You can be making a profit and still go broke by running out of cash. Learn and practice cash flow control.
• Arrange for financing well before the need arises.
Conclusion
Cash Flow management is the single most important function for financial freedom in your business.
C = Cash available to run your business A = Access to accurate information for quality decision making S = Sensitivity towards the effects of expenses and incomes H = Help to discipline all who affect income and expenses F = Future Planning for prosperous business L = Lower risk of financial disarray by budgeting O = Open the door to financial independence W = Wealth creation and protection.
CASE STUDY
Petrobas Case-Study Case Preparation Questions
What strategy did Petrobas use? Was it good? ¬ What financial position is Petrobas facing? How did he get there? If you are Mussa how would you deal with the situation?
Engage us:
inquiries@tangaza.ac.ke @TangazaUniversityCollege
TANGAZA UNIVERSITY COLLEGE A Constituent College of The University of Eastern Africa
Teaching Minds, Touching Hearts, Transforming Lives
Presenter
Presentation Notes
How to engage us: - You may conveniently engage us by applying for a program through our website or raise an enquiry on phone, email, Facebook, Twitter, instagram or visit us in Tangaza University College.
Academic Programs in Tangaza University College
Theology
Management
Presentation Notes
-We are running 8 masters programs among the 54 academic programs. -Two that have supported businesses and governance world-wide are Master of Arts in Social Transformation and MBA in Global Business & Social Entrepreneurship. Our MBA units and activities are selected to ensure entrepreneurs develop skills in innovation, management, strategy, sales, marketing and emerging business trends. Our MA in Social Transformation is designed to enhance your skills in organizational management, sustainable development and governance. This is delivered in a way that caters for the working class and engages their enterprises. We are proud of our current and alumni students some of whom are serving as Parliamentarians, business managers, church leaders and government officers.
Contact Details
Tangaza University College Cell: +254722685762
Email:dwangombe@tangaza.ac.ke
Slide Number 7
Reasons Often Given to Avoid Writing a Budget
Benefits of Budgeting
CASH FLOW BUDGET
Slide Number 13
Slide Number 14
Managing your debtors
10 things you can do to increase your cash flow:
Slide Number 18