S12 E61-64 (OWNING YOUR NUMBERS) - THE CASH CONVERSION CYCLE WITH WILLIAM EASTMAN

Did Your Know?

• #1 Reason small businesses fail is cash flow
• 40% of startups have insufficient capital to survive the first year

Understanding the cash conversion cycle makes it easier to assess the operational efficiency of a company in managing its resources.  ​

As it is true with other cash flow computations, the shorter the cash conversion cycle, the better the business is at selling its inventories and recovering money from these sales while paying vendors.
​
Show Objective
Given our previous shows on Financial Reporting, Break Even Analysis, and Activity Based Costing; build a spreadsheet for managing cash flow that will identify periods when the outflow of cash exceeds its inflow to determine how much cash on hand is required to meet all of your financial obligations on time.

EPISODE 61: Summary (support podcast)
The cash conversion cycle measures how efficiently a company’s management is handling its working capital. It shows the length of time between an entity’s purchase of inventory/materials and the receipts of cash from its accounts receivables. More precisely, it is put in practice by the management to envisage how long a company’s cash remains tied up in its operations.

Topics:

• Identify all the sources of cash (what is coming in)
• Identify all of the demands on cash (what is going out)
• Creating a Cash Flow Spreadsheet (Balance Statement, Cash Flow Statement)

IMPORTANT SUPPORT IS NOW AVAILABLE - Wednesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, cash flow, cash flow spreadsheet, sales forecast, production forecast, csh flow forecast, IBGR, IBGR Network, William Eastman

EPISODE 62: Money In - Money Out (support podcast)
Let's get this puppy rolling. None of this difficult, it is really a thought process to capture how money is flowing in and flowing out. You start with Balance & Cash Flow Statements. Then add your Sales Forecast to build an accurate picture of the next 90 or 120 days.

Topics:
Sales Forecast

• Forecast (Planned)
  • Estimated individual units or hours sold over the period
  • Average price per individual unit or hours over the period
• Performance to Plan (Actual)
  • Closed sales to date
  • Actual vs Forecast

Production Forecast

• Forecast (Planned)
  • Total Schedule
  • Schedule Sequence
  • Average labor hours per day
• Performance to Plan (Actual)
  • Actual vs Planned Total
  • Actual vs Planned Sequence
  • Actual vs Planned labor hours per day

Cash Flow Forecast

• Revenue Recognition (Inflow)
  • AR by month
  • AR average recognition time (AR Aging Report)
• Cost of Goods Sold (Outflow)
  • AP by month
  • AP average payment time (AP Aging Report)
• Velocity (Inflow/Outflow)
• Monthly Cash/Credit Demands
  • Forecast period = 2x Aging Report
  • Isolate periods of negative COH (Cash On Hand)
  • Credit - can you cover or be forced to reduce marketing/sales?

IMPORTANT SUPPORT IS NOW AVAILABLE - Wednesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, cash flow, cash flow spreadsheet, sales forecast, production forecast, csh flow forecast, IBGR, IBGR Network, William Eastman

EPISODE 63: Building Your Spreadsheet (support podcast)
Now that we have broken down the Balance & Cash Flow Statements, you need to create a spreadsheet where you can track the flow of dollars or pounds or euros - or any currency. It is powerful for you to do this manually to really understand how this cycle takes place to identify trouble periods. I have found this the most useful way of doing it rather than having it built for you.

Topics:

• Create a spreadsheet that covers all of the elements of cash in and cash out.
• Using historical data for variable and constant (fixed) items, project the numbers over the next 3 months or longer - we match the sales cycle at a minimum.
• Place close attention to those months when cash out exceeds cash in and especially when it cleans out all of your cash used for operations (Cash on Hand or COH).
• If you didn't understand why a Line of Credit was essential - now you will.
• Shift your Executive behavior at either delaying cash out to a better period or increasing the cash in to balance the equation.

IMPORTANT SUPPORT IS NOW AVAILABLE - Wednesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, cash flow, cash flow spreadsheet, sales forecast, production forecast, csh flow forecast, IBGR, IBGR Network, William Eastman

EPISODE 64: Capacity, Sales, and Working Capital (support podcast)

Example Spreadsheet

IMPORTANT SUPPORT IS NOW AVAILABLE - Wednesday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: willing in difficult times, recession proofing your business, owning your numbers, cash flow, cash flow spreadsheet, sales forecast, production forecast, csh flow forecast, IBGR, IBGR Network, William Eastman