Basic Cash Planning Example.Docx
Basic cash planning example
Lets start with a simple example. Illustration 1 looks at the business from the point of view of money coming in and money flowing out. Sales and profits are out of the picture, (although sales influences money in and costs and expenses influence money out).
In this very simple model, your sources of money are cash sales, payments from receivables, new loan money, and new investment. Your expenditures include buying widgets in cash, paying interest, paying bills as they come due (i.e. paying accounts payable), and paying off loans.
Illustration 1: Basic cash plan
Even at this basic level, you can see the potential complications and the need for linking the numbers up with a computer. Your estimated receipts from accounts receivable must have a logical relationship to sales and the balance of accounts receivable. Likewise, your payments of accounts payable have to relate to the balances of payables and the costs and expenses that created the payables. Vital as this is to business survival, it is not nearly as intuitive as the sales forecast, personnel plan, or income statement. The mathematics and the financials are more complex.
SWOT ANALYSIS
Strengths
* Strong product supported by great tasking meals with a strong focus on quality, healthy and competitively priced meals in addition to the speed of producing meals * Strong brand, which has been tested before full implementation. Emphasis on a fund brand culture * Market conditions are favorable by offering new niche spark in an otherwise static market * Low development risk as the product currently exists * Ability to capitalize on brand and concept with expansion through franchise and other market segments * Low management risk due to experienced team and the strong diversification of skills and expertise = holistic results * High gross margins on meal products, which can be maximized by negotiating bulk purchase agreements with wholesalers.
Lets start with a simple example. Illustration 1 looks at the business from the point of view of money coming in and money flowing out. Sales and profits are out of the picture, (although sales influences money in and costs and expenses influence money out).
In this very simple model, your sources of money are cash sales, payments from receivables, new loan money, and new investment. Your expenditures include buying widgets in cash, paying interest, paying bills as they come due (i.e. paying accounts payable), and paying off loans.
Illustration 1: Basic cash plan
Even at this basic level, you can see the potential complications and the need for linking the numbers up with a computer. Your estimated receipts from accounts receivable must have a logical relationship to sales and the balance of accounts receivable. Likewise, your payments of accounts payable have to relate to the balances of payables and the costs and expenses that created the payables. Vital as this is to business survival, it is not nearly as intuitive as the sales forecast, personnel plan, or income statement. The mathematics and the financials are more complex.
SWOT ANALYSIS
Strengths
* Strong product supported by great tasking meals with a strong focus on quality, healthy and competitively priced meals in addition to the speed of producing meals * Strong brand, which has been tested before full implementation. Emphasis on a fund brand culture * Market conditions are favorable by offering new niche spark in an otherwise static market * Low development risk as the product currently exists * Ability to capitalize on brand and concept with expansion through franchise and other market segments * Low management risk due to experienced team and the strong diversification of skills and expertise = holistic results * High gross margins on meal products, which can be maximized by negotiating bulk purchase agreements with wholesalers.