Cash Management
Business analysts report that poor management is the main reason for business failure
Cash Management
Business analysts report that poor management is the main reason for business failure. Poor cash management is probably the most frequent stumbling block for entrepreneurs. Understanding the basic concepts of cash flow will help you plan for the unforseen eventualities that nearly every business faces.
Cash vs. Cash Flow Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These can potentially be converted to cash, but can”t be used to pay suppliers, rent, or employees.
Profit growth does not necessarily mean more cash on hand. Profit is the amount of money you expect to make over a given period of time. Cash is what you must have on hand to keep your business running. Over time, a company”s profits are of little value if they are not accompanied by positive net cash flow. You can”t spend profit; you can only spend cash.
Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.
Positive Cash Flow
If its cash inflow exceeds the outflow, a company has a positive cash flow. A positive cash flow is a good sign of financial health, but by no means the only one.
Negative Cash Flow
If its cash outflow exceeds the inflow, a company has a negative cash flow. Reasons for negative cash flow include too much or obsolete inventory and poor collections on accounts receivable (what your customers owe you). If the company can”t borrow additional cash at this point, it may be in serious trouble.
What are the Components of Cash Flow?
A Cash Flow Statement shows the sources and uses of cash and is typically divided into three components:
Operating Cash Flow
Operating cash flow, often referred to as working capital, is the cash flow generated from internal operations. It comes from sales of the product or service of your business, and because it is generated internally, it is under your control.
Investing Cash Flow
Investing cash flow is generated internally from non-operating activities. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.
Financing Cash Flow
Financing cash flow is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock, and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.
How Do I Practice Good Cash Flow Management?
Good cash management is simple. It involves:
Before inquiring about financing, ask yourself the following:
Do you need more capital or can you manage existing cash flow more effectively?
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure
Before inquiring about financing, ask yourself the following:
Do you need more capital or can you manage existing cash flow more effectively?
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure.
How great are your risks? All businesses carry risks, and the degree of risk will affect cost and available financing alternatives.
In what state of development is the business? Needs are most critical during transitional stages.
For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs.
What is the state of your industry? Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.
Is your business seasonal or cyclical? Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods.
How strong is your management team? Management is the most important element assessed by money sources.
Perhaps most importantly, how does your need for financing mesh with your business plan? If you don”t have a business plan, make writing one your first priority. All capital sources will want to see your for the start-up and growth of your business.
Not All Money Is the Same
There are two types of financing: equity and debt financing. When looking for money, you must consider your company”s debt-to-equity ratio – the relation between dollars you”ve borrowed and dollars you”ve invested in your business. The more money owners have invested in their business, the easier it is to attract financing.
If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won”t be over-leveraged to the point of jeopardizing your company”s survival.
Equity Financing
Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or industry colleagues. However, the most common source of professional equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions. Most specialize in one or a few closely related industries. The high-tech industry of California”s Silicon Valley is a well-known example of capitalist investing.
Venture capitalists are often seen as deep-pocketed financial gurus looking for start-ups in which to invest their money, but they most often prefer three-to-five-year old companies with the potential to become major regional or national concerns and return higher-than-average profits to their shareholders. Venture capitalists may scrutinize thousands of potential investments annually, but only invest in a handful. The possibility of a public stock offering is critical to venture capitalists. Quality management, a competitive or innovative advantage, and industry growth are also major concerns.
Different venture capitalists have different approaches to management of the business in which they invest. They generally prefer to influence a business passively, but will react when a business does not perform as expected and may insist on changes in management or strategy. Relinquishing some of the decision-making and some of the potential for profits are the main disadvantages of equity financing.
How to finance a film. Funding William Macy Meg Ryan Sparkah
http://www.sparkah.com funds!
William H. Macy, Meg Ryan, LL Cool J. THE DEAL / Canada
Director: Steven Schachter
Screenwriters: William H. Macy, Steven Schachter
Cast: William H. Macy, Meg Ryan, LL Cool J.
This is the how to fund or finance a hollywood film. The trials and tribulations of making imagination a solid film – at the sundance world premier.
Funding the Deal. How to finance a film: http://www.youtube.com/watch?v=TiiXoVKiT0Q funding.
Cash Management
Business analysts report that poor management is the main reason for business failure
Cash Management
Business analysts report that poor management is the main reason for business failure. Poor cash management is probably the most frequent stumbling block for entrepreneurs. Understanding the basic concepts of cash flow will help you plan for the unforseen eventualities that nearly every business faces.
Cash vs. Cash Flow Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These can potentially be converted to cash, but can”t be used to pay suppliers, rent, or employees.
Profit growth does not necessarily mean more cash on hand. Profit is the amount of money you expect to make over a given period of time. Cash is what you must have on hand to keep your business running. Over time, a company”s profits are of little value if they are not accompanied by positive net cash flow. You can”t spend profit; you can only spend cash.
Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.
Positive Cash Flow
If its cash inflow exceeds the outflow, a company has a positive cash flow. A positive cash flow is a good sign of financial health, but by no means the only one.
Negative Cash Flow
If its cash outflow exceeds the inflow, a company has a negative cash flow. Reasons for negative cash flow include too much or obsolete inventory and poor collections on accounts receivable (what your customers owe you). If the company can”t borrow additional cash at this point, it may be in serious trouble.
What are the Components of Cash Flow?
A Cash Flow Statement shows the sources and uses of cash and is typically divided into three components:
Operating Cash Flow
Operating cash flow, often referred to as working capital, is the cash flow generated from internal operations. It comes from sales of the product or service of your business, and because it is generated internally, it is under your control.
Investing Cash Flow
Investing cash flow is generated internally from non-operating activities. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.
Financing Cash Flow
Financing cash flow is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock, and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.
How Do I Practice Good Cash Flow Management?
Good cash management is simple. It involves:
Charlie Rose – CAMPAIGN FINANCE REFORM / DENCH
E.J. Dionne, The Brookings Institution / The Washington Post (from Washington, DC); Norman Ornstein, American Enterprise Institute (from Washington, DC) /// Judi Dench, Actor, “Iris” [Miramax Films]; Trailer and 3 clips from “Iris” [Miramax Films]; 1 clip from “The Shipping News” [Miramax Films]; 1 clip from “GoldenEye” [MGM]
Kucinich in New Jersey About Campaign Finance
Dennis receives a question about campaign finance from a New Jersey fourth grader! To learn more about Dennis go to http://www.kucinich.us
Open Source Micro Finance
This video describes a bit about the Grameen Foundation and their efforts to create an Open Source Software solution to facilitate the use of microfinance to alleviate worlds poverty.
Applying for a Loan
When applying for a loan, you must prepare a written loan proposal
Applying for a Loan
When applying for a loan, you must prepare a written loan proposal. Make your best presentation in the initial loan proposal and application; you may not get a second opportunity.
Always begin your proposal with a cover letter or executive summary. Clearly and briefly explain who you are, your business background, the nature of your business, the amount and purpose of your loan request, your requested terms of repayment, how the funds will benefit your business, and how you will repay the loan. Keep this cover page simple and direct.
Many different loan proposal formats are possible. You may want to contact your commercial lender to determine which format is best for you. When writing your proposal, don”t assume the reader is familiar with your industry or your individual business. Always include industry-specific details so your reader can understand how your particular business is run and what industry trends affect it.
Description of Business:
Provide a written description of your business, including the following information:
Type of organization
Date of information
Location
Product or service
Brief history
Proposed Future Operation
Competition
Customers
Suppliers
Management Experience: Resumes of each owner and key management members.
Personal Financial Statements: SBA requires financial statements for all principal owners (20% or more) and guarantors. Financial statements should not be older than 90 days. Make certain that you attach a copy of last year”s federal income tax return to the financial statement.
Loan Repayment: Provide a brief written statement indicating how the loan will be repaid, including repayment sources and time requirements. Cash-flow schedules, budgets, and other appropriate information should support this statement.
Existing Business: Provide financial statements for at least the last three years, plus a current dated statement (no older than 90 days) including balance sheets, profit & loss statements, and a reconciliation of net worth. Aging of accounts payable and accounts receivables should be included, as well as a schedule of term debt. Other balance sheet items of significant value contained in the most recent statement should be explained.
Proposed Business: Provide a pro-forma balance sheet reflecting sources and uses of both equity and borrowed funds.
Projections: Provide a projection of future operations for at least one year or until positive cash flow can be shown. Include earnings, expenses, and reasoning for these estimates. The projections should be in profit & loss format. Explain assumptions used if different from trend or industry standards and support your projected figures with clear, documentable explanations.
Financial Statements
Understanding financial statements is critically important to the success of a small business
Financial Statements
Understanding financial statements is critically important to the success of a small business.
