This document provides an overview of cash flow management for a new business. It discusses developing a business plan that includes identifying the business model, validating key assumptions through market research, and forecasting revenues and expenses. The presentation emphasizes that cash flow management is critical, as the timing of cash inflows and outflows differs from when revenue and expenses are recorded. It provides examples to illustrate how to forecast cash needs and recommends planning contingencies for unexpected costs to avoid running out of cash.

1. Ca$h Flow Management
Presented by
Robert Coatsworth, MBA (Rotman)
Rise Business Advisor
June 12, 2013
1

2. Introduction
• From ‘Idea’ to ‘Business Plan’
• Financial Management –
Who Cares? Why You Should Care!
• Financial Statements Overview
• Cash Flow Management Basics
• The Working Model for Your Business -
A Hands-on Workshop
2

3. 3
From ‘Idea’ to ‘Business Plan’
1. Idea – Starting point is your Business concept
2. Business Model – Multiple ways to Build the Idea
3. Business Case – Validate Key Assumptions of the Model
4. Business Plan – Detailed Plan of Action
Key Steps in Creating a Business Plan --

4. 4
Getting Started
1. Idea – Start a Photography business
2. Possible Business Models –
• Taking pictures to display and sell?
• Get hired to take pictures? Portraits, weddings etc.
• Open your own store front studio?
• Work from home? Rent studio space when needed
• Partner with a business that needs photographic
support? e.g. a magazine, media agency, real estate
• Video and/or still photography?
• Subject specialties? e.g. food, fashion, retail products?
• A combination of these?
• Other??

5. 5
Alex Osterwalder’s ‘Business Model Canvas’
Developing Your ‘Business Model’

6. 6
Developing Your ‘Business Model’
Capturing possible elements of a Model

7. 7
Developing Your ‘Business Model’
Comparing Alternative Business Models:
• Value Proposition / Differentiation
• Product-based; Service-based
• Cash requirements
• Revenue potential
• Profit potential
• Risk profile
• Level of effort
• Achieving your personal goals
What needs am I meeting?

8. 8
The ‘Business Case’ for Your ‘Business Model’
3. Identifying and Testing Key Assumptions:
• Your Value Proposition – Why choose me?
• Value is not just Price > Service; Quality;
Reliability; Availability; Personality; Style
• Customer needs, and willingness to buy
• Test your Pricing
• Confirm your Input costs
• Confirm access to required resources
• Competition (includes ‘the way your
potential customers do things now’)
• Regulations / Special Requirements

9. 9
Creating Your ‘Business Plan’
4. Business Plan –
• What do you need to get Started?
• Business form? Sole Proprietor? Incorporated?
• Start-up equipment and supplies costs?
• Can you get started slowly and make further
commitments as Sales grow?
• Bank Account? Business Registration?
• Insurance? Website? Portfolio of experience?
• What do you need and when do you need it?

10. 10
Creating Your ‘Business Plan’
Forecasting Revenues and Expenditures:
• Identify pre-Revenue Expenditures
• Project Revenue streams based on Number of
Customers and Revenue per Customer
• Project on-going Expenditures – Fixed and
Variable Expenses; Additional Capital Needs

11. 11
Creating Your ‘Business Plan’
Forecasting Revenues and Expenditures:
• Identify and explain all key Assumptions
• Identify key Milestones to measure success
• Generate confidence
• Be conservative

12. 12
Who Cares?
• Your Creditors: Rise; and other Suppliers
• And You:
• Confidence you understand your business
• Credibility with third parties
• Credit Rating
• Track Record and Reputation
• Reaching your Goals

13. Financial Statements Overview
• Standard Financial Statements (Accrual Accounting)
• Balance Sheet – a point in time picture
• Income Statement – measure of activity between
two points in time
• Statement of Sources and Uses of Cash – how
cash was generated or used between two points in
time to reconcile opening/closing Cash
13

14. 14
Cash Flow Management Basics
• Cash Flow Statements and Projections –
How are they different from Financial Statements?
• Cash based, not Accrual based
• Based on actual or expected timing of Cash
inflows and outflows
• Shows when Cash is available or will be needed

15. 15
Cash Flow Management Basics
• The Cash Cycle –
• Cash On Hand
• Purchase Inventory and Supplies
• Payment of Expenses
• Accounts Payable, where Suppliers finance you
until you pay them
• Accounts Receivable, where you finance your
Customers until they pay you
• Back to Cash

16. 16
Cash Flow Management Basics
• The Cash Cycle – each segment represents time
• You need to understand how this cycle works for your
business, and how to manage it – it is the heart of
your Cash Flow Management plan
• Extreme examples – Hair Salon and Book Publishing
The Cash
Cycle may be
fast or slow
depending on
your business

17. 17
Cash Flow Management Basics
• Some examples may help to illustrate - #1
Business Start Up June 1:
• Receive Loan of $5,000
• Purchase Camera for $1,500 ; Computer for $1,000; and
$500 of supplies – total $3,000
• Remaining Cash balance of $2,000
• First Customer: I land a $500 project , with work to be
completed by June 10, but I will not get paid until June 30
• Project completion requires $100 of my supplies
• $400 Net Profit. Sweet!

18. 18
Cash Flow vs. Accounting
Accounting - Financial Statements
Date Cash Accounts
Receivable
Equipment
+ Supplies
Total
Assets
Liabilities
Loan
Net
Income /
Equity
June
1
$2,000 - $3,000 $5,000 $5,000 -
June
10
$2,000 $500 $2,900 $5,400 $5,000 $400
June
30
$2,500 - $2,900 $5,400 $5,000 $400
Assets = Liabilities + Equity
____________Assets___________ _Liabilities + Equity_
The Balance Sheet shows ‘Point in Time’ amounts

19. 19
Cash Flow vs. Accounting
Accounting - Financial Statements
Date Revenue Expenses Income
June
1
- - -
June
10
$500 $100 $400
June
30
- - -
• The Income Statement records the ‘Activity’ and
captures, or ‘accrues’ it, when it occurs.
• Not dependent on timing of the actual Cash in or out

20. 20
Date Cash In Cash Out Cash Balance
June 1 $5,000 $3,000 $2,000
June 10 - - $2,000
June 30 $500 $2,500
Cash Flow vs. Accounting
Cash Flow
• The $100 of supplies was paid for June 1 so there is no
change to Cash when I do the job
• I receive the Cash payment on June 30 even though I
earned it June 10 when I did the job
• Key point is – the Timing of Cash Inflows and Outflows

21. 21
Cash Flow Management Basics
• Some examples may help to illustrate - #2
Business Start Up June 1:
• Receive Loan of $3,000
• Purchase Camera for $1,500 ; Computer for $1,000;
and $500 of supplies – total $3,000
• Remaining Cash balance of $0
• First Customer: I land a $1,000 project , with work to
be completed by June 10, but I will not get paid until
June 30
• Project completion requires $250 of my supplies;
and I have to pay a $250 studio fee, upfront.
• $500 Net Profit. Sweet!

22. 22
Cash Flow vs. Accounting
Accounting - Financial Statements
Date Cash Accounts
Receivable
Equipment
+ Supplies
Total Assets Liabilities
Loan
Net
Income /
Equity
June
1
$0 - $3,000 $3,000 $3,000 -
June
10
($250) $1,000 $2,750 $3,500 $3,000 $500
June
30
$750 - $2,750 $3,500 $3,000 $500
Assets = Liabilities + Equity

23. 23
Cash Flow vs. Accounting
Accounting - Financial Statements
Date Revenue Expenses Income
June
1
- - -
June
10
$1,000 $500 $500
June
30
- - -
• The Income Statement records the ‘Activity’ and
captures, or ‘accrues it’, when it occurs.
• Not dependent on timing of the actual Cash in or out

24. 24
Date Cash In Cash Out Cash Balance
June 1 Loan $3,000
June 1 Purchases $3,000 $0
June 5 Studio Fee $250 ($250)
June 10 Nothing - - ($250)
June 30 Collect $1,000 $750
Cash Flow vs. Accounting
Cash Flow
• The job would be profitable but I won’t have the cash to
pay the studio fee

25. 25
Cash Flow Management Basics
So What Happened in #2?
• Unanticipated Cash requirement arose
• Profitable project but Cash shortfall
• Common problem – not enough Cash to
start or keep the project going
So What Do You Do?
• Plan for Contingencies
• Create a Cash buffer for unforeseen needs
Cash is King and Timing is Critical

26. 26
Cash Flow Management Basics
Starting Up
• You will be learning from your first customers
• Be flexible but stick to your plan
• Carefully assess what is working and what is not

27. 27
Cash Flow Management Basics
Cash Requirements Forecasting
• Expenses are always more certain than Revenues, but
be very conservative with both so you don’t end up
short

28. 28
Cash Flow Management Basics
Debt Repayment and Operating Expenses
• Plan to Pay Your Lender and Pay Your Expenses
•Create a conservative Repayment Plan with your
Lender that you can meet, even with delays in sales
• Make sure that you provide for all your Business
Operating Expenses and have a buffer for
unanticipated requirements or delays

29. 29
Cash Flow Management Basics
Debt Repayment and Operating Expenses
• Plan to Pay Yourself
• Your loan is to support business growth but your
lender knows you need to support yourself
• Plan to pay yourself very modestly and primarily
out of profits – and be upfront on this, no one likes
surprises

30. 30
Cash Flow Management Basics
Receiving and Giving Credit Terms
• As a new business, you will have to prove that you are
credit worthy - Expect and Plan that suppliers will
initially want cash
• Work towards establishing credit by small steps
• And be careful about who you extend credit to. Don’t
be afraid to ask for a deposit on work.

31. 31
Cash Flow Management Basics
Record Keeping – Accuracy
• Accurate invoicing is essential to avoid delays in
payments
• Follow up on invoices is also essential to ensure
they have been received and are not disputed. Your
customers are managing their Cash as well

32. 32
Cash Flow Management Basics
Communication
• Always keep key stakeholders up to date on how
you are doing, especially your creditors – silence is a
red flag
• Don’t be afraid to ask for help
• Ask for referrals and testimonials

33. 33
How Will You Measure Success?
• Referral of new business?
• Repeat business?
• Meeting milestones e.g. loan repayments?
• Personal feeling of accomplishment?

34. 34
30 Minute Workshop
• Each person to introduce their ‘Business Idea’ to
their group and talk about their business planning
thinking so far – 10 minutes each
• Describe your Business Model; and identify your
key assumptions and how you can test them
• Group members to provide feedback on the
possible ‘Business Model’ elements to consider
• How will you know how much Cash you will need?

35. My Contact Info -
Rob Coatsworth
robertcoatsworth@sympatico.ca
416 725 4972
35
Thank You and
Good Luck!