CONTROL COLLEGE JOB AID FOR CASH FLOW MANAGEMENT

Interpreting a Cash Flow Statement A cash flow statement is a financial statement that shows a company's sources and uses of cash. It reveals the amount of cash that has moved into and out of a company, as a result of the company's efforts to produce and sell its products or services. Drivers: Maximize Cash Flow

While trying to maximize your cash flow, focus on the factors below: Increase sales Increase profit margins Improve accounts receivable collection Increase accounts payable turn rate What do the different sections of a cash flow statement tell us? Operating Activities: When analyzing cash flow, the first place to look is the cash flow from operating activities It tells you whether the firm generated cash from its day-to-day operations or whether it needs a cash infusion It also allows us to assess the difference between our organizations accounting income and its associated cash inflows and outflows Investment Activities: This section shows whether or not a surplus in operations is being used to "grow" the company A lack of investing activities, i.e. few purchases of new equipment or other assets, may indicate stagnant growth It may also be due to a diversion of funds away from the company, or a short-term decision to keep cash within the company Financing Activities: The financing activities section of the cash flow statement will show repayments of debt, borrowing of funds, as well as injections of capital and the payment of dividends. As a company expands, this area of the cash flow statement will become increasingly important. Improve inventory management Control capital expenditures Metrics Formula

These are some of the Metrics you need to bear in mind while forecasting Cash Flows. Cash Conversion Cycle:

Days Sales Outstanding

Days In Inventory

Days Payable Outstanding

Days Sales Outstanding

Trade Receivables Last Period Sales

X Number of days in the period

Days In Inventory

Total Inventory X Number of days Last Period in the period Cost of Goods Sold

Days Payable = Total Trade Payables X Number of days in the period Last Period Outstanding Cost of Goods Sold

CONTROL COLLEGE JOB AID FOR CASH FLOW MANAGEMENT

Cash Flow : Key Areas of Focus Drivers: Cash Flow Forecasting

The following are some key areas to focus on while forecasting cash flow: Performance misses resulting in lower profits Timing issues on collection of receivables, e.g. Delayed VAT reimbursements in Sabritas, have a major impact on the cash flow of the business Planning misses, such as production planning, not being in sync with the sales planning team resulting in excessive inventory levels The following are some of the key drivers to improve cash flow forecasting: Net Operating Profit Before Taxes Optimize working capital Other balance sheet changes Capital expenditure Use metrics to measure and improve performance

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