The Thirteen Week Cash Flow Report, defined as a method to forecast the cash flow needs of a company, is commonly used in businesses with complicated cash cycles. When active cash management is required, this tool is especially useful. This model is used best as a “big picture” tool to see how much cash is required on a forward rolling basis. However, having a clear sense of your working capital needs and when you need it gives added impetus to collect cash and/or to generate revenue.
When used in conjunction with the daily cash report, this tool is also helpful. Think of the 13-Week Cash Flow report as giving you the strategic big picture needs, while the Daily Cash Flow Report provides a more tactical level measure of the firm’s cash position.
The 13 week cash flow report is used to project cash flow expectations into the coming weeks. When you have a strong understanding of this report, it creates the foundation to make valuable models. There are several key areas of information that you will need to obtain, including beginning cash balances, estimated cash receipts, estimated payroll and taxes, estimated operating expenses, note/lease payments, payments on LOC-ML and payments on old A/P.
(Managing your cash flow is vital to a business’s health. If you haven’t been paying attention to your cash flow, access the free 25 Ways to Improve Cash Flow whitepaper to learn how to can stay cash flow positive in tight economies. Click here to access your free guide!)
In a Thirteen Week Cash Flow Report, modeling the proper information is essential to creating meaningful statements. First, collect information to assure that numbers, concepts, and processes are added to the report with regard to the regular business operations. Keep in mind that an accounting firm will have a completely different thirteen week cash flow forecast than an e-commerce store.
Second, financial information must be input in the proper places in the report. Incorrect reporting leads to useless statements, so the maker must take great care to avoid mis-entry or confusion.
Garbage in … is Garbage Out. The integrity of your forecast will depend on your ability to obtain solid information on forthcoming cash receipts, operating expenses, payroll and other cash disbursements such as notes and old A/P.
After you have gathered information, key in the information into the spreadsheet. Make sure you are keying the information into the correct week. Depending on the number of disbursements or cash receipts of your company, you may want to consider separate tabs that list out all the associated receipts and disbursements for each week. You can then sum up all the disbursements or receipts and link them to the summary page.
After you have input your estimated forecasts, you will want to monitor and review against actuals. As each week passes, you may want to consider dropping in the actuals into the spreadsheet. Actual cash receipts and cash disbursements can be tied to the Daily Cash Report.
For example, Stanlee is the head bookkeeper for a retail boutique. Because the work environment is more relaxed and his efforts carry more effect on the business, Stanlee appreciates working with small vendors.
This week, the company owner decided to deepen her understanding of financial statements for business. So she asked Stanlee to create a Thirteen Week Cash Flow Report. Stanlee sits down to prepare these statements.
Stanlee begins by accumulating proper information. He starts by looking through quickbooks, bank statements, business credit card statements, and a few other forms. With these, Stanlee finally has the background he needs to create the report. He then moves forward data entry.
Stanlee begins inputting information for the 13 week cash flow analysis. He starts by looking at end of period cash balances in the bank, credit card payments due, and anything else that effects cash flow. After Stanlee enters this information fully, he checks his work to ensure completion.
Next, Stanlee monitors the statement. Then after finishing, he takes some time to look at the report. At the end of the 13 week period, he discovers that the company cannot complete payment of all accounts payable. This worries Stanlee. So, he takes a few more moments to create a potential plan of action. He then resolves that if the store owner, a woman with impeccable credit, opens an additional business credit card she will be able to meet her cash needs. As a result of the increased sales volume due to opening of the spring season, the owner will be able to pay back the credit card balance before having to make a payment.
What could have been a major catastrophe is now a simple matter. In conclusion, the owner of the boutique thanks Stanlee, gives him a nice bonus, and decides to always have a Thirteen Week Cash Flow Report on hand. For more ways to improve your cash flow, download the free 25 Ways to Improve Cash Flow whitepaper.
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