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Why You Need to Have a 13-Week Cash Flow Report

Why You Need to Have a 13-Week Cash Flow ReportHave you ever been in a cash flow crisis?

You aren’t able to make payroll.

You can’t pay your vendors.

There is simply not enough cash.

BUT sales are rocketing.

So in theory, there should be enough cash… Wrong.

I say this during every Office Hours I host for our SCFO Lab members… “You need to have a 13-Week Cash Flow Report. If you don’t have one, get one.” As we are quickly coming into the holidays and the new year, let’s look at why you need to have a 13-Week Cash Flow Report.

Or, do you live in a company that is cash rich, and you simply do not see the need to forecast cash because you know you have plenty in the bank?  Well, you still need a cash flow forecast.

Handling a Cash Flow Crisis?

Handling a cash flow crisis is never easy because it puts financial leaders in a difficult place. It may look like asking vendors to extend their payment terms, selling off assets, or laying off employees.

Whether your cash flow crisis resulted from the fluctuating market or mismanagement, there are a couple of tips in handling a cash flow crisis.

(NOTE: Regardless of whether cash is tight or flush, every company should have a 13-Week Cash Flow Report. In the SCFO Lab, members have access to our 13-Week Cash Flow Report template that we use with all our clients. Click here to view.)


Every company needs cash. That’s why you need to have a 13-Week Cash Flow Report! Learn 25 different ways to improve your cash flow with our free whitepaper. 

Click here to Download the 25 Ways to Improve Cash Flow


Update Financials & Reports

Look at your financial statements regularly, and make sure they are updated – especially your…

You cannot make smart and strategic decisions without the most up-to-date facts.  Having an updated cash flow forecast for your business that is updated weekly allows you to have a true pulse on the business. Your accounting records should be based on accrual based accounting. But your cash flow forecast ties in nicely as a great tool.

Communicate Effectively

Communication is key to handling a cash flow crisis. This could look like…

Why You Need to Have a 13-Week Cash Flow Report

The #1 reason why you need to have a 13-Week Cash Flow Report is because it’s active cash management. This report is a big picture tool that tells companies how much cash is required on a forward rolling basis. More specifically, it gives you the freedom to make big decisions.

Cash Rich or Cash Poor – You Need a Cash Flow Forecast

So, we briefly discussed that in a cash flow crisis the cash flow forecast allows you to manage cash and adjust payments to vendors while making payroll and keeping the lights on. What about in a cash rich company?

I recently started on a client, and the company is a cash rich company. The CFO was surprised when I mentioned to him that he should have a cash flow forecast.

Here are a few reasons why a cash rich company would want to know exactly how rich they are:

  1. If you are cash rich, then you may be looking at acquisitions. It would be nice to know who much you pay as cash and how much you finance.
  2. CAPEX acquisitions – you want to know how much actual cash you have to acquire CAPEX.
  3. Distributions/Bonuses, etc. – how much can you pay out?
  4. Plan for the worst –  I do not care what industry what you are in; they all eventually have downturns. Plan ahead and save up for those rainy days.
  5. If you are cash rich, then that means you made a large profit. That also means you have to probably pay taxes, or distribute cash to pay taxes. How much cash for taxes do you need?

How to Create a 13-Week Cash Flow Report

Now, let’s look at how to create a 13-Week Cash Flow Report.

There are several pieces of information that you need to gather as you build this report, including the following:

Why You Need to Have a 13-Week Cash Flow ReportTips on Making Your Cash Flow Report Successful

Here are a couple of tips on making your cash flow report successful.

Get C-Level Support

If your C-level is not supportive of creating the 13-Week Cash Flow Report or using it as they run the business, then it’s just going to be another report that never gets used.

Don’t let it become that!

This tool is so valuable AND every company should be using one.

Not using a 13-Week Cash Flow Forecast is like deciding not to drink water for an extended time. You know you need to water/cash, but you do nothing about it. Eventually, you become so illiquid that you are financially distressed, if not bankrupt.

For example, we once put together a 13-Week Cash Flow Forecast for a company that was making a small percentage of what they used to make when the market was better. We predicted that if they did not take any action, then they would be out of cash within 9 months. Unfortunately, the CEO and senior leadership did not make any changes and had to shut their doors. Our long term cash flow forecast was accurate and we warned the CEO.

Use The Report As A Playbook

The report is useless unless you actually use it as a playbook and use it to make strategic decisions. When you use the report as a playbook, you go from being an accounting/finance professional that knows how to build reports to a financial leader that strategically directs the firm.

How to Use a 13-Week Cash Flow Report

Once you have created the 13-Week Cash Flow Forecast, it’s important to maintain it. We suggest to maintain and update it at least weekly. We also suggest that you use this report in conjunction with the Daily Cash Report.

If you want to increase cash flow, then click here to access our 25 Ways to Improve Cash Flow whitepaper.

Why You Need to Have a 13-Week Cash Flow Report

Strategic CFO Lab Member Extra

Access your Cash Flow Tuneup Execution Plan in SCFO Lab. This tool enables you to quantify the cash unlocked in your company.

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Why You Need to Have a 13-Week Cash Flow Report

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What You Should Know About Preparing a Forecast

Ready or not, it’s time to start the process of preparing your 2016 forecast.  While it may seem a bit premature, a walk down the aisle of your favorite home improvement store to check out their (already) prominently featured holiday displays tells the story.  Some of this can definitely be attributed to overzealousness to capture the consumer’s holiday dollar. But it drives home the point that 2015 is winding down. It’s time to start thinking about 2016.

3 Things You Should Know About Preparing a Forecast

So what should you keep in mind when preparing your 2016 forecast?  In the video below, Jim talks about 3 things you should know about preparing a forecast.

According to the video, the following 3 things are important when it comes to preparing a forecast:

Be Reasonable

If you choose to include pie-in-the-sky numbers in your forecast, then you’ll lose credibility. You won’t be able to excite your team about helping you achieve unrealistic goals.  If you paint too bleak a picture, you’ll lose motivation and won’t be able to effectively drive action toward goals.

Involve as Many People as Possible

While it’s true that the responsibility of preparing the forecast usually falls squarely on the shoulders of the CFO or Controller, it’s necessary for all departments to get involved in the process to create the most realistic plan possible.  Not only will you end up with better numbers, but sharing the ownership of achieving company goals spreads the burden to everyone.  People are more willing to be held accountable to numbers they understand and had a hand in producing.

Make it Dynamic

Now that you have the forecast prepared, you can put it in a drawer and forget about it, right?  Wrong.  In order to make all the time and effort you put into preparing the forecast worthwhile, it needs to be a living document.  Static forecasts are only realistic for a couple of months, at best.  Dropping in actuals and adjusting future estimates based upon conditions on the ground create a much better tool for running a business than one that ceased to be relevant months ago.

Check out our article Cash Flow Projections for more info on how to prepare a forecast.

If you need help creating an accurate forecast, then download our free Goldilocks Sales Method whitepaper to project accurately.

Preparing a Forecast

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Preparing a Forecast

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Managing Cash Flow

Effectively managing cash flow is an issue that all businesses face, whether they have plenty of cash or are experiencing a cash crunch.  Cash is the lifeblood that fuels current operations and allows for growth, so developing a strategy to manage this most important asset is key.

Effectively Managing Cash Flow

So how do you effectively manage cash flow?  In the article “Track Money In and Out of a Company“, Jim Wilkinson suggests the following strategies:

  1. Prepare cash flow projections
  2. Manage and work your operating cycle
  3. Watch expenses carefully
  4. Use your cash wisely

The article lists specific examples of what these strategies look like and how to implement them. Click here to read more about it.

For more tips on how to improve cash flow, click here to access our 25 Ways to Improve Cash Flow whitepaper.

managing cash flow
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Track Money In and Out of a Company

See Also:
How to Develop a Daily Cash Report
Cash Flow Projections
Discounted Cash Flow Analysis
Cash Flow Statement
Free Cash Flow Analysis

Track Money In and Out of a Company

We have all heard CASH IS KING and HE WHO HAS THE GOLD RULES. I was talking with a business owner of a growing company. He was complaining about the lag between the time he had to pay his suppliers and employees and the time it took him to collect from his customers. He told me that is his biggest problem. Then he asked me how to resolve it. The trick is to track money in and out of a company.

Cash Flow Management

I said the solution is cash flow management. He looked at me and asked “what do you mean cash flow management?” I told him the most basic definition of cash flow management is delaying outlays of cash as long as possible, while encouraging anyone who owes you money to pay it as rapidly as possible.

He looked and me and said if he could do that, then he would not be talking to me. In reality he said his suppliers will not give him the credit he needs and his customers will not pay him when their receivables were due. I told him that his situation was normal and not unusual. He then asked what I would suggest for him to have good cash flow management.

Prepare Cash Flow Projections

I told him first of all, you can not manage anything if you can not measure it. So, you should consider preparing cash flow projections for next year, next quarter and, if you’re on shaky ground, next week. The objective and results of an accurate cash flow projection is they will alert you to negative cash flow situations well before the money is not there.

However, you must understand that cash flow plans are not glimpses into the future. Cash flow plans are only estimates that will take into account such items as your customerspayment histories, your upcoming purchases, and your vendors’ patience.

Additionally, to make an accurate projection you need detailed understanding of amounts and dates of upcoming cash outlays. This means you need to account for every dollar that will be spent, as well as what it will be spent on.


Download The 25 Ways to Improve Cash Flow


Manage Operating Cycle

Secondly, you must manage and work your operating cycle. You know if you were paid for sales the instant you made them, you would never have a cash flow problem. Unfortunately, that doesn’t happen in business to business transactions. You can still improve your cash flow by managing your operating cycle. The basic idea is to speed your operating cycle, which is the time it takes to turn materials and supplies into products, inventory into receivables, and receivables into cash. Some techniques for doing this include, offer discounts to customers who pay their bills rapidly, ask customers to make deposit payments at the time of ordering, issue invoices promptly, and follow up immediately if payments are slow in coming.

Understand Sales Growth

Another area to help your cash flow is to understand that sales growth will conceal problems. Don’t be lulled into complacency by simply expanding sales. You need to watch expenses carefully. Any time and any place you see expenses growing faster than sales, examine costs carefully to find places to cut or control them. You must use your cash wisely. Some ways to achieve this is to take full advantage of creditor payment terms. If a payment is due in 30 days, don’t pay them early, consider using electronic funds transfer or credit cards to make payments on the last day they are due. And, don’t always focus on the lowest price when choosing suppliers. Sometimes more flexible payment terms can improve your cash flow more than a bargain-basement price.

With this information, he told me he is now prepared work on his cash flow management.

For more tips on how to improve cash flow, click here to access our 25 Ways to Improve Cash Flow whitepaper.

Track Money In and Out of a Company, Cash Flow Management
Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

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Track Money In and Out of a Company, Cash Flow Management

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Prepare an Investor Package

See Also:
How to Prepare a Breakeven Analysis
Contribution Margin
Cost Volume Profit Model
ProForma Financial Statements
Net Profit Margin Analysis

Prepare an Investor Package

The Investor Package serves as a medium to visually communicate to the Owner/Management financial information which they might otherwise have difficulty digesting in financial statements. This is not unusual since many entrepreneurs have a better intuitive grasp of the financials rather than an analytical understanding. A secondary benefit to prepare an Investor Package is that the preparer is able to share this information with banks, suppliers or any other concerned parties.

The impact of the Investor Package contrasts with the effort to create it. Based on historical experience, the Owner/Management appreciated the value of the Investor Package more so than the many analyses and hard efforts put forth for other projects. Much of this has to do with how the graphical nature of the Investor Package allows the entrepreneur to intuit the financial statement.

At it’s core, the Investor Package is collection of graphs that tells a story about the company’s financial health.

The biggest challenge to setting up the Investor Package is access to good information. The most important inputs are current and projected monthly financial statements. This means that you may need to finish certain projects before you can start on the Investor Package. Once complete, it will be necessary to maintain the graphs by inputting the information in on a monthly or quarterly basis.

Accumulate Info

In order to successfully create the Investor Package the company’s financial information will need to be gathered and/or created: Current Monthly Financial Statements (Balance Sheet and Income Statement), Updated Cash Flow Projections (Balance Sheet, Income Statement and Cash Flow Statement) and Financial Statements from last 4 years (Balance Sheet, Income Statement and Cash Flow Statement). Note: This is optional depending on whether or not you would like to bring in historical financials as a comparison to current fiscal year performance.

Input Financial Info

Once you have gathered and/or created all the necessary financial statements, it will now be time to enter the appropriate data into the template. The 10 core graphs in the Investor Package all draw from the following information: Revenue, Net Income, Working Capital, Debt to Equity, Accounts Receivable, Days Accounts Receivable Outstanding, Inventory, Cost of Sales, Average Days in Inventory, Current Month Balance Sheet and Current Month Income Statement.

Customize Graphs

Determine what graph(s) you want to include in the Investor Package. Determine what additional information you will need: Do you need to create a new table for inputting the data? Will it be possible to use existing information already there? What 4-year historical information will you need (if any)? Create a new input table as necessary in the Input Section. Key in the appropriate information into their respective tables in the Input Section. Create a new graph in Excel and link to the appropriate cells in the Input Section.

Maintain Monthly/Quarterly

Once you tailor the Investor Package to meet the company’s needs, you have set up the basic infrastructure. The task will now shift to maintain the package by continuously updating it with current financial information. Maintenance should be done on either a monthly or quarterly basis.

If you want to further your relationship with your CEO, then learn how you can be the best wingman with our free How to be a Wingman guide!

Prepare an Investor Package

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

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Prepare an Investor Package

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Cash Flow Projections

See Also:
Cash Flow After Tax
13 Week Cash Flow Report
How to Produce Realistic Sales Projections
Optimistic Projections
Why Most Sales Projections Fail

Cash Flow Projections

Financial statements are the basic building block for understanding how a business is doing. They provide management a way to assess the results and consequences of past decisions. However, because financial statements reside in the past, they are of limited use when used to forecast the future. While there does not exist a fool-proof way to forecast the future, there does exist a reasonable best-guess method to forecast how things may turn out. This is where financial projections come in.

Like historical financial statements, there are 3 basic financial projection reports: Projected Income Statement, Projected Cash Flow Statement and Projected Balance Sheet. Dynamic cash flow projections model is an important tool for managing your business.

Most professionals will produce projected income statements. Some will produce projected cash flow statements. However, few will do projected balance sheets! A complete set of financial projections is very important to keep and maintain.


Download The Know Your Economics Worksheet


Income Statement Projections

A projected Income Statement provides management an idea of how the company’s profitability will look 12 months into the future. This projected profitability rests in large part on management’s ability to forecast industry and customer demand, costs, as well as many other macro and micro economic factors.

Cash Flow Statement Projections

The cash flow projections provides management with an idea of how the firms liquidity will be impacted given the business assumption inputs for the Income Statement projection. The projected Cash Flow Statement seeks to answer the following questions:

Balance Sheet Projections

The projected Balance Sheet allows management to know the state of its asset, liability and equity base. As business expands or contracts so too will the firm’s assets, liabilities and equity. The projected Balance Sheet allows the company to project debt levels and covenants.

Cash Flow Step by Step

In order to successfully create financial projections, gather a variety of information. It is important to obtain the most recent and up-to-date information as all projections of the future are grounded in the past.

In other words…Garbage In Is Garbage Out! Done correctly, you will only need to do this once. However, if you come to find out that there are pieces of information missing, you may need to adjust accordingly. Someone in accounting, preferably a person who has access to the most current financial statements.

Income Statement Projections

After you have finalized the entries for the assumptions page, the next task at hand will be to tackle the Income Statement projections. Of all the projections you do, this is one that receives the most attention. The Income Statement projection can serve as a budget as well as a tool for management to analyze various business scenarios.

Want to check if your unit economics are sound?  Download your free guide here.

accounting income definition

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Banks Tighten Credit Standards

An article in todays’ Wall Street Journal highlights how banks tighten credit standards across the country’s banking community. The author cites interviews with bankers indicating a change in the amount of risk that lenders are willing to take. Later in the article the author cites sources that say they haven’t seen a credit crunch. So which is it?

Banks Tighten Credit Standards

The short answer is that it depends on your local market. How is the local economy performing and how competitive is your banking community? Regardless of the current lending environment you can count on banks‘ underwriting to become more conservative. Why? Because the federal banking regulators will begin to tighten the rules for the entire banking community not just local markets.

Prepare for This Changing Environment

As a CFO or controller how can you prepare for this changing environment? The best way is to get your financial house in order. Improve your cash management reporting. Prepare a cash flow projection to give to your banker. Prepare a strategic plan to manage and predict your capital needs months in advance. Finally, take your banker to lunch. Let him know what is happening in your business so there will be no surprises.

By improving your cash management tools, forecasting your needs and communicating with your banker you can actually weather the coming credit crunch.

Download your free External Analysis whitepaper that guides you through overcoming obstacles and preparing how your company is going to react to external factors.

Banks Tighten Credit Standards

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Banks Tighten Credit Standards

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