Unformatted text preview: al statements are prepared.
13. “Earnings” are the accumulated earnings since the end of the last year. This month’s balance
should be equal to last month’s balance plus this month’s earnings. At the end of the year, with
an annual adjustment, earnings still left in the business become retained earnings. How to Plan Cash Flow
1. When you reach the Cash Flow table, after ﬁlling in proﬁts and assumptions, and again whenever
you change proﬁts or assumptions, look at the cash balance row at the very bottom. 2. If all entries are positive numbers, then your cash plan works. 3. If you have one or more negative numbers showing in the bottom row, go to the column for
the ﬁrst month showing a negative cash balance and adjust the cash to make it positive. 4. Here are some things you can do to make a negative cash balance positive: HURDLE: THE BOOK 16.12 ON BUSINESS PLANNING • Invest more money. In the cash plan, ﬁnd the row for “New Investment Received” and
type a positive number. • Borrow money. Find a row named “New Current Borrowing,” or “New Other Liabilities”
for interest-free loans, or “New Long-term Borrowing” for long-term loans, and type a
number to represent a new loan. • Increase your estimated payment days. Go to your Payment Detail table and change
your payment days estimator. This indicates that you are paying slower, not making your
vendors happy, but sometimes this is necessary. • Decrease Sales on Credit % in the Receivables Detail table. • Decrease Collection Days in the Receivables Detail table. • Decrease the estimated average inventory on hand estimate in the Inventory Detail table. 5. To repay loan principal, type a positive number into the proper repayment of liabilities row in
the cash ﬂow. 6. To take money out of the company as dividends, type a positive number into the Dividends row
of the cash ﬂow. These are just a few examples. Cash is the most sensitive portion of business management, so of
course there are many other options you might choose. Remember, cash is critical. Understanding Loans, Interest, and Repay...
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