This preview shows page 1. Sign up to view the full content.
Unformatted text preview: ng out. Sales and proﬁts are out of the picture (although
sales inﬂuences money in, and costs and expenses inﬂuence money out). BASIC CASH PLAN This sample shows examples of incoming cash and expenditures for our sample company.
In this very simple model, your sources of money are cash sales, payments received (for sales on
credit, also called accounts receivable), new loan money, and new investment. Your expenditures
include buying widgets in cash, paying interest, paying bills as they come due (i.e., paying accounts
payable), and paying off loans.
Even at this basic level, you can see the potential complications and the need for linking up the
numbers using a computer. Your estimated receipts from accounts receivable must have a logical
relationship to sales and the balance of accounts receivable. Likewise, your payments of accounts
payable have to relate to the balances of payables and the costs and expenses that created the
payables. Vital as this is to business survival, it is not nearly as intuitive as the sales forecast, personnel
plan, or income statement. The mathematics and the ﬁnancials are more complex. HURDLE: THE BOOK 16.2 ON BUSINESS PLANNING A More Realistic Example
The cash plan can get complicated quickly when you deal with a more realistic business example.
In the following illustrations, we’re going to look at the cash planning for the company whose cash
balances were described in Chapter 14: About Business Numbers. This was the company whose cash
ﬂow varied widely, depending on cash assumptions. Beginning Assumptions
With the next illustrations we set the starting points, which are the projected income and the starting
balances. We see a simple example of business income, which we’ll use as a ﬁrst step for planning
cash. The example already divides sales between cash sales and sales on credit. We also have a
simpliﬁed version of wages and operating expenses so that we can focus on the cash plan instead of
the income statement. SAMPLE CASE STARTING INCOME STATEMENT SAMPLE CASE STARTING
BALANCE In these two projected...
View Full Document
This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.
- Winter '09