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Unformatted text preview: e in liabilities increases cash. A decrease in liabilities decreases cash. These two principles lead eventually to the impact of receivables, inventory, and payables. As you look
at your assumptions for the cash ﬂow, keep in mind that every extra dollar of receivables or inventory
as assets is a dollar that you don’t have in your cash balance. Every dollar in payables is a dollar that
you have in cash, too. Although this simple cash model doesn’t show the critical impact as clearly as
our examples in the previous chapter, the mathematics and ﬁnancial principles are the same.
Your business plan should help you develop a realistic cash estimate with mathematically and
ﬁnancially correct cash tables, in which all the key tables are linked to the cash ﬂow correctly. Use the Cash Flow Chart as a Cash Pilot
Every plan should have a monthly cash ﬂow chart, which the computer draws from your cash ﬂow
table. The chart takes the data from the ﬁnancial worksheet in the rows for net cash ﬂow and cash
balance. Use this chart as an illustration of your cash ﬂow projection.
As an example of how useful the cash chart can be, revisit the series of cash scenarios presented in
Chapter 14: About Business Numbers. You can see how the estimated cash varies radically depending on
critical assumptions for collections, payments, and inventory; and also how the cash chart shows you
those variations instantly.
When I am actually working with a business plan, I usually keep the cash chart visible as I change my
assumptions. That way I know immediately when I need to revise numbers further because my cash
balance is negative. CHAPTER 17: FINISH THE FINANCIALS If you’ve followed through with the cash plan, your ﬁnancials are almost done. The balance sheet should be
completed by the time you have a cash ﬂow working. Business ratios should be almost automatic too, because
they draw their information from tables you’ve already ﬁnished. The Balance Sheet
I showed you some basic balance sheets in Chapter 14: About Business Number...
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- Winter '09