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Lean Cash Flow
Simple Steps to
Better Cash
Management
Ryan Johnson
VP of Operations
EGFS
#LeanCashFlow
“Startups face a huge burden in today’s
economy, often having to choose
between funneling resources toward
creating their goods and services or
managing the often complex
accounting, tax and financial strategy
planning necessary to run a successful
business.”
~ David Ehrenberg,
Founder and CEO
Early Growth Financial Services
Agenda
WWW.EARLYGROWTHFINANCIALSERVICES.COM
What is "lean cash flow?"
Making assumptions
Cash flow modeling
Understanding your cash flow
Better cash flow management
Lean cash flow
WWW.EARLYGROWTHFINANCIALSERVICES.COM
“Using the Lean Startup approach,
companies can create order not
chaos by providing tools to test a
vision continuously.”
Applying the principles of lean
cash flow, you can actively control
your cash management.
Lean is “about putting a process, a
methodology around the
development of a product.”
Lean cash flow is about putting a
methodology around cash
management.
Lean Startup Lean Cash Flow
Cash flow projections in an uncertain
world…
• If there’s history,
use it
• If there are
industry examples
(comps) use those
as starting
guidelines
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Focus on assumptions
Coming up with assumptions, when you
just don’t know…
Things to consider:
• How much more product
development before you’re
able to generate the
hockey stick?
• How will you generate
revenue?
• How quickly will you
generate revenue?
• How many people do you
need to hire?
• How much will customer
acquisition cost?
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Building out your model from your
assumptions
• Focus on assumptions
• Keep model flexible; model should be driven off
assumptions as much as possible
• Analyze sensitivity. Tweak assumptions – different
inputs to see how it trickles down through your model
• Level of detail should match company needs; types and
amounts of activity should drive model complexity
• Iterate
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Cash flow model approaches
Hybrid
• Combination of income
statement and capex
• Easier to think through
from entrepreneur’s
standpoint
• Some drawbacks – easy
to miss items that suck
up cash (e.g., working
capital)
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Full set of financial
statements
• Includes income
statement and balance
sheet projections
• Cash flow forecast
results from this
combination
• If you want to do it right
– this is how you do it!
Your cash flow forecast
• Update regularly (minimum monthly,
weekly if needed)
• Use actuals to continually update
projections
• Stay on top of your run rate – always
know when you’re going to run out of
cash
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Practical tips for better cash flow
management
• Close management of costs; question all
spending (can we do without, can we push
out?)
• Approval process in place for spending
• Right processes for hiring
• Manage accounts payable and accounts
receivable
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Accounts payable
• Mind your cash obligations
• Proper vendor
management
– Set up credit with vendors
– Pay with purchase order
– Get payment terms
– Push out payments for 30
days
• Pay bills on time!
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Accounts receivable
• System in place to collect payments in a timely
fashion
• Don’t count revenue before payments are
collected
– Receivables need to be in balance with your payments
– Don’t let receivables linger
– Try to get cash up front
– Subscription model, try to get a year upfront, or at
least quarterly – not monthly.
– Use credit card and automatic payments
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Consider debt financing
• Accounts receivable factoring
• Asset based financing
• Revenue based financing
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Closing thoughts
• Knowing how much cash you have in the bank is
baseline but it doesn’t give the full story.
– Commitments?
– Accruals?
• What does your cash flow look like over the next
6-12 months – not just today
• Need to actively monitor and manage your cash
flow – if you don’t have the time or expertise to
do this, you need to hire a professional
WWW.EARLYGROWTHFINANCIALSERVICES.COM
Thank you and Q&A
Ryan Johsnon
VP of Operations
contact@earlygrowthfinancialservices.com
415-234-3437
@EarlyGrowthFS
WWW.EARLYGROWTHFINANCIALSERVICES.COM

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Lean Cash Flow: Simple Steps to Better Cash Management

  • 1. Lean Cash Flow Simple Steps to Better Cash Management Ryan Johnson VP of Operations EGFS #LeanCashFlow
  • 2. “Startups face a huge burden in today’s economy, often having to choose between funneling resources toward creating their goods and services or managing the often complex accounting, tax and financial strategy planning necessary to run a successful business.” ~ David Ehrenberg, Founder and CEO Early Growth Financial Services
  • 3. Agenda WWW.EARLYGROWTHFINANCIALSERVICES.COM What is "lean cash flow?" Making assumptions Cash flow modeling Understanding your cash flow Better cash flow management
  • 4. Lean cash flow WWW.EARLYGROWTHFINANCIALSERVICES.COM “Using the Lean Startup approach, companies can create order not chaos by providing tools to test a vision continuously.” Applying the principles of lean cash flow, you can actively control your cash management. Lean is “about putting a process, a methodology around the development of a product.” Lean cash flow is about putting a methodology around cash management. Lean Startup Lean Cash Flow
  • 5. Cash flow projections in an uncertain world… • If there’s history, use it • If there are industry examples (comps) use those as starting guidelines WWW.EARLYGROWTHFINANCIALSERVICES.COM Focus on assumptions
  • 6. Coming up with assumptions, when you just don’t know… Things to consider: • How much more product development before you’re able to generate the hockey stick? • How will you generate revenue? • How quickly will you generate revenue? • How many people do you need to hire? • How much will customer acquisition cost? WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 7. Building out your model from your assumptions • Focus on assumptions • Keep model flexible; model should be driven off assumptions as much as possible • Analyze sensitivity. Tweak assumptions – different inputs to see how it trickles down through your model • Level of detail should match company needs; types and amounts of activity should drive model complexity • Iterate WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 8. Cash flow model approaches Hybrid • Combination of income statement and capex • Easier to think through from entrepreneur’s standpoint • Some drawbacks – easy to miss items that suck up cash (e.g., working capital) WWW.EARLYGROWTHFINANCIALSERVICES.COM Full set of financial statements • Includes income statement and balance sheet projections • Cash flow forecast results from this combination • If you want to do it right – this is how you do it!
  • 9. Your cash flow forecast • Update regularly (minimum monthly, weekly if needed) • Use actuals to continually update projections • Stay on top of your run rate – always know when you’re going to run out of cash WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 10. Practical tips for better cash flow management • Close management of costs; question all spending (can we do without, can we push out?) • Approval process in place for spending • Right processes for hiring • Manage accounts payable and accounts receivable WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 11. Accounts payable • Mind your cash obligations • Proper vendor management – Set up credit with vendors – Pay with purchase order – Get payment terms – Push out payments for 30 days • Pay bills on time! WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 12. Accounts receivable • System in place to collect payments in a timely fashion • Don’t count revenue before payments are collected – Receivables need to be in balance with your payments – Don’t let receivables linger – Try to get cash up front – Subscription model, try to get a year upfront, or at least quarterly – not monthly. – Use credit card and automatic payments WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 13. Consider debt financing • Accounts receivable factoring • Asset based financing • Revenue based financing WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 14. Closing thoughts • Knowing how much cash you have in the bank is baseline but it doesn’t give the full story. – Commitments? – Accruals? • What does your cash flow look like over the next 6-12 months – not just today • Need to actively monitor and manage your cash flow – if you don’t have the time or expertise to do this, you need to hire a professional WWW.EARLYGROWTHFINANCIALSERVICES.COM
  • 15. Thank you and Q&A Ryan Johsnon VP of Operations contact@earlygrowthfinancialservices.com 415-234-3437 @EarlyGrowthFS WWW.EARLYGROWTHFINANCIALSERVICES.COM

Notes de l'éditeur

  1. Other questions: cap ex,