Importance of a 13 Week Cash Flow Forecast

If you own or operate a small business, knowing how much your assets are worth is essential. In fact, the term “cash position” summarizes something that every entrepreneur should understand. A company’s cash position is calculated by taking current assets on the company’s balance sheet divided by its current liabilities. This gives the business owner a good sense of where the company stands.

After you’ve done that, you’ll never find yourself in a situation where “the business owns you, instead of you owning the business.” Understanding your company’s cash position on a daily, weekly, or monthly basis is an easy thing to do if you create a “13 Week Cash Flow Forecast.”

What is a 13 Week Cash Flow Forecast?
A 13 Week Cash Flow Forecast is a financial spreadsheet used to forecast the future cash flow needs of a company. The analysis helps owners or managers understand and anticipate cash and expense cycles of their business. It is the “big picture,” used to determine working capital needs on a rolling basis.

The analysis helps the business owner or manager get to know and understand their numbers. They begin to understand how one set of numbers impacts another. As such, the manager may find they need to collect cash from account debtors on a more timely basis, find ways to generate profitable sales and make tough decisions in managing expenses to ensure a positive cash position.

Why 13 weeks?
13 weeks gives a full business quarter — a three-month window — for the company to be forward-thinking and proactive to develop and maintain a good cash position. Also, if management sees a growing trend in sales, it gives them enough time to negotiate with lenders for a working capital facility to fund growth until cash is generated from the new sales to support associated expenses.

Also, this helps determine the level of growth the company can efficiently manage before it has to borrow, or buy equipment, hire new employees, or other expenses. Conversely, if management sees a slowing trend, 13 weeks gives them time to plan cost-cutting measures such as reducing inventory and associated carrying cost or sell unused assets to help preserve liquidity.

What are the items to include in the analysis?
The Cash Flow Forecast uses several balances on a rolling basis to help owners manage their business from a financial perspective. Depending on the company and industry, some forecasts may be more detailed than others. Items to include are:

  • Beginning Cash Balance
  • Estimated Cash Receipts (cash sales for the week)
  • Estimated payments from account debtors (credit sales)
  • Estimated payroll and associated payroll taxes
  • Loan payments
  • Rent/lease payments
  • General operating expenses
  • Vendor payments (accounts payable)

As a business owner, add any other items specific to your business that have a direct effect on cash. A few that come to mind are:

  • Add any one-time expense that will impact cash as it rolls forward. In other words, how long will it take to replenish cash or cumulative cash flow respective of the one-time or unexpected expense?
  • The sale of assets that are no longer needed. The asset sale may be a one-time event, but how will it affect cash rolling forward. Will the sale help pay-off or reduce debt, or directly add to the cash coffers of the business?

Templates are available online to help you get started. Also, a good CFO, CPA, or controller should be able to create an accurate 13 Week Cash Flow Analysis for your company. The numbers should be updated weekly to show available cash. You’ll notice how changes in one week affect the next week, next month, on so on. Hence, the spreadsheet is a rolling cash tool to help management be proactive in predicting the company’s cash position.

If cash trending gets tight, management may increase borrowing from a line of credit to meet obligations while trying to increase profitable sales to create cash, or management may cut expenses to preserve liquidity.

Considering a 13 Week Cash Flow Forecast is beneficial for companies to help them identify cash fluctuations and accurately predict cash position. Being able to predict cash confidently can help relieve financial stress for the company and its owners.

Not to mention, the company will have a better understanding of its capacity for growth and expansion. The forecast is also a great tool to determine future borrowing needs if any. Business owners will find that bankers and investors will also be impressed as the 13 Week Cash Flow Forecast shows them how serious management is when it comes to their company’s financial success!

Additionally
Our Cash Flow team provides alternative financing that leverages your inventory and receivables. If you have questions or would like to learn more about our program please complete the form below or call 855-717-6400. 


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These days, too many businesses are struggling.
Let’s help them survive.

Partner with Cash Flow.

As a banker, you’re seeing too many good businesses facing problems that seem insurmountable. But there could be a solution. Consider partnering with Cash Flow, and you can refer them to a trusted program when your bank is out of options to help.

Cash Flow has two programs that businesses can use to quickly access the cash they need:

  • Accounts Receivable financing for funding invoices, and
  • Asset-based lending that also includes borrowing against inventory.

Cash Flow has flexible financing, competitive rates, and exceptional customer service. We make transitioning from your bank to ours — and back to yours — a smooth process. And since this program is a division of Chesapeake Bank, one of the most highly acclaimed community banks in the country, you know they’ll be in good hands as they recover from their challenges.

Learn more about the Cash Flow advantage. Read a few case studies. Then, contact me and let’s work together, so they can keep working, too.

Robbie Faucett

Robbie Faucett, District Sales Manager, Corporate and Business Development

Email: rfaucett@chesbank.com
Address: 204 Indian Wells Drive, Spartanburg, South Carolina 29306
Phone: 864-580-9444
Mobile: 864-580-9444
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These days, too many businesses are struggling.
Let’s help them survive.

Partner with Cash Flow.

As a banker, you’re seeing too many good businesses facing problems that seem insurmountable. But there could be a solution. Consider partnering with Cash Flow, and you can refer them to a trusted program when your bank is out of options to help.

Cash Flow has two programs that businesses can use to quickly access the cash they need:

  • Accounts Receivable financing for funding invoices, and
  • Asset-based lending that also includes borrowing against inventory.

Cash Flow has flexible financing, competitive rates, and exceptional customer service. We make transitioning from your bank to ours — and back to yours — a smooth process. And since this program is a division of Chesapeake Bank, one of the most highly acclaimed community banks in the country, you know they’ll be in good hands as they recover from their challenges.

Learn more about the Cash Flow advantage. Read a few case studies. Then, contact me and let’s work together, so they can keep working, too.

Jerry Calabrese

Jerry Calabrese, District Sales Manager, Corporate and Business Development

Email: jcalabrese@chesbank.com
Address: 5133 Vermont Drive, Easton, Pennsylvannia 18045
Phone: 610-442-9107
Mobile: 610-442-9107
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  • Fill out this form and Jerry from Cash Flow will be in touch as soon as possible. Thank you!
  • By checking this box, you agree to receive communications from Cash Flow. *

These days, too many businesses are struggling.
Let’s help them survive.

Partner with Cash Flow.

As a banker, you’re seeing too many good businesses facing problems that seem insurmountable. But there could be a solution. Consider partnering with Cash Flow, and you can refer them to a trusted program when your bank is out of options to help.

Cash Flow has two programs that businesses can use to quickly access the cash they need:

  • Accounts Receivable financing for funding invoices, and
  • Asset-based lending that also includes borrowing against inventory.

Cash Flow has flexible financing, competitive rates, and exceptional customer service. We make transitioning from your bank to ours — and back to yours — a smooth process. And since this program is a division of Chesapeake Bank, one of the most highly acclaimed community banks in the country, you know they’ll be in good hands as they recover from their challenges.

Learn more about the Cash Flow advantage. Read a few case studies. Then, contact me and let’s work together, so they can keep working, too.

Kevin Wood

Kevin Wood, Managing Director

Email: kwood@chesbank.com
Address: Post Office Box 799, Gloucester, Virginia 23061
Phone: 804-695-8247
Mobile: 804-513-7597
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AFA Delegation Educates Legislators About Factoring

By Kevin Wood

Commercial Factor Magazine, August 2019 edition

NOTE: This article originally appeared in the August 2019 issue of Commercial Factor, a publication of the International Factoring Association, which Kevin Wood is a member of the advisory board.

July 16, 2019 was the 50th anniversary of the Apollo 11 Moon launch. Not only did that successful launch lead to placing the first humans on the moon four days later, it also affected our day-to-day lives, bringing new products and innovations that were created as part of the Apollo missions. Things like computer microchips, cordless tools, CAT scanners, satellite television and numerous other inventions that make our lives better resulted from the efforts of those Apollo missions.

Fifty years later, on that same day, three AFA members, along with our AFA Lobbying Group, launched another successful visit to Washington to lobby Congress and several key committees to continue the important work of the AFA.

The AFA seeks to influence our elected leaders and regulatory authorities to make our lives better for our factoring community from both a legislative and regulatory perspective.

Our two-day fly in was led by Palmer Hamilton of Jones Walker and included Debra Wilson from BAMfi and Tania Daniel from ENGS Commercial Capital. It was great to have such an experienced and knowledgeable team on our visit.

Not having participated in a previous fly in, I did not know what to expect, but Palmer and the team at Jones Walker had everything planned out for our meetings and had prepared focused agenda topics for discussion. We had a detailed agenda and reading material to allow us to quickly get up to speed on the topics.

Our main focus for this visit was to continue to differentiate factors from MCA lenders and to work to insure that Section 1071 of the Dodd-Frank Act would not be improperly applied to factoring. This section of Dodd-Frank will require lenders to gather and report information on applications based on race, gender and other components.

Since factors do not lend money, but rather purchase assets, we wanted to make our position known to as many influencers as possible and to ensure that factors would not be inappropriately required to comply with the regulation implementing Section 1071. Not only would this be a difficult and onerous burden on individual factors, it would
also distort the information that Congress hoped to have compiled, since factoring is not a lending function.

Our two days started with a strategy meeting with Palmer and then we met with leadership from the Small Business Administration; leadership from the Consumer Financial Protection Bureau (CFPB) which is crafting the actual regulation implementing Section 1071; House Financial Services Committee staff; the financial liaison for a US Senator and, finally, a House Member and his team.

Even though we had to suffer in 95-degree heat with the high Washington humidity, we had a very successful discussion in every meeting. We were all very impressed with the Representative from Colorado, Ed Perlmutter, who, as a former bankruptcy attorney, knew quite a bit about the details of factoring!

Everyone we met was aware of factoring and our concerns which speaks to the effectiveness over the past 10 years of our lobbying firm and the numerous members of the AFA who have spent time and money to attend and educate our elected officials.

All of the people with whom we met understood our point of view and were receptive to our ideas. Because the CFPB regulations implementing Section 1071 will not be finalized until 2021, we must continue to educate and inform Congress and request Congressional help to make sure we have the best possible opportunities to help fund small businesses across the U.S. and provide creative solutions to helping businesses grow.

Being new to the fly in process, my main takeaways from the two days were:

  • The depth of knowledge and the amount of groundwork that is required to set up these meetings
  • The willingness of our elected officials to hear our side of the story and be open to our point of view
  • The knowledge and professionalism of our IFA and AFA members and their willingness to contribute time and money to help the industry overall
  • The need for more people to get involved and contribute either time or money to help direct legislation that will create a better future for the Factoring industry

We must continue to be diligent in monitoring and managing the receivables. We need to be just as diligent in monitoring and managing the legislation and regulations that affect our industry and our livelihoods.

Just as the launch of Apollo improved the lives of all of society, the continued launches of AFA visits to Washington will hopefully help the lives of factors now and in the future.

The goal of the AFA is to increase membership and financial support from every IFA member. We urge every IFA member to contribute to the AFA as we are in the midst of our annual membership fund drive. Currently, we have Bronze Members who have contributed as little as $500, up to Diamond Members who have contributed in excess of $10,000. This is a very inexpensive insurance policy to help protect our industry from needless regulation which will be both costly and prohibitive. Please consider supporting the American Factoring Association. •


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Cash Flow 101: Cash flow management for business owners

By Reggie Connaughton

Cash flow management for business owners

Effective cash flow management is essential to maintain and grow your business — big or small.

As Managing Director at Chesapeake Bank’s Cash Flow division, Kevin Wood understands the complexities associated with managing a business’ cash flow. To help break down the basics and share best practices for cash flow management, Kevin answers a few cash flow FAQs.

What is cash flow management?

Cash flow management simply means managing your cash so that you have enough cash in your account to pay your expenses as they come due. Some companies are very profitable in their financial statements but never have enough cash on hand to cover weekly payroll.

Profits are often determined by what jobs you have completed and how much you have billed your customers, not how much they have paid you. Your accounts receivables balance may look great on your balance sheet, but it doesn’t help with your actual checking account balance.

Why is managing cash flow important?

Managing cash, or cash flow is important because if you do not pay your expenses when they come due, it can create poor relationships with vendors and suppliers, poor employee morale and possibly late fees or tax penalties. In extreme circumstances, cash flow issues can cause a profitable company to go out of business.

What are some key cash flow management terms?
  • Net Profit – sales minus expenses
  • Accounts Receivable – money owed for services performed
  • Accrual Accounting – a type of accounting that includes money owed to you and money you owe to others as part of the balance sheet
  • Cash Accounting – a type of accounting that includes only cash received by you and cash paid out by you for expenses as part of the balance sheet

Understanding these terms and how they apply to your business can help you better manage cash flow.

What are some best practices for managing cash flow?

One of the best ways to manage cash flow is for the owner to spend 15-30 minutes each day reviewing what and who was billed that day and making calls to collect payment. This will alert the owner to potential problems so he/she can be proactive, rather than reactive.

If you know you’re not going to be paid on time for a job, reach out to vendors, explain the circumstance and provide a projected payment date prior to the due date. Most companies appreciate the information in advance and are willing to work with a partner who is on top of their business.

Also, If a company is growing quickly or working with mostly slower paying clients, they will often need to find an outside funding source to help them cover the swings in cash flow, even if they are monitoring their cash daily. Lines of credit, asset-based lending and factoring are some of the options available. Each has different credit qualifications, usage requirements, and structures.

Tell me about Cash Flow at Chesapeake Bank and is it right for my business?

Cash Flow at Chesapeake Bank is a program that purchases or lends against a business’ account receivables (invoices) and inventory. The Cash Flow program provides immediate cash (usually same day) to enable a business to run more efficiently. Growing companies, companies that work with slower paying companies, those that need to shorten cash conversion cycles or have challenged balance sheets are the best fit to use Cash Flow.


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The True Cost of Early Pay Discounts

By Reggie Connaughton

The True Cost of Early Pay Discounts

As a business owner, you know all too well that there are times when there is not enough cash to go around. This can happen for many reasons, but for some, it is simply a reflection of the gap between merchandise going out and payments on invoices coming in. Banks aren’t always able to provide enough working capital either, even if a company has good financials.

As a result business owners find themselves creating alternative solutions to get money flowing again; like adjusting the terms of the invoice or offering discounts to get paid before the invoice is due so that they don’t have to borrow from lenders. Usually, this discount is expressed as 2% /10 net 30. Simply stated, you will accept 2% less of the invoice amount if your client pays within ten days. 

While an ‘early pay discount’ may sound good, it can cause a significant loss in funds over time.

Let’s look at the math.

Say that we sell you a box of widgets for $10,000.

Once you receive the widgets, I will issue you an invoice for $10,000 that is due within 30 days.

In that invoice, I state to you that I will accept a 2% discount if you pay that invoice within 10 days.

Effectively, I am saying to you that if you accelerate my cash flow by 20 days (paying early), then I will accept $9,800 as full and final payment. (Reflecting the 2% discount.)

Sounds like a win-win right?

Well consider this:

If your customer chooses to take advantage of the discount noted above, you now have use of the amount of $9,800 for an additional 20 days, which in turn reduces the funding needed from lenders by the same amount.

But let’s say that you’re using the same numbers in this next math equation. Except that we’re going to take the $200 ‘discount’ and break it down in reverse to show you how much the equivalent of that would be as an ‘interest percentage’ IF you would have gotten a loan to get you through that 20 day period.

Interest Rate for 20 days: = $200 (identified earlier as 2%)

Annual Interest Rate = (2% /20 days) x 365 days in a year = 36.5% 

That would be the equivalent of paying 36% interest on the $9,800!

Shocking isn’t it?!

From that angle, it is easy to see that if a business could borrow at a rate which is less than the calculated annual interest rate (shown above), then it would be preferable to do so rather than offer the customer the early payment discount, right?    

Right!

Here’s the good news.

Not only can you borrow at a lower rate, our program is designed specifically for this type of situation; offering you two different models for you to choose from. One allows you to borrow against the strength of your invoices, while the other lets you borrow against the strength of your invoices and your inventory. By partnering with us, we can allow you to offer better terms back to your clients while saving a substantial amount of money, and it could even lead to more sales, even though it’s financing.

The bottom line is that if you need extra cash to meet daily expenses or to secure new business, then the Cash Flow Program is for you!

Contact us today!


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IT Staffing Company

Case study #6: On the job for an IT staffing company.

IT StaffingClient: IT staffing company.

Situation: A satisfied past client started a new business with thin profit margins. Recalling the value that Cash Flow added to his previous business, he called on us again.

Solution: A $500,000 accounts receivable facility allowed the new business to take on more clients immediately and to adapt to their largest client’s new, extended payment terms.

Result: The company was able to grow with confidence and take on many more available contracts. Cash Flow will look to increase his credit line within the next several months.


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Tech Staffing Company

Case study #4: Fast cash access for a N.J. staffing company.

Working in New JerseyClient: A tech staffing company in central New Jersey.

Situation: This growing company had an existing credit line with a large national bank but was anticipating accelerated growth and larger contracts coming into the new year. They needed a larger line to manage the anticipated new payroll demands.

Solution: A $750,000 accounts receivable facility, closed in a matter of weeks.

Result: The client was able to ramp up new business and new profits, eliminating the restrictions that their traditional line of credit had imposed on their company.


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Hydraulic Parts Distributor

Case study #3: Partnering with a bank to help a business client.

partering with a bankClient: A machining company and hydraulic parts distributor.

Situation: The majority owner wanted to retire and sell the company to a 29-year employee, the General Manager and Vice President of the firm, whose management style had contributed to the overall success of the business. His loan request was three-fold: 1) $4MM stock purchase of business, 2) $600K owner-occupied real estate, 3) $500K operating line of credit.

The General Manager began to negotiate the purchase and entertained a financing solution with both large and community banks. The community bank that ultimately earned their business realized that the request would exceed its comfort level and partnered with Cash Flow.

Solution: Cash Flow provided a $1,800,000 accounts receivable facility with aggressive pricing and a 90% advance rate. The facility was initially used to fund the buy-out then as an ongoing working capital solution. We also helped solve challenges inherent in the unusual deal, such as: with new ownership, should the company be underwritten as a start-up​ or a continuing business?

Result: By including Cash Flow as a funding partner, their local bank minimized their exposure, provided a complete business solution and received non-interest income from the referral on a monthly basis.


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