Bentley Cat Food Company

Three Shareholders, Bently, Izzy and Cooper have just set up a small company that distributes natural cat food . Marketing and Selling

is done only via the intranet. When they started the business each Partner contributed $12,000 each in return for the initial

share issue.

The Company started out very slow, but the market is growing and sales have increased significantly. The owners have been putting

all of their efforts into buying and selling. Credit control has been ignored an Izzy (the Accountant) has let the work on the

cash flow slip

The owners are in the middle of a conference when the receiptionist interrupts them to tell them the Bank Manager is on the phone.

The account is in overdraft and they must call her back immediately or she will call the overdraft in. Cooper was irritated. ' what is

this about? Does this mean that I have to cancel my order for the new BMW?

Izzy went to his office. He had not really cheked the cash position for over two months. He was a little worried.

His records showed the following.

Overheads:

Rent ( Due 1st of month). - Office $3,000 per month.- two months have been paid, rest of the invoices are sitting the A/P Analyst desk

Furniture- ( Due the 20th of month). $1,000 per month - one month paid) , A/P Analyst has put these invoices in a folder

and never entered them into A/P

Cars - $1,000 per month - due 15th of month- Purchased in Month 2, however only 1st month paid

Rates, Insurance, ( due weekly). $1,000 per month. All months paid

Taxes $500 per month . None paid

Services: ( due weekly). $250 per month, all months paid

Salaries - ( paid semi-monthly). $9,500 per month, Payroll is current

Sundries : $2,000 per month - all months paid

Sales. ( credit terms are net 30 days)

Sales are shipped as follows 1st week of month = 25% 2nd week = 20% ; 3rd week = 20%; 4th week = 35%

AR collection pattern is 70% is collected timely, 10% paid 10 days late, 15% paid 20 days late; and 5% paid 30 days late

Month 1: $15,000.

Month 2: $24,000.

Month 3: $30,000

Month 4: $40,000

Month 5: $ 86,000

Purchases (vendor terms are net 30 days). All purchases were purchased equally throughout month

Checks are processed weekly on Thursdays, payments were paid within vendor terms in Month 1 and 2. The A/P Analyst was

working on a project in month 3 and half of the payments were paid 10 days late. In month 4, the A/P Analyst was tired of

phone calls requesting payment, so he/she started paying vendors 15 days early and continued this practice through today.

Month 1: $8,000

Month2: $15,000

Month3: $25,000

Month4: $55,000

Month 5: $60,000

Was he right to be worried, and will Cooper get his car?

a). Prepare a weekly cash forecast going out 6 months. Assume Sales in month 6 is $80,000 and purchases are $50,000

b). Prepare a 13 week cast forecast to present to the bank

c). What ideas and suggestions would you give to the Bently Cat Food Company to get their Company back on track with the bank and to keep them

in a positive cash flow. (up to 5)

Make sure you prepare a professional forecast in a clear neat format.