You Be the Consultant In Search of a Cash Flow Forecast "Till never make that mistake again," Douglas Martinez said to himself as he got into his car. Martinez had just left a meeting with his banker, who had not been optimistic about the chances of Martinez's plumbing supply company getting the loan it needed. I should have been better prepared for the meeting," he muttered, knowing that he could be angry only at himself. "That consultant at the Small Business Development Center (SBDC) was right. Bankers' primary concern when making loans is cash flow." "At least salvaged the meeting by telling him I wasn't ready to officially apply for a loan yet," Martinez thought. "But I've got a lot of work to do. I've got a week to figure out how to put together a cash budget to supplement my loan application. Maybe that consultant can help me." When he returned to his office, Martinez gathered up the file folders containing all of his fast-growing company's financial reports and printed his projected revenues and expenses using his computer spreadsheet. Then he called the SBDC consultant he had worked with when he was launching his company and explained the situation. When he arrived at the consultant's office that afternoon, they started organizing the information. Here is what they came up with Current balance 8.750 Sales pattem 71% on credit and 29% in cash Collections of credits sa in the same month as these 19% in the first month are in the second month after the 6% never collected bad debts Sot 515 August $17.940 October $15.000 $17,500 $19,750 November $14,000 $16.500 $18,500 December $11.200 $13,000 $14,000 January $0,000 $12,500 $14.900 February $10.500 $13,800 $15,800 March $13,500 $17.500 $19,900 Uits expenses $800 per month Rent $1,200 per month Truck loan $317 per month The company's wages and salaries including payroll taxes) estimates are the following: October $2.050 November $1,825 December $1,725 January February $1,950 The company pays 63 percent of the sales price for the inventory it purchases, an amount that it actually pays in the following month. (Martinez has negotiated "net 30" credit terms with his suppliers.) Other expenses include the following: Insurance premiums $1,200 payable in August and February Office supplies $95 per month Maintenance $75 per month Computer supplies $75 per month Advertising $550 per month Legal and socounting for $250 per month Miscellaneous experts 500 per month A tax payment of $1.400 is due in December Martinez has established a minimum cash balance of $2.000 and can borrow money at an interest rate of 8.75 namant for Create a 2 month | Douglas beginning in cash budget October. You Be the Consultant In Search of a Cash Flow Forecast "Till never make that mistake again," Douglas Martinez said to himself as he got into his car. Martinez had just left a meeting with his banker, who had not been optimistic about the chances of Martinez's plumbing supply company getting the loan it needed. I should have been better prepared for the meeting," he muttered, knowing that he could be angry only at himself. "That consultant at the Small Business Development Center (SBDC) was right. Bankers' primary concern when making loans is cash flow." "At least salvaged the meeting by telling him I wasn't ready to officially apply for a loan yet," Martinez thought. "But I've got a lot of work to do. I've got a week to figure out how to put together a cash budget to supplement my loan application. Maybe that consultant can help me." When he returned to his office, Martinez gathered up the file folders containing all of his fast-growing company's financial reports and printed his projected revenues and expenses using his computer spreadsheet. Then he called the SBDC consultant he had worked with when he was launching his company and explained the situation. When he arrived at the consultant's office that afternoon, they started organizing the information. Here is what they came up with Current balance 8.750 Sales pattem 71% on credit and 29% in cash Collections of credits sa in the same month as these 19% in the first month are in the second month after the 6% never collected bad debts Sot 515 August $17.940 October $15.000 $17,500 $19,750 November $14,000 $16.500 $18,500 December $11.200 $13,000 $14,000 January $0,000 $12,500 $14.900 February $10.500 $13,800 $15,800 March $13,500 $17.500 $19,900 Uits expenses $800 per month Rent $1,200 per month Truck loan $317 per month The company's wages and salaries including payroll taxes) estimates are the following: October $2.050 November $1,825 December $1,725 January February $1,950 The company pays 63 percent of the sales price for the inventory it purchases, an amount that it actually pays in the following month. (Martinez has negotiated "net 30" credit terms with his suppliers.) Other expenses include the following: Insurance premiums $1,200 payable in August and February Office supplies $95 per month Maintenance $75 per month Computer supplies $75 per month Advertising $550 per month Legal and socounting for $250 per month Miscellaneous experts 500 per month A tax payment of $1.400 is due in December Martinez has established a minimum cash balance of $2.000 and can borrow money at an interest rate of 8.75 namant for Create a 2 month | Douglas beginning in cash budget October