Managing Cash Flow for your Startup. Alan Wainer & Eli Palachi Partners Soberman LLP, Chartered Accountants

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1 Managing Cash Flow for your Startup Alan Wainer & Eli Palachi Partners Soberman LLP, Chartered Accountants

2 Why are financial goals important? Provides focus and direction Sets targets Realize full potential

3 Set SMART goals Specific Measurable Attainable Relevant Time-specific

4 What is working capital? Cash on hand + cash coming in cash to be paid out = working capital

5 Importance of working capital Provides a snapshot of your financial position for the short term (indicates ability to meet your obligations)

6 Managing your working capital Understand its meaning: working capital needs to be positive! Match credit and payment terms Keep financial records up to date Keep business separate from personal expenses Use all the tools available to you

7 What is a budget? Organizational plan stated in monetary terms (revenue and expenses) Tool to project future cash flows Budget can be short or long-term Financial communication device

8 Preparing a cash flow budget involves four steps: 1. Prepare a sales forecast 2. Project inflows (including sales, collection or receivables, loan proceeds, etc.) 3. Project outflows (including cost of goods sold, inventory, payroll, rent, and all other operating expenses, loan payments, interest, one-time purchases, etc.) 4. Combine to come up with your cash flow bottom line Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

9 Tips for developing a budget: Assumptions and control sheet Consistency with business plan and goals Look at past performance or current market conditions Identify one-time versus recurring expenses Be conservative and plan for emergencies/contingencies

10 Advertising Beginning inventory Building construction Cash Decoration Deposits Fixtures and equipment Installing fixtures and equipment Insurance Lease payment Licenses and permits Miscellaneous Professional fees Remodeling Rent, equipment Services Signs Supplies Unanticipated expenses Other Other Other Schedule A: Initial Setup Costs Promotion for opening the business The amount of inventory needed to open The amount per contractor bid and other Requirement for the cash register Estimate based on bid if appropriate Check with the utility company Use actual bid on all F and E Use actual bids Bid from insurance agent Bid from real estate agent Check with city or state offices All other Include CA, lawyer, engineer, etc. The amount per contractor bid Amount to be paid before opening Cleaning, accounting, etc. The amount per contractor bid Office, cleaning, etc. supplies Amount for unexpected costs (10 percent of total) Total Setup Dollars Needed $ Total Schedule A (Pre-Opening Costs) Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

11 Schedule B: Personal Living Expenses Family Income Month 1 Month 2 Month 3 Total Wages (take home) $ $ $ $ Wages (take home) Spouse $ $ $ $ Interest and dividends $ $ $ $ Miscellaneous $ $ $ $ Total Income $ $ $ $ Family Expenses Budget Month 1 Month 2 Month 3 Total Auto expenses (gas, maintenance, etc.) $ $ $ $ Auto insurance $ $ $ $ Auto payment $ $ $ $ Beauty shop & barber $ $ $ $ Cable TV $ $ $ $ Charity $ $ $ $ Child care $ $ $ $ Clothing $ $ $ $ Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

12 Schedule B: Personal Living Expenses continued Family Expenses Budget Month 1 Month 2 Month 3 Total Credit card payments $ $ $ $ Dues and subscription $ $ $ $ Electricity $ $ $ $ Entertainment $ $ $ $ Gas company $ $ $ $ Gifts $ $ $ $ Groceries & outside meals $ $ $ $ Health Insurance $ $ $ $ Home repairs $ $ $ $ Homeowner s insurance $ $ $ $ Household $ $ $ $ Income tax (additional) $ $ $ $ Laundry and dry cleaning $ $ $ $ Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

13 Schedule B: Personal Living Expenses continued Family Expenses Budget Month 1 Month 2 Month 3 Total Life Insurance $ $ $ $ Medical and dental $ $ $ $ Miscellaneous $ $ $ $ Mortgage payments $ $ $ $ Other debt payments $ $ $ $ Rent $ $ $ $ School expenses $ $ $ $ Telephone bill $ $ $ $ Tuition $ $ $ $ Vacations $ $ $ $ Water, sewer, trash collection $ $ $ $ Other $ $ $ $ Total Expenses $ $ $ $ Net Cash Remaining (Needed) Total Schedule B $ $ $ $ Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

14 Schedule C: Business Operating Costs (First 90 Days) Estimate business income Month 1 Month 2 Month 3 Total Notes Total Revenue $ $ $ $ Monthly expenses Month 1 Month 2 Month 3 Total Notes Advertising $ $ $ $ Bank service charges $ $ $ $ Business insurance $ $ $ $ Not including the amount from Schedules A or B Credit card fees $ $ $ $ Delivery charges $ $ $ $ Dues and subscriptions $ $ $ $ Health insurance $ $ $ $ Not including the amount from Schedules A or B Inventory $ $ $ $ Lease payments $ $ $ $ Not including the amount from Schedules A or B Loan payments $ $ $ $ Principal and interest payments Miscellaneous $ $ $ $ Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

15 Schedule C: Business Operating Costs (First 90 Days) continued Monthly expenses Month 1 Month 2 Month 3 Total Notes Office expenses $ $ $ $ Payroll other than manager $ $ $ $ Payroll taxes $ $ $ $ Rent $ $ $ $ Not including the amount from Schedules A or B Repairs and maintenance $ $ $ $ Salary of owner or manager $ $ $ $ Only if applicable first 90 days Sales tax $ $ $ $ Supplies $ $ $ $ Telephone $ $ $ $ Utilities $ $ $ $ Other $ $ $ $ Total Expenses $ $ $ $ Net Cash Remaining (Needed) $ $ $ $ Total Schedule C Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

16 Recap of Costs Initial Business Setup Dollars Needed (from Schedule A): Operating Dollars Needed for First 90 Days (from Schedule C): Total Dollars Needed for Set up and First 90 Days (sum of A + C): Additional Personal Cash Needed or Available (from Schedule B): Net Cash Needs for Personal and Business Survival during Startup and First 90 Days: $ $ $ $ $ $ Magos, Alice H. Small Business Financing: How and Where to Get It. Chicago, IL: CCH.

17 Monitor your budget A budget is only a useful tool, if you use it. Keep financial records up to date for ease of comparison Set up budget and financial information so they mirror each other Review short and long term budgets regularly Readjust budget as necessary Consider budget and actual results before making large purchases

18 Why do you need to manage your cash flow? Be aware of short falls before they actually happen Better chance to stay on budget Can plan in advance for large purchases or low sales periods Shows you have an understanding of your business and situation

19 How to manage cash flow: Set up accounting system to monitor actual to budget and calculate important ratios Figure out timing (cyclical, seasonal, etc.) Consider obtaining retainer or deposit prior to completion of service or delivery of product Follow up on receivables personally (enhances good customer relationships) Keep good records official invoices vs. handshakes

20 Ways to save money File HST monthly/quarterly Avoid unnecessary penalties and interest Do your own research first Use free resources and online tools Look into government funding (grants, SRED) Identify needs vs. wants Be wary of buying in bulk Negotiate for the short-term

21 Thank You! Presented by Alan Wainer and Eli Palachi of Soberman LLP Alan Wainer CA, CPA (Illinois), Partner - Assurance & Advisory t awainer@soberman.com Eli Palachi MBA, CA, Partner - Assurance & Advisory t epalachi@soberman.com

22 About Soberman LLP Soberman LLP, Chartered Accountants is a leading provider of assurance & advisory, taxation, and business advisory services to various small to medium sized businesses and enterprises, many of which are privately-held, ownermanaged and family businesses, in Ontario. We also provide public company as well as individual client services. We take into account the life cycle of a company and provide a wide range of services that support clients' continued success. Our team of experienced professionals provides clients with a comprehensive approach to your business and compliance needs. Soberman advisors work in conjunction with other Soberman specialists including: domestic and international tax experts, chartered business valuators, GST experts, transfer pricing specialists, and risk management professionals. Together they assist you in reaching your company s long term financial and business goals.

23 About Soberman LLP Whether you are looking for advice on structuring a business plan, financing, tax minimization strategies, or you are simply trying to understand evolving accounting standards, and how they might affect you, Soberman's professionals have the expertise and experience to offer a solution that works for you. Our full range of services for business owners and entrepreneurs include but are not limited to: Audit and accounting Budget development and analysis Business advisory services Business valuations Financing and debt restructuring Internal controls and operating efficiency reports Owner and management succession Tax planning and compliance

24 About Soberman LLP The key benefits of working with Soberman LLP professionals include: Broad range of services - Soberman LLP strives to provide our clients with a wide range of professional services designed to meet their special and ongoing needs. Excellent customer service - Our competitive edge rests in our ability to provide you with the close, personalized service of a partner designated as your prime business advisor. We endeavour to understand our clients' needs, form quality relationships with them and fill the role of listener, advisor and innovator. Totally familiar with and focused on your business challenges and opportunities, your partner can also liaise with professionals in the specialty areas of our full-service practice when necessary. Knowledgeable staff - Continuous training and leading-edge technology provide our service teams with the knowledge to assist you in all financial aspects of your business. Cost-effective results - You will receive valuable insights on procedures that will keep your business on the right track. Visit our website: to learn more about our team of professionals and the services we offer.