Overview

This module covers the following topics:

• What is cash flow?
• Causes of cash flow problems;
• Managing cash flow;
• Fixed versus variable costs;
• Understanding pricing & margin issues;
• Sales mix forecasting;
• Anticipating expenses; and
• Forecasting cash flows.

Learning Outcomes

On completion of this module, you will have a better understanding of the flow of cash through your business and how to address cash flow problems.

You will also be able to identify the difference between fixed and variable costs, and determine how these also affect cash flow.

Finally, you will learn how pricing and margin choices affect both cash flow and the viability of your business, and how to predict future performance by forecasting sales, expenses and cash flow.

Activity One:

• After watching the above ‘Preparing budgets and cash flow forecasts‘ video, write down your top 3 cash flow risks in your current or proposed business.

• For the 3 cash flow risks you identified above, provide one idea for each on how you could manage that risk.

Activity Two:

• For a franchise business you are considering or currently operating calculate your break-even in units and sales for your target profit using the break-even formula (PDF 92KB), contribution margin formula (PDF 52KB) and target profit formula (PDF 50KB).

Activity Three:

• Review Q&A Interview with Mr Rentals Franchisees, Greg and Natalie Nash, where they discuss how they manage cash flow in thier business. A transcript of the interview is available here (PDF 80KB).

Activity Four:

• Using this ‘Personal Expenses Checklist‘, calculate your annual, quarterly, monthly and weekly living expenses.  Next,  figure out whether the revenue projections of the franchise you’re considering can cover those costs.

Activity Five:

• Review ‘Develop Your Own Sales Mix Template (PDF 24KB)‘, then speak to your business advisor about developing your own.  This is an important part of your business planning process.