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we will get started here in one moment we just want to let everybody load into the zoom app and join the meeting and before we get started so we'll start here momentarily morning everybody thank you for joining the aca small business boot camp and resource collective for this thursday february 4th now we're excited to be here today and we want to start as we always do by thanking all our community partners we could not do these sessions without them we have a number of community partners that help out they provide their expertise their time their effort their energy and so we thank them very much the small business bootcamp and resource collective is designed to help small businesses or through the covent crisis as i mentioned it is supported by is a statewide initiative supported by our community partners we have approximately 100 or more community partners that have helped throughout the last 11 months of doing these boot camps for 10 months and we can't stress enough the importance that they bring with their expertise and their experience besides the boot camp it is also resource collective and we have a great website set up with all the information that you went to this website to register for today's session but also on this website you'll have the link to the resource collective and also to all the previous boot camp sessions that we've done we record all the sessions and we post them uh on this page so you can go back and review them review the materials that were part of it and uh or watch it for the first time if you couldn't make it for scheduling reasons you couldn't make the boot camp that you can go back and watch it and get that information the resource collective is a great uh compilation of tools and guides and resources provided by our community partners these tools are designed to help small businesses work through the crisis uh return stronger than ever there's some tools you know this is a sample listing of some of the guides and resources and tools that are available on there um but our community partners have provided lots of information that you can download and link to on that page so we highly encourage everybody to take a look at it um as we talk about our community partners we want to do some updates with from the sba and other organizations um as of january 31st the sba is reported for the second round of ppp lending so the ones started in 2021 that arizona had done 10 279 loans for over 873 million dollars so it's a great infusion of funds into arizona in 2021 for those small businesses if you're still looking to get a ppp loan um this is the lender list that the sba provides and we will link this in the chat all these links that are on here you can find them afterwards in our presentation but we will link them to the chat as well so if you hit the chat these links will get posted here shortly um additionally there's the emerge a z fast grant which is a grant program for tech businesses um and startups that uh throughout the state so we've got the link for the information on that grant um additionally i want to share two new updates on the sba's website um the sba just created a page called the sba cross program eligibility and it's a little chart that helps to understand um how the ppp the shuttered venue operators grant the eidl how those different programs kind of cross over and how it works for you and then additionally the shuttered venue operators grant if you have a venue that's been shut down a theater music venue etc museum um the sba just updated information they've got a great page now set up with lots of information on this grant the application's still not up yet but the information on eligibility and so forth is um and so if you have one or you know somebody has a venue please get this information to them also i just want a quick mention of our coven 19 arizona business resources page this website includes links to all the financial guidance to business guidance to the boot camp to all the different resources available for small businesses and all arizona businesses during the covet 19 pandemic additionally the ac has some great programs to help support small businesses we have our small business services that includes working with the sba working with the sbdc's helping guide people local banking contacts for sba loans and ppp loans and et cetera additionally our workforce division has programs to help employers that are looking to hire or upskill their employees we have a number of great programs there and then our arizona mep manufacturing extension partnership is a great program for to help support manufacturers throughout the state additionally for all those looking to start a small business full-time or start a side gig business we have our small business checklist and it is an online interactive tool to help understand the licensing and registration compliance needs for small business at the local state and federal level it covers every incorporated city it covers different professions and industries so it is a great tool as you're looking to start a business and then finally we want to just remind everybody about the state's covet 19 information resource page arizona arizonatogether.org a lot of great information on the site for daily detox 19. so look into next week's sessions uh we've got a great session today but just to mention for next week's sessions we have uh using data driven strategies to run your business on tuesday with chris speer from traction point and then on thursday we have 10 legal mistakes that can hurt your business growth with uh brian burt from the law office of snell and wilmer so we're excited about both of those sessions as well but since we're in this week we're going to go ahead and turn the time over to amber kellogg and cj johnson amber and cj work with the maricopa small business development centers and they're both business funding analysts that are excellent at what they do so i'm going to go ahead and stop sharing my screen and turn the time over to them thank you america it's all yours thank you all right thank you cj how exciting thank you guys so much for joining us this morning and um we wanted to just kind of go over um you know the cash flow management knowing your cash position during covid19 that's what we're going over today in order to strengthen your company's financial position business owners should know the importance of cash flow which is why we're doing this today and how it impacts your business um in this presentation you will will explain the impact of cash flow and how to complete a template give you an overview and then examples too so i'm helping you find issues and opportunities um in in that as well and here's our pictures again robert introduced us my name is amber kellogg we probably should give you a quick introduction um i am a business funding analyst with the maricopa center we are a resource for small business financial literacy we help guide educate and support business owners um through um a little bit i'm so sorry through maricopa community colleges development center is power part of a powerful statewide network um bear with me just a second as through the sbdc we are um help guide educate and support business owners to be financial leaders of their business before working actually for the svdc i worked in the lending world with jpmorgan chase for about 10 years so i kind of know the lending world a little bit uh prior to that i worked managing businesses with the limited brands alternating between two divisions which you guys might know limited brands as victoria's secret bath and body works for about 14 years then finally called arizona home about 13 and a half years ago and i'm excited to be a part of the discussion today cj you want to tell us a little bit about yourself certainly certainly well i've been with the sbdc going on two years now i can't believe it's really flying by um prior to this i was in the commercial lending world i've done lots of different commercial loans including sbas their 7a's and even the 504s so coming into the sbdc was really being on the flip side because as a lender i use the sbdc all the time to help get my clients into a stronger financial position and then they'd come back over and then we'd do the loans so now i'm on flip side and i get to do what i used to have others do for me so i'm really enjoying my time here well before we begin to we should probably tell you um i was sharing a minute maricopa community colleges is a development center part of a powerful statewide network america's svdc arizona which is accredited by the nationwide americas svdc we are funded in part of a cooperative agreement with the um small business administration and hosted by maricopa community colleges and we also share productive partnerships with the city of peoria and our friends over here at arizona commerce authority who invited us to come visit with you guys today our guide is to um our mission is to guide educate and support you as business owners um whether you're a pre-venture client who just have an idea um clients who do businesses that are just starting out or even in long-standing is existing businesses we have a no fee counseling service that focuses on helping you grow launch and sustain your small business we have a team of business analysts there's about 17 of us now we're growing um and we have experience in all of these areas that you see listed here if you don't see your industry listed here it's okay we have a ton of resources um that we have that we can help you with your business the maricopa sbdc offers research and training as well as our counseling and we have a ton of tools and resources to help you with your business development and planning we do have great relationship also cj was saying with lenders and um we have an understanding what lenders are looking for so that helps our business owners because you know there is a long list of things that when you need when you're doing financial anything with lenders and that's kind of how we help our clients it's part of how we help our clients we put together that lending list of you know 30 30 things that they want you to use when you're doing lending um and we try to make it um your package a little bit more appealing to lenders so it helps the lending process a little bit less stressful for you so so our discussion today is to help businesses by supporting your efforts in understanding and utilizing your cash flow position these efforts should have a positive impact on your business and please keep in mind that this information that we're sharing is in no way legal or investment advice we are not attorneys nor are we cpds no we're not so sometimes we try to pretend but no we're not um today we're going to go through cash flow how to manage it and become a financial leader of your business cash flow problems are one of the leading causes for a small business's failure and these problems can stem from any one of the following it could be cost management and those things um inventory maybe debt utilization or just not knowing where your cash positions are and having not enough reserves and these are some of the no cost resources that are available to our clients um we have growth wheel live plan profit sense um the sbec net and then ibis world and some of these you'll see pop in and throughout our presentation during those times today we'll be covering four sections in our discussion um it will be the cash flow management the definition and its steps and then also the sbdc's guidance and by the end of our session you'll have a better understanding of the importance of cash flow management and how to become that financial leader of your business when it comes to a business financials the business owner typically falls into one of these three mindsets the first one is proactive owner they are consistently know the status of their cash position they have good cash reserve in the bank for any unforeseen events the second type is reactive they spend their time looking about and putting their time into putting out their fires maybe they only look at portions of the business such as focusing on sales but ignoring operations expenses as it eats away at their cash reserves and they don't realize it until it's too late the third owner is kind of inactive their mindset might be one of detachment because they have people to do the book they just find the checks they don't see any problems unless their bookkeeper brings it to their attention and that's usually after the fact in order to be a proactive business owner the first step is to know what cash flow management is and what it should be in your toolkit so right now we want to take a quick poll and lisa is going to help us do this um lisa if you just take a couple minutes not minute excuse me we'll leave it up for about 25-30 seconds and then we'll discuss the results of this have any of you used a cash flow template before in your business just give it a couple more moments how's that going lisa good can you see the results i do not see the results yet okay let me end the polling and see here if you can see the results here there you go see that wow okay well then we got our work cut out this is great that's good all right all right amber perfect thanks for doing that poll for us lisa it shows that we have a lot of work to do and i know there's a lot probably going to be a lot of questions throughout our presentation if you could put your q a or the questions in the q a and at the end we'll try to get to as many questions as we can and if we don't get to them we will have our contact information that you can reach out to cj and i too to request for counseling and we can help answer those questions as a business owner it's important to proactively know your profitability your cash flows and how to manage it consistently that's kind of the key is being consistent in it companies with higher cash flows tend to have more reliable businesses um um and fewer problems when it comes to funding in their business so if they kind of know where they're at in their funding then it's a little bit easier for them to be able to fund their business needs cash flows do vary from industry to industry we realize that and there are different rules for every industry as well and this is just a quick high level so i know that there's going to be a lot of questions particularly about maybe just your business but this is really an in general high level quick overview it that will give you a very general understanding of the health of your business looking at general cash flows looking at the trends of the cash flows from operations that we see in yellow investing and financing the correlation of the cash of your earnings to your net income or earnings the following are the components of cash flow so yellow we see that their operation are operating this refers to day-to-day overhead expenses like payroll utilities office supplies um those kind of things so cash expenses that are related to net income in purple there is investing activities refers to long-term assets that we may consider for acquisition or disposal cash activities related to non-current assets and in pink there is financing this means that the activities that incur business debt whether it's long term or short term which impacts the owner's equity the cash flow management needs process needs to be completed on a consistent basis that's why i said before consistence is key it's not just during like times like now an epidemic or a recession we need to make sure that we're consistent in understanding where our cash flow is as a small business owner um we know you're very busy we get it and we may not enjoy this part of i'm tracking your numbers because it's the financial side and it's numbers right so knowing your cash position though is very critical it's a critical point that you need to manage your business and knowing um it should be a part of your tool kit so the things that we give you today should be a part of your toolkit and it helps you check the health of your business as we mentioned a minute ago and today we're going to help you add this to your financial toolkit and help you be more financial leader of your business by the end of the cash flow manag ment session you'll understand the importance of the following we have a list here understanding and knowing your cast position creating your financial toolkit troubleshooting to identify and overcome financial challenges preparing your future goals using the checklist that we'll provide within our presentation and you know what guess what it's okay if you don't know how to do any of this it looks like a majority of you have never done a cash flow um before and that's okay that's why with a maricopa sbdc is here to help um as i said we have 17 counselors in addition to um including cj and i so our mission is to guide educate and support you and we'll help you with this these steps and provide feedback and assist in identifying those issues and help you spot trends to be are aware of as well as guiding you through an action plan to help you towards that positive cash flow which is what we're looking for we're going to move into section two this section is to how to complete a cash flow template um to calculate your company's current and projected cash flow position and again please keep in mind there are many different cash flow templates out there and today we're just going to show you an example of a very basic one honestly if you google it you're going to be able to see um uh you know a ton of different ones but the one that we're showing you today is very diff is very basic each of your industries will dictate what type of revenue sales versus service the different line items called chart of accounts or your cost of goods or cost of services and on your operating expenses it will vary from industry and industry as well however the consistent part is the math itself which i know everyone is always hesitant to do we're excited about that part yes we like the math part we love the math yes we like the math part so we're going to do the math part and of course the first step in understanding that is is to understand how to calculate it you're going to need your financials to support this and again i know that some of you are probably wondering if we're going to have this presentation available and it will be they told us that it will be posted and they'll share all of that um i believe towards the end hopefully they'll let us know where that'll be um so you'll be able to see our presentation and it will be accessible to you so um you'll need your financials to support this your income statement your income and expense statement otherwise known as a profit loss or p l so we're going to say that interchangeably you're going to understand throughout this presentation we're going to keep saying that so you understand that it means the same thing you're also going to need your balance sheet some of you may already know this but we're going to take a quick look at the steps before we're moving on okay um the calculation shows in this slide from operations financing and investing you minus the cash flow cash outflows from operations financing and investing equaling the net cash flow please keep in mind like around the circle right now you know it's not making sense i promise it will start making sense yes i it's a word problem and i used to panic when it was word problems i would rather see like you know numbers but we're gonna fill in the numbers if you do fill in the blank on a piece of paper that you're writing on it'll make sense i promise cash flow keep in mind cash flow is the inflow and outflow of money from your business okay it's just that simple okay it's necessary for daily operations right it's purchasing inventory paying employees if operating costs positive cash flow which we like positive indicates the pump company um liquid assets are increasing right positive means we're going up negative indicates the lack of that so lack of liquidity it means we're not doing so hot okay there are two accounting methods that kind of we should probably mention um your accountant probably tells you that um we have an accrual cap accounting method or we have a cash accounting method which is cash basis the difference between accrual and cash basis accounting lies between the timing okay um it was very confusing to me years ago when i started learning all of this so believe me i understand cj and i talk about this all the time but it's all about the timing when the revenue expenses are recognized cash method is more immediate so cash is just that cash right it's the revenue of expenses while the accrual method anticipates the revenue and expenses simply put the cash basis is when cash exchange hands so when i give you cash that's cash basis okay accrual counts income when it's incurred build in one cycle and collect it in another if that makes any sense i hope you guys are following us here if not again you'll have access to these slides or you can give us a call and we'll walk you through it again sign up for the counseling yes yeah we're gonna take a moment to do another poll and this is a true or false question it's a profit and loss statement is different um than an income statement we're going to see if you're listening so at least it's going to help us put the pull up thanks lisa we're going to put it up for about 25 seconds and then we're going to see what the results are so a profit and loss statement is different from an income and expense statement like i should put jeopardy music on i know i feel like dude we're gonna do that next time we're gonna keep everyone engaged thank you what was our results lisa here we go see yeah good 50 they're listening i love it i love active participants business owners are smart b is false um the answer is false they are the same thing so thank you the names are used interchangeably and like i said like we said we're going to continue to say that you're going to hear profit and loss and it's also abbreviated as p l so when you hear p l and profit loss you're going to understand that um it's the same as the income and expense statement we're going to acclimate you all to banking ease that's that's the whole process here yes when people talk in bank lingo it's kind of hard to understand so thank you um so we mentioned cash flow is looking at the trends in each of the cash flow from operations investment and financing activities your business now the correlation of the earnings to your net income or earnings the process of assessing and reviewing your net cash receipts minus your net cash expenses in order to optimize that cash position so we need to make sure that your cash receipts and your cash expenses put you in a positive light okay so we need to make sure that there's some sort of balance there cash flow is defined in tracking how much money is coming in and going out of your business cj's going to talk in a minute and discuss the tools that we need to calculate cash flow but again keep in mind that each financial document tells a different story um i know that when somebody says do you know your financials a lot of business owners but just keep in mind that um it tells a different story and the timing is different for each of those documents the biggest takeaway is that let's say like there's a balance sheet that balance sheet needs to always balance that's why it's called a balance sheet so the balance sheet will always balance and cj's going to walk us through um some of the tools and from a balance sheet on our next slide awesome all right well here's a simplistic view of a balance sheet and how it is basically split in half we have the assets on the left and we have the liabilities on the right uh the cash line item uh see where the yellow star is right here um that's going to play a key part when we look at the cash flow worksheet later in this presentation and remember the balance sheet is a snapshot of any given point of time and it is also cumulative data from when you first started your business and like amber said it has to balance when you provide the balance sheets historical information for an entire year it's referred to as a pro forma balance sheet if you're not in business yet and you're just giving your estimations it is called a projection balance sheet assets in this section some of the common light items could be your cash it could be accounts receivable that's who owes you money could be your inventory it could also be a prepaid item such as rent or insurance or perhaps maybe you have land or building or even maybe some equipment or some vehicles in the liability section here that may include accounts payable that's who you owe money to current liabilities and those are payments that are made within a 12-month span and then loans and other long-term liabilities and that means payments that are due beyond the 12 months and these relate back to some of the assets that we just mentioned earlier then here in the equity section also known as the net worth this is where you see the amount of capital that is left in the business um it comes in the form of capital paid in and this is the money that you and your partners if you have any have paid into your company it can consist of maybe some common stock or dividends and those are typically incorporations and then the equity is also known as retained earnings this is um the accumulation over the lifespan of the business it represents how much money the owners are leaving in the company to keep it running and if it's a negative number it's that's bad another tool for your toolkit that we use with our clients and a document that lenders use in their loan packages is called the scheduled liabilities you may also hear it referred to as a debt schedule the data within here should be found inside your current liabilities and your long-term liabilities it's just saying who you owe in debts and what the monthly payments those type of things that what interest rate you're paying on it this is really a key part of a loan package for a lender and when you meet with your sb dc advisor we'll ask you about this information in order to better understand your financial condition helping you to look at some options maybe getting better terms or if debt consolidation might be in your best interest of your business it's important to consider various ways to free up that additional cash flow here's an example of a couple p l's from two different industries the line items or chart of accounts between industries have some similarities however the differences will be based on what you want to track specifically perhaps the construction company wants to break down their revenue by each job type you know whether it's maybe a residential job or a commercial job if they do that then perhaps they'll also want to match their cost of goods to that specific revenue source um the p l on the right shows more common light items that are found within most businesses again i'm just showing you these examples to familiarize yourself with the various tools that need to be in your toolkit i'd like to take a moment to clarify some of the terminology so that we can all stay on the same page and it sounds repetitious but i think it's better hearing it again and again until you hear it enough that you're like i got that so a performance statement is a is data that's based off your business's historical financial information with hypothetical situations being projected that's a performance statement however if your startup business you would be creating a financial projection startups create these projections relying on market research numbers for their industry an established business can have a performa p l such as this one or a perform a balance sheet as i showed you about three slides ago and in a few moments i'll be showing you a pro forma cash flow statement you may still be asking yourself what's the difference between perform a profit and loss statement versus a reforma cash flow statement well the net income from the performa p l statement provides information on profit earned rather than cash that's generated so if you just use the operative words in there profit and loss statement deals with profit right cash flow statement is only going to deal with cash and that's the reality of today's cash position for your business for example still speaking about a performa p l if a business sells a product to a customer it recognizes the revenue and the product is transferred to that customer even though the payment won't be received until maybe 30 or 60 days so the p l shows the transaction but the cash is not really in your account that's why we have a cash flow statement because that's going to show us the cash like a checkbook this perform a p l shows an entire year there are three sections that we have highlighted we have gross income we have the total expenses and then we have the net profit and remember hint hint the net profit on a p l isn't the same as the net cash balance on a cash flow statement now that we've looked at some of the tools in your toolkit that's the balance sheet the p ls and then the liability scheduler also known as the debt schedule let's take a look at the cash flow template remember the process is like using your checkbook or your bank statement cash in cash out the goal is to put more deposits in your account than you write checks just because you have money in the bank doesn't mean you should just go cut yourself a check and go buy that new boat plus it's in the summer on lake pleasant then okay all right but no having reserves will be vital to keeping your head above water during unforeseen catastrophes such as this pandemic and how much should you keep in reserves well let's see we're going to walk you through a scenario with a sample company called the like new carpet cleaners here is an example of a performa it's a completed performa cashflow statement i'll be enlarging each of these sections i apologize it's small on your screen probably but i'll blow up each section as we discuss it think of this as your checkbook or your bank statement it is to show what cash is coming in and it's important to build up that cash balance so that in the event of a negative financial event such as this pandemic you have reserves to hold you over for a few months and i recommend at least six months of reserves but as you saw this with coved it's been a year now let's look here at the cash receipt this section of the cash flow statement is all about the revenue and the income it reflects the operating income from the sales here in the expenditures this section shows the various expenses that are incurred from operation activities or investment activities or financing activities like loans and then here is the best part this is the net cash flow with the cash balance revealing what this business cash position is so down here it's telling you exactly how much you got sitting out there and that's that is what the whole point of this presentation is today is to get you to the point of where you can pull up your reports your things and look at it at any given point in time and know exactly where you are at and be able to look back into it and see if there's any trending issues coming up the net cash flow indicates the difference between revenues the money coming in and all the operations and financing the expenses the money going out each month and keep in mind that profit does not equal cash flow you can't just look at your profit and loss statement and get a clear picture of your cash flow all right this is our third i think this is our final poll for today in between um lisa let's take a look at this um is net profit the same as net cash flow i'll give you about 25 seconds to mull that over while i take a sip of my water and we're going over a lot of information again remember if anybody has questions if they could put it in the q a opposed to the chat that would be great oh wow looky yay yay thank you yes the answer is no they are not the same thing we're high fiving everyone i'm high fiving everyone they're high fives good job guys all right so accounting is an operational requirement for all businesses okay i i say operational requirement but in the same breath i'm saying it is the best business practice okay it's important you've got to know your numbers um it does far more than just evaluate your sales cash flows revenues and other financial dynamics of the business it als plays a pivotal role in calculating and predicting your future growth the ability to track most the ability to track your most important assets liabilities receivables and payables allows you to make sound business decisions for the future based on the metrics of your past here's a basic cash flow template this is the manual way of doing this within an excel spreadsheet and to complete the cash flow template you would need 12 months of bank statements the end of year balance sheet and 12 months p l and a debt schedule um however there are many accounting systems you can choose from instead of doing it manually like this you can choose quickbooks clicking xero soho there's there's lots of them out there um if by chance you're considering using quickbooks our clients and our sbdc clients they receive a discounts just let your sbbc advisor know that you're interested um the left column should contain the cash activity from operations investing and financing the star cell in the beginning you recall back on that balance sheet a few slides back i had highlighted the star because we needed that number to put here because it's going to be the beginning of it um it's taken from the balance sheet and from the prior the 12 months uh bing statement so if your balance sheet is dated on december 31st 2019 your bank statements would be january through december uh 2020 to create a cash flow that reflects how the year went it's good to do so so that you can see any trends however being a proactive business owner you should take your most current balance sheet from 2020 and then all your bank statements from that point going forward so that you can enter all of your cash income in the upper portion of this template then your operating cash expense activities your investment expense activities and your financing activities below that this will provide you with your net cash flow and your cash balance that is your cash position amber thank you cj i appreciate it now that we understand what cash flow is what tools we need and how to calculate it we need to move on to section three we need to see how we compare to similar companies and troubleshoot cash flow opportunities to improve our cash position now you know how do we measure up we need to first ensure that our industry code is correct so that we're comparing apples to apples there's tools to help you measure up when comparing to like industries to ensure that you have that competitive intelligence so you know where you're at to check your industry code we use a naics code which is a northern american industry classification code otherwise known as snakes if you hear a lender say nakes or one of your counselors said say your next code that's what it is um this website is listed here um for you to jot down or you can just search naics codes and it'll come up and once you have the correct code then we can dive into how we compare to other competitors i will point out to you if you guys have experienced the ppp world the paycheck protection program your next code is important to have as well so understanding your next code and what it is is important for your business all the way around not just to see how you measure up i mean you're going to need it for lending you're going to need it for the ppp you're going to need it for all kinds of things so looking up your next code is kind of important once the code is correct we can dive into the comparison so make sure you take a look um how your business measures up okay um on this slide um we're showing two of our tools um we have a ton of tools we like tools in our toolbox um that show the comparison to industry um in businesses in our industry category again this is to make sure that we're comparing ourselves to other industries that are like us the first image to the right um cj has her the cursor over um is a graph from ibis world we're using our carpet cleaning business as an example and you guys can see it's pretty it's very color-coded and there are quite a few benchmarks that are highlighted and color-coded but the top three codes are wages other costs and purchases um these benchmarks are held as kind of a standard for that industry um so that's why we take a look at these three and we want to ask ourselves you know where are we comparison to this industry and honestly i'm work we do better um do this with the other benchmarks too and if it applies to you because some of it you know may not apply to you but um those three top benchmarks are ones that you want to set as kind of like your goals and where you are and if you see any areas of opportunity it's important to know like what your return investment is um and if it's worth the cost if you're spending all this money on it is it worth the cost because maybe this other carpet cleaning business is doing a pretty good job not spending as much kind of thing the next image to the right is sageworks um it shows the data in a ratio format if you're a numbers person and not a pretty pretty picture person this works pretty good this allows us to see year over year giving just a snapshot of how your performance has grown or decreased you could see the numbers there um and for example we see how long it takes for accounts receivable to come in um how long we have to have inventory before it turns over um and you know if you don't see improvement on that year over year we know those areas that we need to put in action um put it some sort of action in place right so if we're not seeing improvement then we need to figure out what we're doing wrong and obviously if you work with one of us as a business analyst we help you access access these tools that we show here and walk you through your own financials so here i wanted to show you all a feature within live plan that is very useful and it is fun it allows the user to see real time cause and effect on cash flow as you adjust your accounts receivable and if you're working on your eight accounts payable these little uh sliders on the live plan you can move back and forth and you'll see a direct impact on your chart up here so it's really a fun feature that it has um and then also on the inventory it talks about inventory turns and that may or may not apply to your industry so but it is a pretty cool tool because each time you move these little lines it impacts this chart up here and you can see well if i increase the turns of my inventory how is it going to improve my cash flow so it's one of the cool toys and i just wanted to throw it in there because i get to it's a really cool tool to use because a lot of people are like well i don't know what what um what to change and so it gives you an opportunity to figure that out so that's a great tool thank you cj here we're going to take a closer look at what cj showed us in that performa cash flow um now here's the screenshot that was on that same cash flow statement that she showed us a minute ago with the 12 rolling net flow i'm sorry net cash flow and cash balance we see our first four months highlighted in red to show that we're negative so it's kind of like red light green light right so the red is negative um and we definitely want to stop and pay attention when you see something in red right and we're spending more money than we're making in revenue so we need to figure out the why now here we go with the math again but just so you understand just to walk through the math real quick the calculation shows us beginning at twenty four thousand four hundred and forty six dollars okay that's the first month first month the second month having a deficit of 6703 now that leaves us with a total of 17743 the cash reserves for the end of the second month that's that's what that number is at 17 000. now it isn't until the fifth month you see we're negative so she highlighted the yellow 150 that's basically flat right that's honestly showing in the yellow it's showing showing yield mode we're barely breaking even here we call that a break even now finally in our sixth month we finally see some green um and then it's a positive cash flow of 3652 um and though our cash balance is down to 13 988 we're still looking at a positive cash flow improvement and that's what we want to see remember positive cash flow occurs when cash is coming into the business from sales accounts receivable that kind of thing the more um more than the amount of cash leaving the business so monthly expenses salaries that kind of thing so we want to see that green now where that negative cash flow the outflow is cash is greater than the incoming cash flow that's what's read this generally spells out that we're in a little bit of trouble and we need to figure out why but there's steps that you can take of course um to remedy the situation and generate um or collect more cash maybe my one maintaining or cutting expenses with that tool that cj showed you a minute ago i mean having that plan in place is important so we see more green than we do red or yellow right a few things to keep in mind is that cash flow p l i'm sorry keep in mind with your p l shows change in working capital when your inventory increases right it reduces your cash flow so if you're increasing your inventory you're not gonna have as much cash because you use your cash to pay for inventory when accounts receivables increase it reduces your cash flow because it's recorded but you haven't got it paid yet it's not in your hand accounts payable accrued expenses and unearned revenue um increase it increases your cash flow so when that money comes into your hand your cash flow is increased obviously the most important thing to remember about all of those indicators that i just listed is your goal is to have um no red months just barely breaking even yellow we need those green months so the green months are what our goal is now for the part for the most part we don't always think that there's a budge in our budget and i totally get that um especially being a new business owner we don't think that's any budge but here's a few few actions that we can take um to see if there's any wiggle room right as we look at our income statement again otherwise known as the p l or balance um p l or profit loss as well as your balance sheet and industry standards tools that we shared we're going to consider pricing where are you in comparison to your competitors i'm certainly in the pandemic you shouldn't price hike right um but you at least need to take a look and see where you're at um we're to that benchmark we're also keeping in mind your target audience and considering price points and are you comfortable where you're at the next is the cost of goods otherwise known as cogs these are variable costs this includes cost directly related to the production of the goods or services the variable costs such as direct labor commissions raw materials utilities consider inventory management also do you have too much inventory if so what is could be done to turn it is it being held for too long is it seasonal will it expire those are the things that we need to make sure when we're considering cost of goods the other thing is fixed costs taxes leases even salaries here's there's usually not a lot of wiggle room but if there's an expense that can be reduced or renegotiating a lease or something like that maybe having extra funds to hire somebody um so it could be a positive thing too now our next action to consider is knowing your current and projected cash flow um we previously walked you through that so you should know how to do that and how long can we afford to make a profit cj recommended six months which is what we typically recommend but as you guys know we've been in this pandit for a year and so it's important that we um you know have that cash reserves and no no we're at so we know how much cash reserves we need does the net income and cash flow match um remember that sending an invoice to a customer um or service creates sen remember that sending an invoice to a customer for a product or service creates revenue however it creates cash when you actually collect it get that cash in hand hand excuse me we're going to take a look at debt structure i'm sorry i'm looking at the time and work i'm kind of going through this kind of fast just for times sake i want to be mindful of your time we're looking at debt structure so the loans and lines of credit um is it short-term versus long-term such as credit cards and vehicle loans is short-term can they be renegotiated are you on track um can you pay them off to get them off your books what about your long term are we in position to refinance maybe for better terms so you can free up some of your cash um or are you um in the market for a line of credit or lending um keep in mind you have to have the financials to support that um if you're going to pay back that debt that you're requesting and the lastly but most importantly thing i want to make sure that you understand is we have to review a budget um it's important to have one if you don't have one you need to get a budget it helps you stay on track financially um it holds you accountable to your goals that you probably already said on your business plan and we need to stick with that so setting a budget there's something about writing that down on a budget that really holds you accountable and it's much bigger impact than just talking about it so you need to write it down and everyone knows that saying if you failed a plan you're planning to fail or you know that goal without a plan is only a dream well we want to help you set that goal so i'm as a business owner you know it takes a lot of work right we're not familiar with the terms or actions but it's okay again the sbdc is here to help to guide you through that financial review and help you with those solutions and gaps along the way so far we've discussed the tools that we need to calculate the cash flow and here we show a action plan to help you develop the results this is a checklist um it's a tool that um you we have we can give you access to it's a working document that should be treated um you should have access to it all the time you should look at it monthly weekly i mean all the time so it's broken down by categories and ways to create help you create cash flow um ask yourself where do you want to be in six months what plan do i want to take there's steps to the left that show how to carry out your initiatives um and again um you'll have a accident we can give you access from a business analyst standpoint to help you create these lists and create a budget for these tasks if necessary this is one of the features that is off of growth wheel which is one of our resources so you see the importance of knowing your cache position earlier i showed you some of the bells and whistles on live plan but perhaps you prefer excel how about we crank it up a notch and provide you a more manual tool that can assist you with the what-ifs this worksheet looks a little busy and maybe a little bit intimidating but the value it can bring to you and understanding your cash position is exceptional how long you sustain your business at it actually answers the question of how long you can sustain your business at its current cash flow rate this worksheet allows you to test out those what ifs we business funding analysts refer to it as the stress test and no it's not because it stresses us out well sometimes it does but that's okay um but because it allows us to place percentages of stress on the cash flow and the revenue what if your sales dropped five percent in march because of something bizarre like the pandemic or on the positive side maybe you gained a new account in june then it increased your sales by eight percent this worksheet will show you the impact section here the cash flows uh consist of those operating expenses investments and all that again you can input a percentage of stress into the um fields and it will just adjust your numbers just as much as you want to and so you can see that cause and effect as it happens and then here on the outflows um uh this is just showing you more of what you've been spending how you've been spending on loans those um type of entries and again these things will all adjust in um in time and then down here in the bottom it says recommended cash ba ance and retained earnings after you do your calculations it will give you a recommendation as to what you should you know to keep running your business the way that it needs to be and how do the advisors at the svdc support you with their cash flow well we help you review your financials and connect you with these resources to become your best financial leader of your business and we'll provide you honest feedback you don't need to be in an echo chamber we'll help you identify issues and opportunities and help you see if there's any trends going on that you should be concerned about and then we're going to help you develop an action plan that can help overcome obstacles and create a positive cash flow it's just we call it sustainability planning so that the next time an unforeseen issue arises and it will you and your livelihood can weather that storm better with a few clicks of a mouse you can have an assigned advisor here you'll see that this is just like a pop-up screen of what it'll look like when you click on request counseling and then you start filling your information in and all of this comes at no cost to you it's a lot of information that we went over and then we know that there's so many things that you need help with and maybe you don't know who to ask obviously um cj and i are here to help and again we have a lot of other um business analysts but that's why we're here to help um it's it's i always say this but one of my friends told me one time the only conversation um the only oh my gosh the only bad conversation is the conversation we don't have um i'm getting tongue-tied um we want to make sure that maricopa sbdc has that conversation with you and i know that a lot of this is confusing it's a lot of information but we're working remotely please contact us to request for counseling um at our website that's listed um it's actually um on the following slide here yep um now i know that we're looking at time um and i'm not sure um if we have time for any q a but robert what do you um yes we'll we'll take some q a um before we do that i know some people may drop off but the sbdc's are located throughout the state so if you're in outside of maricopa county you don't have to contact the maricopa county sbc you can and i know they'll talk with you but there are sbdcs located throughout the state and you can find that information at azsbdc.net that's the the networks website um or you can contact cj or amber directly or myself directly we will get you connected with uh the analyst in your area um so let's jump in we got just a couple questions real quick um first one is how can we get a hold of the financial info by makes code so um that would that's actually on our through ibis world or um one of the tools that we use through the sbdc um ibisworld is just one of them again sageworks was another one and honestly those require a subscription or something which we don't um don't do we actually do that through the sbdc so if you request for counseling and become one of our clients it is a free service and if you want to do any sort of marketing comparison um then we can help give you access to those to those tools um yeah the reports are really in-depth and then but as far as finding out what your next code is you can go right directly to the next website and start looking up and um putting in some descriptions and i will say use less words than more and just build on it because it's sometimes hard to to locate what your industry code is if you're already in business and you've filed taxes it's actually on your taxes it's in the upper left hand corner you'll see it it has an industry code in there but yeah yeah the code itself is on the nick's website but financials um would be in the industry comparison excellent we are short on time i'm going to read a question and i'll answer real quick it's from chris says what is the best way to understand my cost of sale per unit um that can get pretty deep chris so i would encourage you to reach out to the sbdc use and schedule a session with them you can go through and utilize the tools that they have and the discussion with them to make sure you're accounting for all the costs in the sale of each unit and pricing and knowing that correctly so and that's something i encourage everyone to do is we look at this session there's a lot of great information that if you're confused again contact the spdc it's no cost counseling service they're a great program i work with them closely and they are part of the community colleges and the small business administration great program and they have a lot of tools that are there to help small businesses so leverage the resources that they have for your business with that i want to thank amber and cj for your time great presentation great information and uh want to remind everybody about our sessions next week tuesday morning 9 a.m until then we hope you join us on tuesday morning but until then have a great weekend be safe and enjoy the the great weather and we will see you on tuesday thank you thank you