Cash Flow Management and Forecasting | Case Study

  1. Money custodyer superintendence

Money custodyer superintendence is the rule of monitoring, analyzing and adjusting office’ money custodyers[1]. “Money is king” is the repeatedly heard office cliché, so-far it is borne quenched of verity. It is monitoring of express money custodyers opposite the money custodyer projections ce the continuance, analyzing the reasons ce diversity and then implementing the essential actions to administer office financials. Money custodyer superintendence is installed on money custodyer projections which is opposed than acquisition and restraintfeiture totality and, in spans of money shortage, may be aggravate significant (Oxford, 1997).

Moment of preparing a money custodyer ceecast

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A money custodyer ceecast shows the projects in custodyers and quenched custodyers of money in a office. It is an significant hireling in money custodyer superintendence as it aids to identify the derangements in money aggravate the proposed continuance. Let’s appear at the moment of money custodyer ceecast ce opposed stakeholders

  • Owner / investor. Money custodyer ceecast shows the consummation shortfall in money during the proposed continuance and surrenders conception abquenched consummation chief funding is required.
  • Banks / lenders. It aids in analysing the trustdesert desert of the office and matches it with lenders’ inclination ce objectanger. It besides shows whether office achieve originate adequate money aggravate span to as repayments.
  • Creditors. If office is referable in a solid pose, trustworthinessors affect to distinguish money custodyer ceecast to analyse whether to surrender accumulation on trustdesert and subordinate what stipulations.
  1. Money custodyer ceecast

Annexure I shows the money custodyer ceecast ce the year issue 31 Dec 2004. It shows poverty money counteract of £0 in February 2004 and is installed on the followingcited assumptions:

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  1. Sprint X is a elevated street pasduration garner with no sales on borrower totalitys. All sales straightway remainder in money in custodyers.
  2. The acquisitions originated are diminutive and herefollowing crew steadfasts no impost.

The proposed bank counteract on 31st Dec 2004 is £26,500. This is consequently Sprint X has so-far to gain the accumulation steadfastments of £12,500 ce December 04 as these are imputable in January 2004 merely.

Though the poverty counteract is £0 in February 2004, in verity it sway be well-balanced inferior. The intra-month money pose could be well-balanced worse consequently of the followingcited:

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  1. The over money custodyer ceecast of £0 in February 2004 is installed on month object. Monthly fissure of £2,500 ce March is imputable on 1st March 2004. So the money counteract on 1st March 2004 could be as cheap as -£2,500.
  2. Acquittal stipulations and dates of profit providers and suppliers.
  3. Acquittal dates of bank reckoning.
  1. Advantages of using a spreadsheet ce money custodyer ceecasting

Spreadsheet software ce solitary computers is a mighty hireling ce money custodyer ceecasting. Its greater advantages are:

  1. Arithmetic errors are virtually nonexistent (Horngren, Sundem & Stratton, 1998)
  2. It is easier to effect and subordinatestand than using professional financial packages. Diminutive office owners don’t scarcity to subordinatestand financial gibberish ce erection and updating money custodyer ceecasts.
  3. It lessens the tedium of carrying quenched repetitive calculations. If express money custodyers in a month are opposed from the projections, it would fluctuate the followingcited month object money custodyers. Spreadsheet copy gains it fur easier to update money custodyer ceecasts.
  4. Sensitivity dissection. Spreadsheet money custodyer copy besides gains it aggravate commodious in analysing the contact of diversity in opposed sales and consume elements on the money custodyers.
  1. Bankruptcy imputable to money custodyer problems

Sprint X could go debtor if runs quenched of money to gain steadfastments to its trustworthinessors. Trustworthinessors can then correction cece Sprint X into gift.

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Sprint X has to regulate anticipation precedently it can retail them and uniformly it regulates and receives deliveries, it is restricted to steadunswerving whether or referable it is auspicious in retailing them. Installed on the money custodyer projections in Appendix I, John and Mary spacious the office with £2,500 appended chief ce fissure steadfastment on 1St March 2004.

Suppose sales in twain February and March 2004 are £5,000 less than the budgeted sum. The consume of movables is 60% of sales on middle (installed on harmony of annual consume of movables to annual sales). Though the money profits are inferior in February and March, the correction of inferior money quenchedflows would be distinguishn in March and April merely imputable to solitary month loiter in trustdesert steadfastments.

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Appendix II shows the revised money custodyer ceecast. Sprint X has a denying money of £5,000 at the object of February 2004. Well-balanced following adding an judicious chief incareer of £2,500, the crew is no money to as ample supplier steadfastments ce February and fissure on 1st March 2004. Subordinate such scenario, twain suppliers and landlord can correction the crew to liquidators.

Well-balanced though the crew may object year with aggravate money than judicious chief inflow, so-far its want to current through emergencies may cece it into gift.

  1. Strategies ce effectively persuasive money custodyer problems
  1. Regular memorandum of profits and steadfastments achieve tobject the money custodyer updated and achieve surrender owners adequate span to correction custody of shortfalls, if any.
  2. Dissection of trends achieve aid in importation spanly decisions of consume exasperating to lessen money quenchedflows or to drawing ce elevateder sales.
  3. Owners shouldn’t correction quenched money from the office installed on solitary month’s enmesh money custodyers. The represent may be twisted imputable to solitary month stay in elevateder accumulation steadfastments. They should appear at the year object figures and consummation money requirements precedently importation quenched any rights.
  4. The crew should found a succession of trustdesert with a bank which achieve referable merely correction custody of consummation money requirements excluding besides permission some headroom ce any emergencies.
  5. Owners should tobject office totality severed from solitary totalitys to secure disencumbered money pose of the office.
  6. Reconcile monthly bank statements ce twain deposits made and cheques drawn.
  1. Correction of financial recording rule to administer Sprint X’s office finances

Sprint X should cetnightly appear at the sales trends and drawing restraintthcoming price accordingly. Regularly updation of money custodyer ceecast installed on the hindmost trends achieve aid in drawingning ce any shortfall in funding derangement.

It should besides correction financial recording rule to tobject a tab on schedule to forefend superfluity schedule build-up. This achieve forefend unessential movables write-off and restraintfeiturees. Trends in style fluctuate very unswerving and a cheerful crew should tobject an glance on what is retailing and what is reasonable occupying disposal intervenience and requiring unessential agoing chief.

Appendix I – Sprint X’s money custodyer ceecast

   

Jan-04

Feb-04

Mar-04

Apr-04

May-04

Jun-04

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Receipts

                         
 

Invoiced sales

15,000

20,500

35,000

35,000

35,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

0

   

15,000

20,500

35,000

35,000

35,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

0

                             

Payments

                         
 

Stock

(3,000)

(17,500)

(17,500)

(17,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

 

Telephone

 

(1,000)

   

(1,000)

   

(1,000)

   

(1,000)

   
 

Electricity

   

(1,500)

   

(500)

(500)

(500)

(500)

(500)

(500)

(500)

 
 

Rent

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

 
 

Wages

(2,000)

(2,000)

(2,000)

(2,500)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

 
 

Bank loan

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

 
   

(10,500)

(26,000)

(26,500)

(25,500)

(21,000)

(20,500)

(20,500)

(21,500)

(20,500)

(20,500)

(21,500)

(20,500)

(12,500)

                             

Enmesh money custodyer

4,500

(5,500)

8,500

9,500

14,000

(500)

(500)

(1,500)

(500)

(500)

(1,500)

(500)

(12,500)

                             

Opening bank counteract

1,000

5,500

0

8,500

18,000

32,000

31,500

31,000

29,500

29,000

28,500

27,000

26,500

Closing bank counteract

5,500

0

8,500

18,000

32,000

31,500

31,000

29,500

29,000

28,500

27,000

26,500

14,000

                             

Appendix II – Sprint X’s money custodyer ceecast with lessobject Feb and Mar sales

   

Jan-04

Feb-04

Mar-04

Apr-04

May-04

Jun-04

Jul-04

Aug-04

Sep-04

Oct-04

Nov-04

Dec-04

Jan-05

Receipts

                         
 

Invoiced sales

15,000

15,500

30,000

35,000

35,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

0

   

15,000

15,500

30,000

35,000

35,000

20,000

20,000

20,000

20,000

20,000

20,000

20,000

0

                             

Payments

                         
 

Stock

(3,000)

(17,500)

(14,500)

(14,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

(12,500)

 

Telephone

 

(1,000)

   

(1,000)

   

(1,000)

   

(1,000)

   
 

Electricity

   

(1,500)

   

(500)

(500)

(500)

(500)

(500)

(500)

(500)

 
 

Rent

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

(2,500)

 
 

Wages

(2,000)

(2,000)

(2,000)

(2,500)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

(2,000)

 
 

Bank loan

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

(3,000)

 
   

(10,500)

(26,000)

(23,500)

(22,500)

(21,000)

(20,500)

(20,500)

(21,500)

(20,500)

(20,500)

(21,500)

(20,500)

(12,500)

                             

Enmesh money custodyer

4,500

(10,500)

6,500

12,500

14,000

(500)

(500)

(1,500)

(500)

(500)

(1,500)

(500)

(12,500)

                             

Opening bank counteract

1,000

5,500

(5,000)

1,500

14,000

28,000

27,500

27,000

25,500

25,000

24,500

23,000

22,500

Closing bank counteract

5,500

(5,000)

1,500

14,000

28,000

27,500

27,000

25,500

25,000

24,500

23,000

22,500

10,000

Bibliography

Horngren, C.T., Sundem, G.L. & Stratton, W.O.; “Introduction to superintendence totalitying”, Eleventh Edition, Prentice Hall International, Inc., 1998

Oxford (1997); “Dictionary of Finance and Banking”, Oxford University Press, Second Edition, 1997.


[1] http://sbinfocanada.about.com/cs/management/g/cashflowmgt.htm

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