Utah State

Section 1

Crunch Time

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Cash Crunch

Projected Cash Flow (Excel)

A little more analysis and then it's decision time. The last piece of the puzzle for cash is a cash flow analysis. A Projected Cash Flow Statement looks a lot like a Projected Income Statement. We look at income and expenses but we are only going to look at cash.

 It's vital that as you do the projection you only use numbers as they will be with the cost cuts that you have been able to make in the prior steps of this section. There is no room for feelings, hopes and dreams at this point. This analysis needs to be cold, hard and accurate. When your counselor looks over this statement, he or she will question every income item and every expense. We will want to know where they are coming from and how you know you will have them.

 The spreadsheet you will be using is a sample. As such, there are categories that will apply to you and some that don't. You will have categories that aren't on the sheet so adapt it as needed.

 Assignment: Complete the Cash Flow Projection spreadsheet in the right hand column. Using your new expenses after cuts made in prior steps, calculate the closing day of the business.

Now the hard part. Remember, in the projection you just created, if your "Ending Cash" turns negative, the closing date of your business is the end of the preceding month.

 If your analysis in the Cash Flow Projection shows a closing date within a range of zero to 90 days, make a plan to wind down and close the business on your terms. You are much better off to sell everything, pay off as much of your loans as possible and move on.

Now, talk to your creditors, explain your analysis and situation. If they can restructure your debt, you will definitely want to work through the rest of this course to make it work.

If you cannot get accomodations from your creditors, explain your closing plan to them. Let them know how much money they can expect and when they can expect it. Now, execute your plan. You must execute your closing plan now.

If you hold on until you are further in debt, owe money for rent, utilities, and wages, you will have your debt holders chain the doors closed and take you to court. The hole you are digging will just be that much deeper.

If your analysis in the Cash Flow Projection shows a closing date more than 3 months or so in the future, move on with the rest of this course. You have a lot of work to do. However, you must continually update the Projected Cash Flow worksheet with new information. If it ever gets to the point where you have less than 30 days of cash flow, be prepared to execute a closing plan.

Assignment: If you have less than 90 days of cash flow, create a Closing Plan to wind down and sell all business assets. Allow your counselor to review the plan prior to taking it to creditors in your efforts to restructure debt.

Assignment: If you have more than 90 days of cash flow proceed to the next section

Assignment: Send all of the previous assignments to your counselor for analysis and suggestions.