You can chase a lot of financial measures of your business, but nothing stacks up to cash flow. Like a boat captain on a rough sea, being able to see what is coming at you financially is absolutely invaluable. Cash flow models are the absolute go-to tool for reviewing companies in distress, yet they are also invaluable to venture capitalists who must manage long range investments as well as fast growth. This webinar discusses the basic components of a cash flow model, why it is weekly and not monthly and why 13 weeks is the usual length. This webinar also discusses what type of data is best for making an efficient and practical cash flow model, as well as best practices for reporting and pitfalls associated with modeling and balance roll forwards. To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/the-kpi-cash-flow-modeling-and-projections-2021/

1. 1

2. 2
Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
4

5. Meet the Faculty
MODERATOR:
Jonathan Friedland - Sugar, Felsenthal, Grais & Helsinger LLP
PANELISTS:
Ken Yager - Newpoint Advisors Corporation
Richard Claywell - J. Richard Claywell CPA
Shante George - Baker Tilly
Professor Steven Stralser - Emeritus Professor of Entrepreneurship, Thunderbird School of
Global Management
5

6. About This Webinar
The KPI- Cash Flow Modeling and Projections
You can chase a lot of financial measures of your business, but nothing stacks up to cash
flow. Like a boat captain on a rough sea, being able to see what is coming at you financially is
absolutely invaluable. Cash flow models are the absolute go-to tool for reviewing companies
in distress, yet they are also invaluable to venture capitalists who must manage long range
investments as well as fast growth. This webinar discusses the basic components of a cash
flow model, why it is weekly and not monthly and why 13 weeks is the usual length. This
webinar also discusses what type of data is best for making an efficient and practical cash
flow model, as well as best practices for reporting and pitfalls associated with modeling and
balance roll forwards.
6

7. About This Series
MBA Boot Camp 2021
“If you don’t know your numbers, you don’t know your business.” This is a common refrain
that is equally applicable to attorney and other consultants who work with businesses. This
webinar series is designed for you if you are a startup founder, business owner, executive,
investor, attorney, or consultant who, though not a finance or accounting professional, finds
herself needing to understand finance and accounting. It won’t make you an expert but it will
give you the tools you need to speak with experts in order to get more out of them and it will
provide a solid foundation on which you can build. Packed with illustrative examples, helpful
anecdotes and real-world case studies, this series teaches you some of the key take things you
need to understand about finance and accounting.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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8. Episodes in this Series
#1: EBITDA and Other Scary Words
Premiere date: 1/21/21
#2: How to Read a Balance Sheet – And Why You Care!
Premiere date: 2/18/21
#3: The KPI- Cash Flow Modeling and Projections
Premiere date: 3/18/21
#4: Where Did All My Profits Go? Mastering the Concept of Working Capital
Premiere date: 4/22/21
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9. Episode #3
The KPI- Cash Flow Modeling and Projections
9

10. Introduction to Key Performance Indicators (“KPI”)
• What is a Key Performance Indicator?
 A measurable value that demonstrates how effectively company achieves key
business objectives
 An actionable “scorecard” for a business to measure strategies & achieve goals
 Can help businesses manage, control, and achieve desired business results
 May be applied to various facets of business
 Often used to reflect a business’s most important objectives, not necessarily every
objective
10

11. Introduction to Key Performance Indicators (“KPI”)
• What kinds of objectives can KPI be used to measure?
 Financial goals and successes/failures
 Customer metrics
 Personnel metrics
 Process metrics
11

12. Introduction to Key Performance Indicators (“KPI”)
• Why and when is KPI used to improve performance?
 Helps to understand where the company is performing well and where it can
improve
o Management may be blind to improvement opportunities based on experiences
and duration with company; or
o Management may hesitate calling out opportunities to improve due to fear of
criticism and blame
12

13. Introduction to Key Performance Indicators (“KPI”)
• Why and when is KPI used to improve performance? (cont’d)
 Allows the company to compare performance to other industry participants
o Typically, this is accomplished by benchmarking performance to public
companies, where audited data is available and adjusting the scale where
applicable
 Historical performance can also be used to identify changes and opportunities for
improvement
13

14. Introduction to Key Performance Indicators (“KPI”)
• Example -
 A retail children’s clothing turnover in a brick and mortar retailer is knowable, such
that if a company turns its inventory only 2x a year and the industry average in the
segment is 5x-6x a year, that helps to identify an area to be investigated
 Similarly, if the company has a 7x a year turnover it could help the company
prioritize other areas for improvement
14

15. Introduction to Key Performance Indicators (“KPI”)
• Overall, experience helps to understand where deviation is appropriate
 For example, inventory turn for ski jackets is different from inventory turn for college
- licensed pullover sweatshirts, even though both are seasonal outerwear
15

16. “Don't be afraid to give up the good to go for the great.”
- John D. Rockefeller
16

17. KPI as Part of Overall Business Strategies and
Considerations
• KPIs should be incorporated into a company’s broader strategy and understanding
of its own performance, and used to measure various aspects of business not
captured by other measurements
• Other measures of business health and position covered in this series:
 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
o Essentially, a company’s net operating income
o Used to analyze and compare profitability between companies by
eliminating effects of financing and accounting decisions.
17

18. KPI as Part of Overall Business Strategies and
Considerations
• Other measures of business health and position covered in this series:
 Balance Sheet Analyses
o Balance sheet tells management & investors how much money company
has, how much it owes, and resulting net worth (shareholder equity)
o Presents a snapshot of the Company’s financial conditions at a specific
time
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19. KPI as Part of Overall Business Strategies and
Considerations
• Working Capital
 (Total Current Assets - Total Current Liabilities)
 Positive working capital means that company can pay off its short-term
liabilities. Negative working capital means company currently is unable to
meet its short-term liabilities
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20. Common Steps to Developing & Implementing KPI
• Set Goals and Objectives
 Example: increase sales
• Establish success factors related to goals and objectives
 Steps to be taken by team members to reach goals
 Usually takes the form of measurable activity over specified period
 Example: Increase sales leads by 10% in first quarter of year
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21. Common Steps to Developing & Implementing KPI
• Establish Key Performance Indicators of goal achievement based on success factors
 E.g., KPI related to increasing sales leads: actual % increase or % decrease in
website visits converting to leads for Q1
• Collect data
• Calculate results
• Draw conclusions
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22. Developing KPI – Best Practices and Tips
• KPI should be:
 Well-defined & quantifiable
 Communicated to team members
 Related to important goals & metrics
 Applicable to Line of Business (“LOB”)
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23. Developing KPI – Best Practices and Tips
• Tips for developing KPI
 Identify appropriate team members to work on KPI
 Conduct internal interviews/investigations to develop goals & objectives
 SWOT Analysis by team developing KPI
o Strengths, Weaknesses, Opportunities, Threats
 Team may develop SMART goals or objectives to guide KPI:
o Specific, Measurable, Achievable, Relevant, & Time-bound
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24. Developing KPI – Best Practices and Tips
• Expectations for KPIs
 KPIs evolve
 What is important today may not be tomorrow
 Perfect data may not exist today
o Start with elements available, build from there
o Put timelines and projects together to build better data
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25. Developing KPI – Best Practices and Tips
• Connecting the dots
 Metrics should track from somewhere and lead to somewhere
 High-level metric should also have related, lower level metrics tracked by
individual, and that some plant, department or division also tracks
 Time period should mean something to users of metrics
 Metric must be timely
25

26. Developing KPI – Best Practices and Tips
• How many KPIs to process
 Most KPIs end up part of bigger picture or group of KPIs
 Humans can handle or react to only so many KPIs
 Best rule of thumb: no one person should be responsible for more than 3 KPIs
 For more than 3 KPIs, a group or multiple responsible parties like a department is
required
26

27. KPI Examples: Financial Metrics
• Profit
 Simple, but highly relevant
 Analyze both gross and net profit margins
• Cost
 Measure cost effectiveness of business operations to reduce or manage costs
• Line of business revenue vs. Target
 Comparison between actual and projected revenues
 Tracking discrepancies helps identify how specific departments, or company as a
whole, perform
27

28. KPI Examples: Financial Metrics
• Day Sales Outstanding (“DSO”)
 (Accounts Receivable ÷Total Credit Sales) × Number of days in period examined
 Result = DSO
 Indicates company’s ability to collect accounts receivable
 Lower number = better collections
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29. KPI Examples: Financial Metrics
• Day Payables Outstanding (“DPO”)
 (Accounts Payable ÷Total Cost of Goods Sold) × Number of days in time frame
examined
 Result = DPO
 Indicates company’s ability to gain accounts payable credit
 Bigger number = better vendor credit
29

30. KPI Examples: Financial Metrics
• Days Inventory Outstanding (“DIO”)
 (Inventory ÷Total Cost of Goods Sold) × Number of days in time frame examined
 Result = DIO
 Indicates company’s need to hold inventory
 Lower number = better inventory turnover
30

31. KPI Examples: Cash Cycle (Aggregating Financial
Metrics)
• Cash Cycle
 Measure of working capital converted to a day-based equation
 DPO - DSO - DIO = Cash Cycle
 Most companies have negative Cash Cycle number
 Cash Cycle result indicates gap in total working capital by days, and how much
company needs from outside sources of capital
31

32. “Managers and investors alike must understand that
accounting numbers are the beginning, not the end, of
business valuation.”
- Warren Buffett
32

33. KPI Examples: Financial Metrics
• Sales by Region
 Can be used to compare sales across regions, identify high performers and low
performers, and may provide insight as to how low performers can improve in
specific regions
• LOB Expenses vs. Budget
 Comparison of actual overhead costs against budget
 Aids in developing future budgets
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34. KPI Examples: Customer Metrics
• Customer Lifetime Value (“CLV”)
 Determination of optimal customers
 Examines value of long-time customers to company to narrow targets for future
customers likely to form long-term relationships with company
• Customer Acquisition Cost (“CAC”)
 Total Acquisition Costs ÷ No. New Customers over specific period
 Result = CAC
 Important metric to determine effectiveness of marketing campaigns
• Customer Satisfaction & Retention
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35. KPI Examples: Customer Metrics
• Net Promoter Score (“NPS”)
 Measures likelihood customers will refer others to company
 May be determined by quarterly customer satisfaction survey incorporating
question relating to likelihood of referring contacts/friends to the company
• Number of Customers
 Measuring gains and losses of total customers aids determining ability to meet
customer needs
35

36. KPI Examples: Customer Metrics
• Churn Rate
 Measures % of customers that fail to make repeat purchases or discontinue service
during specific period
 (No. customers lost during Period) ÷ (No. customers at beginning of Period) =
(Customer Churn Rate)
• Contact volume by channel
 Tracks customer support requests by phone, email, web portal, etc. to determine
customers’ preferred method of seeking support
36

37. KPI Examples: Process Metrics
• Customer Support Tickets
 Analysis of number of customer support tickets opened and resolved in specified
time period
 Measures customer service capabilities, strengths, & weaknesses
• Percentage of Product Defects
 No. defective units during time period ÷ total units produced during time period
 Lower is better!
 Can identify process issues if number is high
37

38. KPI Examples: Process Metrics
• LOB Efficiency Measure
 Measured differently depending on line of business (LOB)
• Example: manufacturing
 No. units produced per hour % time plant is running
38

39. KPI Examples: Personnel Metrics
• Employee Turnover Rate (“ETR”)
 No. Employees exiting during time period ÷ average no. employees
 Indicates company’s ability to retain talent, determine steps to reducing turnover for
future if ETR is high
• Percentage response to open positions
 High % of qualified applicants may indicate desirability of company to job seekers
 Low % may indicate issues with employee benefits offerings, salary, etc.
• Employee satisfaction
 Internal employee satisfaction surveys may indicate areas for improvement or
continuance/discontinuance of employee programs or other benefits
39

40. KPI Examples: Personnel Metrics
• Retirement rate
 Key to developing strategic workforce plan with aging workforce
 High retirement rates aid in developing hiring strategies
• Internal promotion vs. external hires
 Measurement of internal promotion vs. external hires when vacancies open
 Effective means of building succession plan
40

41. “Erroneous assumptions can be disastrous.”
- Peter F. Drucker
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42. Common KPI Pitfalls
• Adopting commonly-held business practices instead of developing those specific to a
business
• Recency bias: tending to give weight to most recent information gathered instead of
taking broader history into account
• Reliance on intuition or anecdotal evidence as opposed to measured data
• Confusing lagging indicators (easily measured outputs) with leading indicators (hard-to-
measure inputs)
42

43. About the Faculty
43

44. About The Faculty
Jonathan Friedland - jfriedland@sfgh.com
Jonathan Friedland, a senior partner with Sugar Felsenthal Grais & Helsinger, LLP, views his job
simply: to make money for clients whenever possible and to protect their interests at every turn.
Licensed in four states, Jonathan’s transactional work focuses on representing private funds and
other owners of private businesses, and the businesses they own. He regularly advises on M&A
activities, structuring new ventures and restructuring old ones, and on other commercial
relationships. Jonathan is rated AV® Preeminent™ by Martindale-Hubbell, 10/10 by AVVO, and
enjoys several other similar distinctions. Jonathan graduated from the State University of New York
at Albany, magna cum laude (in three years) and from the University of Pennsylvania Law School.
He clerked for a federal judge before entering private practice and served for several years as an
Adjunct Professor of Strategic Management at the University of Chicago’s Graduate School of
Business. Jonathan is lead author and editor of several significant treatises, several chapters in
other treatises, and scores of articles on law and business.
44

45. About The Faculty
Richard Claywell - richard@biz-valuation.com
Richard is a practicing Certified Public Accountant, and holds the additional designations of Accredited in Business
Valuation, Accredited Senior Appraiser, Certified Business Appraiser, International Certified Valuation Specialist,
Certified Valuation Analyst, Certified in Merger & Acquisition Advisor, Master Analyst in Financial Forensics, Certified
in Fraud Deterrence, Accredited in Business Appraisal Review. Richard has been valuing closely held companies
since 1985. Richard’s practice is restricted to business valuation, economic damages, profit enhancement and exit
planning. Richard received his Bachelor of Science in Accounting in 1979 from the University of Houston – Clear
Lake. He then received certification as a Public Accountant in 1983. Over the years, Richard has earned additional
accreditations that relate to business valuations, economic damages and fraud. Richard has been an instructor for
the National Association of Certified Valuation Analysts for many years, has been an instructor for the Internal
Revenue Service and the International Association of Consultants Valuators and Analysts (IACVA). Richard is
currently the Chairman of the Board for the IACVA and is responsible for the business valuations materials being
taught in 55 countries. Richard has taught business valuation or economic damage courses in China, Korea, Taiwan.
Richard has performed over 1,500 business valuations since 1985. Richard has testified in Texas County Court,
Texas State Court, Bankruptcy Court and Texas State Courts. Richard has given testimony in economic damages
(lost profits), shareholder disputes, personal injury, wrongful termination and divorce.
45

46. About The Faculty
Ken Yager – KYager@newpointadvisors.us
Ken has 25 years of executive leadership experience in stakeholder communication. Mr.
Yager regularly takes on profit and loss and risk-management responsibility for cash-
constrained companies in growth, leveraged-buyout and turnaround situations. He also has
successfully worked on implementing dozens of initiatives involving, operations and project
management, team building, marketing, and sales and joint-venture management. He is a
fierce advocate for capital preservation and saving jobs. Ken has worked with clients in a
variety of industries in over 100 engagements. Prior to Newpoint Advisors, Mr. Yager was a
Principal at MorrisAnderson, a national turnaround management firm focused on assisting
companies deal with severe liquidity issues and insolvency.
To read more, go to https://www.financialpoise.com/webinar-faculty/ken-yager/
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47. About The Faculty
Shante George – Shante.George@bakertilly.com
Shanté George joined Baker Tilly in 2016 and is a principal in the firm’s forensic, litigation and
valuation services practice. She has extensive experience advising companies, unsecured
creditors, lenders, bankruptcy trustees and examiners in both bankruptcy and out-of-court
proceedings. Shanté leads engagements in the development and implementation of
engagement strategy; challenging and developing business plans and comprehensive, long-
term multi-divisional financial models; analyzing and preparing cash flow projections;
conducting claims analyses; and assessing feasibility issues.
47

48. About The Faculty
Steven Stralser – stralser@gmail.com
Steven Stralser is Professor Emeritus at Thunderbird School of Global Management, and previously, was
a member of the faculty at The University of Arizona where he taught Marketing and Entrepreneurship
and awarded “Faculty of the Year” for teaching excellence in the U of A’s nationally-ranked Berger
Entrepreneurship Program and received the Bobcat Senior Honorary Faculty Award. In addition to
academic credentials, Dr. Stralser been an entrepreneur and has held high-level marketing and consulting
positions in business, industry and non-profit organizations, most recently as past-President and Charter
Member of TiE-AZ, (www.tieaz.org) (The Indus Entrepreneurs) recognized as the leading globally-focused
organization that advances entrepreneurship internationally, nationally and locally. Dr. Stralser served as
a member of the Chairman’s Quality Committee of BannerHealth (formerly Samaritan) Health Systems,
the largest healthcare provider in Arizona. Dr. Stralser served on the Board of Surgical Specialty Hospital
of Arizona, and serves as a Board member for Flexxcoach, (www.flexxcoach.com) an e-learning company
focused on sports coaching education and player development. In 2007 Dr. Stralser joined the Board of
Directors of Salt River Devco, the commercial real estate development arm of the Salt River Pima-
Maricopa Indian Community.
To read more, go to: https://www.financialpoise.com/webinar-faculty/steven-stralser/
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49. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
49

50. About Financial Poise
50
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