This deck was presented by Vinod Keni (Avishkar Ventures/ Intellecap) at the #TiEInstitute knowledge Series session for Growth stage entrepreneurs on managing finance led growth by. This is one of the three modules covered by Vinod at this session. Presented in July 2013

1. 1
Cash Flow
Management

2. Successful entrepreneurs usually concentrate their efforts on four key areas:
vision, people, execution and cash.

3. “CASH IS KING”
• Understanding & Managing Cash Flow can make or break
your business
• Cash Flow is the lifeblood of an operating business
• Young, growing companies are “cash sponges”
• A business can be earning a profit and be forced to close
because it runs out of cash!
• Don’t just focus on sales or production. FOCUS on Cash
Flow & ensuring that you have adequate cash
• Cash management – forecasting, collecting, disbursing,
investing, and planning for the cash a company needs to
operate smoothly

4. 4
PROFITABILITY & CASH FLOW
Why is this? Two reasons:
• Business owners are often unrealistic in predicting their
cash flow. They tend to overestimate income and
underestimate expenses.
• Business owners fail to anticipate a cash shortage and run
out of money, forcing them to suspend or cease
operations, even though they have active customers
More Businesses Fail for lack of Cash than lack of Profit
Difference between Profit & Cash Flow:
• Profit is the difference between income & expenses. Calculated at the
time of sales being booked and making actual purchases/expenses
• Cash flow is the difference between cash inflow (actual incoming cash)
and cash outflow (actual outgoing cash). Income is counted when
customers pay and expenses are counted when payment is made,
salaries paid to employees, taxes paid, and other cash expenses.
• Cash flow includes infusion of capital – owner putting cash into
business, bank credit, investment by outside investors

5. CAUSES OF CASH FLOW PROBLEMS
What causes cash flow problems for growing businesses?
• Too much focus on credit sales and not collecting from
customers on a timely basis
• Seasonality
• Unexpected variation due to changes in business
situations, economy, regulatory issues, etc
• Weak Sales
• Uncontrolled expenses
• No cash flow projections & analysis
• Fast growth coupled with poor cash management
• Companies spend too much cash on building infrastructure
ahead of sales which fails to realize
• Paying ahead of collecting cash!

6. 6
KEEP TABS ON CASH
• Know when cash is going to run out!
• Manage your burn rate, if you are investing in new projects
or are a start-up
• Control your working capital
• Typically keep between 15-25% of your cash in a “rainy day
fund”
By having an accurate forecast, you will be able to judge your
expenditure carefully, manage your working capital and seek
additional funding in good time.

7. 7
TIPS FOR MANAGING CASH FLOW
• Cash FLOW not Cash
• Review Receivables & minimize credit sales
• Initiate Inventory Analysis (if your business uses goods or sells products)
• Negotiate aggressively with vendors & pursue group buying/bartering, etc.
• Push Payables
• Produce projections and review & refine constantly
• Know the numbers
• Business owners are often unrealistic in predicting their cash flow. They tend to
overestimate income and underestimate expenses.
• Business owners fail to anticipate a cash shortage and run out of money, forcing
them to suspend or cease operations, even though they have active customers
Cash flow is the fuel that allows your business to continue
operating and, more importantly, achieve growth. By managing
cash flow effectively, you can achieve significant gains over
competitors

8. 8
KNOW YOUR NUMBERS!
You should be able to identify 2-3 critical elements that provide
critical “health” information to you. Perhaps it’s units shipped, or
total sales calls, or conversion of customer inquiries, etc. You
should identify these elements, determine the key threshold
numbers for them (on a weekly or monthly basis) and then be
sure that reports are produced that allow you to gauge progress
and take appropriate actions.

9. Order
Goods
Day 1
Receive
Goods
15
Pay
Invoice
40
14 25
218
178
Sell
Goods*
Deliver
Goods
221
3
Customer
Pays**
Send
Invoice
230
9
280
50
Cash Flow Cycle = 240 days
* Based on Average Inventory Turnover:
365 days = 178 days
2.05 times/year
** Based on Average Collection Period:
365 days = 50 days
7.31 times/year
CASH FLOW CYCLE

10. CASH FLOW
Cash
Accounts Payable
Decrease in Cash
Production/Cash Purchases
Inventory
Accounts Receivable
Cash Sales
Increase in Cash
Leakage
Leakage

11. 11
CASH BUDGET
• A “Cash Budget” is an important tool for all business
owners:
– Amount & timing of cash receipts and cash disbursements over time
• Project & Refine the amount of cash a company will need to
operate smoothly
• Cash budget can protect a company from being unprepared
for seasonal fluctuations in cash flow or prepare a company
to take advantage of business situations
• Your estimates should be based on your experience running
your business and on your goals for your business over the
time frame for which the budget is being created.

12. Advantages of Effective of Cash Management
• Increase amount and speed of cash inflows
• Reduce the amount and speed of cash outflows
• Proper & Effective debt & borrowing program
• Plan debt repayments
• Reduce borrowing costs by borrowing only when necessary
• Make the most efficient use of available cash
• Finance seasonal business needs
• Provide funds for expansion
• Plan for investing surplus cash

13. Dell Inc.’s Cash Conversion Cycle
Days’ Inventory
Outstanding
5 days
Days’ Sales Outstanding
30 days
Days’ Payable Outstanding
71 days
Cash
Conversion
Cycle* = -36
days
Cash Conversion Cycle = Days’ Inventory + Days’ Sales Outstanding – Days’ Payable
= 5 + 30 – 71 = -36 days
Inventory Accounts Receivable
Accounts Payable

14. MANAGE WORKING CAPITAL
• Working capital equals:
– Current assets minus current liabilities
– Amount of cash that would remain if all short-term debt
was paid with the cash on hand
• If a firm runs out of working capital, it:
– Will not be able to spend the cash needed to bring a new
product to market
– Will still have ongoing bills to pay
– May not be able to stay in business

15. 15
 Vinod is a serial entrepreneur, consultant, CFO & investor who during his
15 year career in the US led companies through multiple financings,
M&A and exits. He has taken two companies through NASDAQ listed
offerings. His domain expertise includes technology, healthcare,
outsourcing, services, food services, hospitality and manufacturing.
 As a serial entrepreneur, he has cofounded companies in technology,
services, outsourcing and hospitality. Successful exit with ROI to
investors & founders.
 Experience includes M&A, cross-border operations, business
development, finance, startups, governance, IPO, management &
operations
 CFO of an early stage Venture Capital Fund in India; has helped raise
more than US$100 million for two funds managed by the VC fund.
Familiar with fund raising, LP relations, due diligence, deal making,
portfolio management and reporting.
 Founder of boutique consulting company that has worked with early and
growth stage companies providing financial management, operations
and strategy execution consulting. Clients include VC funds, US &
European MNCs, etc.
 MBA (JWU-US), MS – Finance (Bentley - US), CPA & CA . Angel
Investor - member of Indian Angel Network. Co-founder, TiE Atlanta,
Charter Member - TiE. Co-founder & Director – Atlanta Hitech CEO
Council
VINOD KENI

16. 16
Vinod Keni
vkeni@aquariangroup.com
+91-9845414179
Contact