How to guide – using the SurvivalWare Cash Planner

 

 

Let’s continue with the same set of assumptions from the Excel spreadsheet, but this time using the SurvivalWare Cash Planner.     

Step 1 – enter the current cash balance.  And also define the planning horizon with the ending date of the first period, and the number of periods, and their units (days, weeks, months).  

 

Step 2 – enter payments.  We can copy/paste from Excel.  Also, if you use QuickBooks, you can export the current payables to a file that SurvivalWare can import. (See www.survivalware.com/download/Importing_AP_into_SurvivalWare.pdf)

  

Step 3 – enter open invoices. Again, we can copy/paste from Excel.  Also, if you use QuickBooks, you can export the open invoices to a file that SurvivalWare can import. (See www.survivalware.com/download/Importing_AR_into_SurvivalWare.pdf)

  

Step 4 – Enter monthly sales estimates.  You have the option of making assumptions about the percentage of orders that are prepaid vs. invoiced, and you can take commissions out of the future cash flow stream as well.  You can also set billing patterns if you want (e.g. End of month billing for services vs. evenly distributed throughout the month for product sales). 

 

Step 5: Look at the results. You see them graphically, though you are at a loss as to why it takes 4 charts to convey the message.  All you need is the bottom charts to see if there are any months where your cash balance dips below zero.  It turns out they are identical when you do a simple estimate, but will display different measures when you do a simulation.

 

Here’s where SurvivalWare Cash Planner starts to shine. 

Working on a payment plan

You can mark one or more payments, and then delay them by a certain amount of time, or split them into multiple pieces. 

  

SurvivalWare makes note of the delay in the Payments tab. 

  

Now the results tab shows there is no problem.  You just have to explain the situation to your landlord and employees. 

  

Dealing with multiple credit lines and/or credit cards

 What, you actually borrow against credit cards to finance your business?  Don’t you read the know-it-all financial planning columnists who tell you what a bad thing that is to do?  A very costly form of borrowing?!  Shame on you. 

If you’re going to construct a portfolio of high coupon debt to provide the capital wherewithal to seize opportunities in your business (or borrow from your credit cards to keep from going bust)  – the least you can do is keep track of the details and know where you stand and how it affects your cash flow and cash cushion. 

  

There is a grid in the Credit Lines tab to capture all the information you need to forecast interest, fees, and minimum payments, plus available borrowing capacity in future time periods. 

(see www.survivalware.com/download/CreditLines_in_SurvivalWare.pdf for a full explanation of the Credit Line feature). 

When you run a simulation, you can instruct SurvivalWare on whether it is OK top tap unused credit lines to keep from running out of cash.

  

Introducing uncertainty

 You don’t need SurvivalWare to introduce uncertainty into your life.  I’m sure there’s a lot of that already.  SurvivalWare helps you cope with uncertainty in your cash flow by tying many different assumptions together into a single simulation. 

The computer in effect asks “what-if?” 100 times for each tiny event, including the collection of a specific invoice – and tabulates the end result of all the tiny events happening at random, but within the ranges you set. 

In the settings tab, just pick “Run a SIMULATION.”

  

Collections of existing accounts receivable

You know damned well that not every customer pays in precisely 35 days.  In fact, some receivables may go bad, and you never collect. 

The collections tab allows you to set the “mean” collection period based on the age of the receivable. 

  

Future Sales

This is where you really need a crystal ball.  First, to forecast what sales will be next week, next month, or next year.  Second, to forecast when you’re actually going to collect the cash for those sales. 

SurvivalWare allows you to forecast up to 10 revenue streams, each with its own billing pattern and other cash flow characteristics. 

  

For each revenue stream, you specific a low value, most likely, and high value for the sales in each month of the planning horizon.  You can also specify that a certain percentage of the sales are made for cash (as opposed to invoiced), and you can take commissions out with a lag time from when the money is collected from the customer.  (A negative lag time means you pay commissions before collecting). 

  

Uncertain major events

 The source of the uncertainty could be the timing (a major deal is sure to close anywhere between the 1st of June and the end of August), or the amount (e.g. penalties and interest less negotiated abatements to the IRS for past transgressions), or both. 

I can never remember the format, so I click on the help icon (“?”) in the “Income / Extr Event” tab. 

 

 

 

Tying it all together 

That is what a simulation in SurvivalWare does for you.  Click on the “Results” tab and  the 4 quadrants tell the story of the simulation. 

Here it is without the big deal: 

  

Here it is with: 

 

The tabs along the right hand side of the screen let you access other graphs, or dive into the numbers. 

Upper left: Receipts vs. Requirements

This graph shows what happened during the simulation.  Each green line represents the cumulative amount of cash received at the end of each time period for a single “trial.”  The bottom red line represents the cumulative cash required to make all the payments you listed after exhausting your initial cash balance.  The other red line adds to that the minimum payments required on your portfolio of credit cards if you are using the credit line feature.  It is good to see green lines above the red lines – that means you have enough cash.

  

Upper right: Survival Score 

This graph shows the probability of being able to make the payments according to your payments schedule.

 

Lower left:  Cash – Conservative View 

This graph shows your cash balance for each time period with 90% confidence.  This means that during the simulation, 90% of the time your cash balance was actually higher than the value shown. 

 

 
 

 

Lower right: Cash – with Luck 

This graph shows what might happen with a little luck. It shows your cash balance for each time period with 50% confidence.  This means that during the simulation, 50% of the time your cash balance was actually higher than the value shown.

 

 
 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 
 

 

 

 

 
 

 

 
 

 

 

 

 

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  1. […] How to guide – using the SurvivalWare Cash Planner […]

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