Sun Basket Post #10: Cash Flow Analysis

Even though the meal kit industry celebrates great popularity, this doesn’t mean that evaluating company books isn’t important. It is the companies that are most effective in managing their books that avoid accounting problems and flawed policies that leave the company vulnerable. Therefore, management must routinely evaluate financial aspects like a cash flow analysis to stay on top of trends that threaten to undermine efforts in all other areas of the organization.

            Tables 1 and 2 show a cash flow analysis presented in thousands.

Sun Basket 2018 Cash Flow Analysis (Part 1)
(All figures in thousands)	January	February	March	April	May	June	July
Cash at Start of Month	5,000	3,340	3,080	2,220	1,960	1,700	–740
Cash Coming In
Sales Paid (75%)	7,500	7,500	7,500	7,500	7,500	6,000	6,000
Collections of Credit Sales	2,000	2,000	2,000	2,000	2,000	1,600	1,600
Loans & transfers	0	0	0	0	0	0	0
Total Cash In	9,500	9,500	9,500	9,500	9,500	7,600	7,600
Cash Going Out
Inventory	4,500	4,500	4,500	4,500	4,500	4,500	4,500
Rent	1,000	1,000	1,000	1,000	1,000	1,000	1,000
Wages	4,000	4,000	4,000	4,000	4,000	4,000	4,000
Utilities	100	100	100	100	100	100	100
Phone	30	30	30	30	30	30	30
Insurance	1,200	0	0	0	0	0	0
Ads	200	0	0	0	0	280	0
Accounting	130	130	130	130	130	130	130
Miscellaneous	0	0	600	0	0	0	0
Loan payments	0	0	0	0	0	0	0
Taxes
Total Cash Out	11,160	9,760	10,360	9,760	9,760	10,040	9,760
Cash at End of Month	3,340	3,080	2,220	1,960	1,700	-740	-2,900

Table 1. Sun Basket 2018 cash flow analysis, part 1.

Sun Basket 2018 Cash Flow Analysis (Part 2)
(All figures in thousands)	August	September	October	November	December
Cash at Start of Month	–2,900	–6,410	–4,770	–5,030	–5,290
Cash Coming In
Sales Paid (75%)	5,250	9,000	7,500	7,500	11,250
Collections of Credit Sales	1,400	2,400	2,000	2,000	3,000
Loans & transfers	0	0	0	0	0
Total Cash In	6,650	11,400	9,500	9,500	14,250
Cash Going Out
Inventory	4,500	4,500	4,500	4,500	4,500
Rent	4,000	4,000	4,000	4,000	4,000
Utilities	100	100	100	100	100
Phone	30	30	30	30	30
Insurance	0	0	0	0	0
Ads	0	0	0	0	0
Accounting	130	130	130	130	130
Miscellaneous	400	0	0	0	200
Loan payments	0	0	0	0	0
Taxes
Total Cash Out	10,160	9,760	9,760	9,760	9,960
Cash at End of Month	-6,410	-4,770	-5,030	-5,290	-1,000

Table 2. Sun Basket 2018 cash flow analysis, part 2.

            Cash flow must routinely be evaluated, ideally through a monthly discussion among the company’s management team with detailed analytics dashboards and/or reports available from the accounting department. These oversight measures are very important to catching data trends early that could indicate a larger problem. For example, in the above tables, there would be a big difference between catching the downturn in cash at the start of July versus not seeing the problem until an end-of-year report. Seeing the problem earlier would allow management to investigate the problem and implement a strategic plan to reverse the downward trend.

Post #11 in this series explores a sales analysis.