10 MAY 2020 0 Ready? Here's how to get started on your first draft. You need to make only a few entries; the 3-in-1 Cash Flow Calculator auto-magically does the number-crunching for you. The PROFITS Tab Set any month as the first month of your 12-month plan on the Profits tab. (Don't worry about the calendar year; start with June or July or whenever your stores will have re-opened.) Then, enter expected sales and margins for each month. Grim, we know, especially the first few months. This will be a combination of what sales have typically been recently, plus the first draft of your adjusted sales plan. Be realistic. (This is for your eyes only.) Be sure to adjust the margins you expect, showing especially significant markdowns in the first months you are open – and an uptick in sales – as you clear out what has suddenly become old and excess inventory. Then, make the entries for Expenses. Here, you will enter each number just once, versus month by month. If you need some help on the "expense buckets", review the User's Guides here. Take a look at the projected P&L for the 12 months. Scroll down to take a quick look at the P&L for the year. But don't linger (or freak out too much with the loss it shows.) Keep moving. You want to quickly get to your first draft. The INVENTORY Tab Next, on the Inventory tab, enter the inventory @cost you have on hand (again, close counts. Round off your numbers.) Then, choose the Turn rate you expect. And finally, be sure to enter all Inventory On Order for the month you expected to receive it. See Buying Plan Scroll down to check out the Inventory Buying plan. Likely it will show you as being overbought; no surprise there. Again, don't linger. The CASH Tab Okay, on to the third tab: Cash. Once again, very few entries. The 3-in-1 Calculator brings over the appropriate numbers from your P&L and buying plan. Automatically. And accurately. Nice, huh? Enter the Inventory payables Enter other payables you have now If you have a long term loan, enter the monthly payment amount (principal only.) Finally, enter the cash on hand. Now, this IS the page to linger on. Scroll down to see the Ending Cash Balance for each month. Any negative numbers you see represent a cash shortfall for that month. And that is exactly what you need to know. And you know it now, while you still have time to do something about it! Now is when you start to play "what if...?" That is, "How would cash flow be affected by changes I might make?" Changes to the Profit & Loss plan What if you change SALES assumptions? What about MARGINS? Make those changes on the PROFITS tab, for however many and whichever months you choose. (This is a calculator for retailers; no "global" percentage changes across all months.) Now, look at the CASH tab again. Did those changes matter? Let's take another look at OPERATING EXPENSES. Renegotiate with the landlord? Change the Occupancy Expenses entry on the PROFITS tab. Reduce hours we're open? That would probably mean lower Selling Expenses because of reduced payroll. What about cutting travel expenses? Lots of shows and events are being cancelled. Adjust the Administrative Expenses entry. Senior management take salary cuts? Sigh. Everything must be considered. Again, that would mean an adjustment to the Admin Expenses. Again, after each change you can look at the CASH tab to see what difference it makes. This is how "what if-ing" works! Now look at the INVENTORY tab. No worries; if you made changes to your planned sales or margins, the 3-in-1 Calculator automatically adjusted your buying plan. Look at the bottom row on that tab. Any negative numbers on the Net Open-to-Buy row? That represents how overbought you are, or how much excess inventory you would have. Now that you know the amount can put a number on it, you are better able to decide the magnitude of the changes you must make. Have we cancelled all open orders? Can any merchandise be returned? Even if you have to pay freight, it could be worth it. If we really focus on clearing out old merchandise – sharp markdowns – maybe we can increase our turns a bit? What does that do to cash? Okay. Well, what else can raise turns? What if we change distributors to get faster turns? Look again at the CASH tab. What else can we do to improve our cash flow? See those two rows for entries on Dating. Can we get more dating or better terms from our vendors? Enter those dollar amounts in the months you can defer payments. Then, based on your Ending Cash balances (bottom row), when could you expect to pay it back? Enter those payments into the appropriate month. Still helping the cash flow? Or, should we go ahead and take on some loans? (Lots of those are being talked about and offered.) But, most loans will need to be repaid at some point; would we have the cash flow to make those payments when they start coming due? The 3-in-1 Cash Flow Calculator can help answer that. In the Loan Proceeds IN row, enter the amounts borrowed in the month(s) you receive them. In the Loan Repayments OUT row, enter when you expect to repay them. Finally, when you see a plan that shows some promise, date it and print it out. And of course, whenever your assumptions must change – and they will – do another plan. Entries go in quickly; the "what if...?" power is readily available. Cause-effect, cause-effect, cause-effect. The 3-in-1 Cash Flow Calculator is INTEGRATED. The impacts of changes you make in one area are recognized and shown immediately. All the number-crunching is done for you; all the formulas are correct, and are "baked in." You immediately can see the impacts of any of your possible decisions, before any salaries have been cut or merchandise orders cancelled (or placed.) You are free to focus on applying your own informed good judgment! There IS a lot you can do besides worry! These are difficult times for us all. Retailing in particular is under enormous stress. Many feel like there are no good choices. But, there are good decisions. And The ROI is dedicated to helping you be able to make those good decisions for yourself.