Cashflow Review Techniques Session Guide MABS Technical Resource Specialist Training-Workshop

Session 6:Cash Flow Review Techniques Objective:At the end of the session, the participants should know the techniques on how to review the cash flow of the applicants. Duration:2 hours (1.5 hours for discussion &.5 hour for case exercise) Methodology:Lecture-Discussion, Case Analysis Training Material:Power point presentation Cash Flow Case Exercise-Jennifer Delima’s Bakery Training Handout: Training Supplies: Equipment: Other Requirements: 3-slide in a page Power point presentation Manila papers/ pentel pens/white board markers Digital projector, white board, chairs and tables Calculators (one for each participant)

Session Guide: After the case analysis, present the topic on Cashflow Review Techniques. This topic analyzes whether the information provided by the applicant in his/her cash flow is realistic or not. This can be done by looking at the 5 indicators in the clients cash flow: (1) price mark-up or profit margin, (2) normal inventory, (3) total monthly income from business and other sources, (4) total monthly household expenses, and (5) net monthly income. A. Introduction 1.Show the title slide "Cash Flow Review Techniques". Tell the participants that in this session, they will learn how to analyze certain components of the prepared cash flow to be able to establish the accuracy and consistency of the data used in its preparation. Then proceed to next slide which discusses the session’s objectives.

2. Present the 3 rd slide. This slide explains why there is a need for the participants to learn about cashflow review techniques. The first bullet indicates that the AOs rely on the verbal informations supplied to them by the applicant since most microenterprise operators do not keep records of their business. The second bullet supports this observation by concluding that as a result the applicant either overstate their income or understate their expenses which would enable them to avail of a bigger loan. These errors in the declaration of the client's cashflow, if not detected and reviewed properly, could lead to delinquency later on. 3. The 4 th slide presents the outline of the review techniques that will be discussed in details.

B. Main Presentation 1.Discuss each indicator thoroughly with the participants i.e. price mark-up or profit margin, normal inventory, total monthly income from business and other sources, total monthly household expenses and net monthly income. 2.Make sure that the formulas contained in the appropriate indicators are discussed thoroughly with the participants. And how they relate to the analysis of the cash flow. C. Closing 1.End the session by stressing the following: "The MABS Approach always presents ways to help its participating banks mitigate the risks in lending to microenterprise clients. The cash flow review techniques enable banks to adopt a more conservative approach to microenterprise lending. Using these techniques will reduce errors on overestimating the credit capacity of the clients. 2.Afterwards, instruct the participants to retrieve the cash flow computation they did for the Jennifer Delima Bakery cash flow exercise. Ask the participants what error did they notice or observe in the cash flow computation of Jennifer Delima. Ask the participants to re-compute the cash flow of Jennifer Delima to correct the error in the computation.