1. SHOPS is funded by the U.S. Agency for International Development. Abt Associates leads the project in collaboration with Banyan Global Jhpiego Marie Stopes International Monitor Group O’Hanlon Health Consulting Business for Health Business Skills for Private Medical Practices Module 17: Manage Your Cash Flow

2. A Quick Start Welcome! While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator. While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator. Thank you!. 2Business Skills for Private Medical Practices

3. Agenda Welcome Can You Show a Profit and Still be Cash Poor? Read a Cash Flow Statement Make Cash Flow Projections Improve Cash Flow Summary and Evaluation Close 3Business Skills for Private Medical Practices

4. Learning Objectives During this session, you will: 1.define key terms related to cash flow and profit; 2.explain the difference between cash and profit; 3.describe the categories in a cash flow statement; 4Business Skills for Private Medical Practices

5. Learning Objectives 4.interpret a cash flow statement; 5.practice making cash flow projections; 6.identify strategies to improve cash flow; 7.describe the next step; and 8.state your key take-away from this session. 5Business Skills for Private Medical Practices

6. Introduction You will have 1 minute to introduce yourself: 1.Your name 2.Your position 3.Your business 4. How long you have been in business 6Business Skills for Private Medical Practices

7. Can You Show a Profit and Still be Cash Poor? Business Skills for Private Medical Practices 7

8. Cash Flow and Profitability  Cash Flow Statement- Shows cash inflows and outflows over a past period of time.  Cash Flow Projection- Shows cash inflows and outflows projected for the future.  Income Statement- shows profitability over a past period of time, but says nothing about the business’ cash position. 8Business Skills for Private Medical Practices

9. Cash Flow and Profitability 1.How can a business show a net profit but have a negative cash position? 2.How can a business show a loss on an income statement but still have cash? 3.What causes more businesses to fail: lack of profitability or lack of cash? Why? 9Business Skills for Private Medical Practices

10. Profitable or Cash Poor? Scenario #1 10Business Skills for Private Medical Practices 1.After paying the expenses, how much money did the clinic owner have left? 2.Did the clinic owner make a profit from this service? 3.Did the clinic owner have cash in the business after this transaction?

11. Profitable or Cash Poor? Scenario #1 11Business Skills for Private Medical Practices

12. Profitable or Cash Poor? Scenario #2 12Business Skills for Private Medical Practices 1.Did the clinic owner have enough cash from the sales to pay all the expenses? 2.Why didn’t the clinic owner have enough funds? 3.Does the clinic owner have a cash flow problem? 4.Is this service profitable?

13. Profitable or Cash Poor? Scenario #2 13Business Skills for Private Medical Practices

14. Profitable or Cash Poor? Scenario #3 14Business Skills for Private Medical Practices 1.Did the clinic owner have enough cash from the sales to pay all the expenses? 2.Why did the clinic owner have less than a shortfall than in Scenario #2? 3.Does the clinic owner have a cash flow problem?

15. Profitable or Cash Poor? Scenario #3 15Business Skills for Private Medical Practices 4.Is this service profitable? 4.What would happen to the clinic owner’s profit and cash if the utility also offers a 30-day credit?

16. Profitable or Cash Poor? Scenario #3 16Business Skills for Private Medical Practices

17. Profitability versus Cash Flow Profit ≠ Cash  Accrued net profit is calculated regardless of when cash is received or paid out  Expenses are paid with cash, not profits  Businesses go bankrupt if they run out of cash, even though they generate net profits Business Skills for Private Medical Practices17

18. Net Profit  Total revenue minus total expense, regardless of when the cash goes in or out.  Found on the Income Statement. 18Business Skills for Private Medical Practices Profitability versus Cash Flow

19. Accounts Receivable  Money owed to you for services provided in the past.  It appears as an Asset on the Balance Sheet. 19Business Skills for Private Medical Practices Profitability versus Cash Flow

20. Accounts Payable  Money you owe for services provided to you in the past.  It appears as a Liability on the Balance Sheet. 20Business Skills for Private Medical Practices

21. What can the clinic owner in Scenario #2 do to meet the cash requirements of the business? Business Skills for Private Medical Practices21 Profitability versus Cash Flow

22. Determining Implications for Profitability and Cash Positions A. Payment Incentive 1.How did this affect: a.the profitability of the business? b.the cash position of the business? 2.What are the immediate consequences to the business? Business Skills for Private Medical Practices22

23. Determining Implications for Profitability and Cash Positions B. Purchase More Drugs 1.How did this affect: a.the profitability of the business? b.the cash position of the business? 2.What are the immediate consequences to the business? Business Skills for Private Medical Practices23

24. Determining Implications for Profitability and Cash Positions C. Supplier Credit 1.How did this affect: a.the profitability of the business? b.the cash position of the business? 2.What are the immediate consequences to the business? Business Skills for Private Medical Practices24

25. Determining Implications for Profitability and Cash Positions D. Larger Facility 1.How did this affect: a.the profitability of the business? b.the cash position of the business? 2.What are the immediate consequences to the business? Business Skills for Private Medical Practices25

26. Read a Cash Flow Statement Business Skills for Private Medical Practices 26

27. Introduction to a Cash Flow Statement Business Skills for Private Medical Practices27

28. Cash Flow Story: What Do the Numbers Say? Cash Flow Story: What Do the Numbers Say? Business Skills for Private Medical Practices28

29. Cash Flow Story: What Do the Numbers Say? Cash Flow Story: What Do the Numbers Say? Business Skills for Private Medical Practices29 1.What is your general feeling about this business? Does it have enough cash to operate comfortably? 2.What did the owner do to keep a positive cash flow each month? 3.Does this business have any cash reserves? How much does it need?

30. Cash Flow Story: What Do the Numbers Say? Cash Flow Story: What Do the Numbers Say? Business Skills for Private Medical Practices30 4.How many months in the year did the clinic need to borrow money? Do you see any cash flow patterns? 5.What would have happened if the owner did not put in her own cash in month 4? 6.What can this owner do to build her cash reserves?

31. Make Cash Flow Projections Business Skills for Private Medical Practices 31

32. Why is a Cash Flow Projection Important?  It is an early warning system.  Depending on the projected cash balances, it indicates when:  there is a need to access external funds,  expenses need to be cut, or  investments can be made. Business Skills for Private Medical Practices32

33. Making Cash Flow Projections Business Skills for Private Medical Practices33

34. Cash Flow Projection Business Skills for Private Medical Practices34

35. Cash Flow Projection Business Skills for Private Medical Practices35

36. Cash Flow Projection Business Skills for Private Medical Practices36

37. Cash Flow Projection Business Skills for Private Medical Practices37

38. Cash Flow Projection Business Skills for Private Medical Practices38

39. Cash Flow Projection Business Skills for Private Medical Practices39

40. Making Cash Flow Projections Making Cash Flow Projections Business Skills for Private Medical Practices40 1.Will Dr.Abich have enough cash to pay the 11,000 rent at the beginning of next month? 2.What issues can affect the inflow or outflow of cash? 3.What should you keep in mind when creating a cash flow projection?

41. Improve Cash Flow Business Skills for Private Medical Practices 41

42. Strategies to Improve Cash Flow Please stand up next to your chair if you have an answer to one of these questions: 1. What can you do to accelerate cash inflow? 2.What can you do to delay cash disbursement? Business Skills for Private Medical Practices42

43. Summary and Evaluation Business Skills for Private Medical Practices 43

44. Evaluation Sheet 44Business Skills for Private Medical Practices

45. The Next Step 1.Analyze your cash flow on a weekly or monthly basis. 2.List your assumptions about future cash flow. 3.Make a cash flow projection. 45Business Skills for Private Medical Practices

46. Let’s See How Much You’ve Learned Please take the Post-Test. We will compare it to your Pre-Test to see how much you’ve learned in this session. Thank you. Business Skills for Private Medical Practices46

47. My Key Take-Away 47Business Skills for Private Medical Practices