Comments on: Cashflow is the king http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/ Resources for starting a startup Thu, 19 Nov 2009 05:37:09 +0000 http://wordpress.com/ hourly 1 By: Cashflow in practice « Bootstrap in Bangalore http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/#comment-131 Cashflow in practice « Bootstrap in Bangalore Mon, 01 Sep 2008 02:52:34 +0000 http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/#comment-131 [...] 1, 2008 at 2:52 am · Filed under book Cashflow is the king is almost a guru mantra for start ups and bootstrappers. I wanted to explore this in a more [...] [...] 1, 2008 at 2:52 am · Filed under book Cashflow is the king is almost a guru mantra for start ups and bootstrappers. I wanted to explore this in a more [...]

]]> By: HimS http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/#comment-106 HimS Thu, 17 Jan 2008 14:03:28 +0000 http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/#comment-106 A post on managing bad debts would be helpful. What was your bad debt percentage? Did it increase as you grew? How do you keep it low? A post on managing bad debts would be helpful.
What was your bad debt percentage? Did it increase as you grew? How do you keep it low?

]]> By: Ankit Jain http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/#comment-77 Ankit Jain Sat, 29 Dec 2007 08:16:13 +0000 http://bootstrapinbangalore.wordpress.com/2007/12/27/cashflow-is-the-king/#comment-77 While going through finance and accounting courses, I came across cases where companies were reporting "Profits" in accounting (GAPP) terms but had negative cash flows! This was because their booked profits for a particular period were sitting as "Account Receivables" - a positive revenue figure but doesn't help in showing cash balance in bank. So, one may pretty much be in green but has no cash to pay for operating expenses as well as loan installment repayments. Further loans taken to cover cash deficit just compound the situation because the interest amount liability for subsequent periods is increased. This is of major concern to businesses with high capital expenditure. They monitor the ratio of cash flow to interest payable on debt on each period in order to avoid a default. Another useful tip was to allocate some part of Account Receivables (say, 2%) towards "Provision for bad debts". This amount gets deducted from profits and gets added to balance sheet. Think of it like a cash reserve that you cannot touch and will be useful if somebody defaults. While going through finance and accounting courses, I came across cases where companies were reporting “Profits” in accounting (GAPP) terms but had negative cash flows! This was because their booked profits for a particular period were sitting as “Account Receivables” – a positive revenue figure but doesn’t help in showing cash balance in bank. So, one may pretty much be in green but has no cash to pay for operating expenses as well as loan installment repayments. Further loans taken to cover cash deficit just compound the situation because the interest amount liability for subsequent periods is increased. This is of major concern to businesses with high capital expenditure. They monitor the ratio of cash flow to interest payable on debt on each period in order to avoid a default.

Another useful tip was to allocate some part of Account Receivables (say, 2%) towards “Provision for bad debts”. This amount gets deducted from profits and gets added to balance sheet. Think of it like a cash reserve that you cannot touch and will be useful if somebody defaults.

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