Page 9 - Beverage Master December January 2020
P. 9
Craft Beverage
f. Cash reserves You decide the next step to minimizing your nega-
tive cash flow in the first half of the year is to eval-
To make sure your projection stays accurate uate the impact of producing a new seasonal brew
throughout the year, consider these variable as seen in the projection below:
expenses:
• Months with three payrolls.
• Months when insurance premiums are due.
• Increased estimated taxes due to increased
sales.
A good rule of thumb is to designate an amount
equal to 10% of revenues for “other expenses”
under uses of cash — so you’ll have some cushion
when unforeseen costs arise.
To keep your projections on track, create a rolling
12-month plan that you update at the end of each
month. If you add a new month to the end every
time a month is completed, you’ll always have a
long-term grasp of your business’s financial health.
However, don’t try to project more than 12 months
into the future or you’ll end up spending a lot of
time trying to predict something with too many Using cash flow projections is a cyclical activity.
variables (prime rate could shoot up, sales could go As months pass, you can compare your monthly
down dramatically, etc.). cash flow statements to your projections for each
month and the numbers should be close. You can
Cash Flow Projection Example: get away with a 5% variance but if you start to see
large differences from month to month, you should
After you define your assumptions and approach- revisit your key assumptions to check for flaws in
es and create your 12-month cash flow, you notice your logic.
a net cash loss in the first half of the year as high-
lighted below (shown as 6 months). Even if the actual numbers come in higher than
your projections, you should take a close look at
your assumptions, because higher returns in the
short term could lead to shortfalls later on. For
example, if you predict your Oktoberfest brew to
have the greatest cash inflow during October and
you start distributing it in September, you may
run out of product by mid-October. You’ll need to
adjust for these unexpected changes as you move
forward month to month.
Once you’ve gotten into the habit of using a cash
flow projection, it should give you added control
over your cash flow and a better understanding of
your brewery’s financial position.
Beyond cash flow, it is important to understand
and consider all of your financials when determin-
ing your strategy and planning for the future of
your brewery.
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