Sunday, June 27, 2004
Cashflow Learnings + Doug Heins and Mick Bates Conversation Response
Today I read a book on cashflow management and re-read the chapters on creating cashflow statements in my accounting text. From the book, I took these notes:
Cash never equals profit minus depreciation.
Reasons profit and cash on hand may differ:
1. Cash flow from operations is basically profit before charging depreciation
2. In any year in which capital expenditure is incurred, the total cash flow of the firm could be negative despite having made a profit
3. In any year in which there is no capital expenditure, the total cash flow will be higher than profit by the amount of the depreciation
4. In any accounting period in which inventories increase, there cash outflow will not be reflected in profit, since the cost of inventory is not listed until it is sold.
5. In any accounting period during which the value of unsold inventories decreases, there will be a cash inflow that is not reflected by an increase in profits
6. In any accounting period during which there is an increase in the amount of credit extended to customers, cash flow from operations will be reduced by this amount
7. In any accounting period in which there is a reduction in the amount of credit given to customers, cash flow from operations will be increased by this amount
Inflation’s effect on cash flow:
1. The value of capital expenditures will increase past the set depreciation
2. The value of inventories will increase irrespective of volume
3. The value of credit given to customers will be greater than that taken from suppliers
Some products, such as popular music records, are short lived leaving little time to get cash flow in balance if things begin to go wrong. Including Judas will be able to avoid this problem by offering less expensive recordings priced correctly for the market over a longer period of time. Including Judas will also receive passive income from webcasting concerts that has already occurred.
Cash equivalents are “readily convertible to known amounts of cash and so near their maturity that their market value is relatively insensitive to changes in interest rates.”
Management will always try to do one of the following when planning cash for the short term:
1. Plan the management of future cash inflows and outflows so as to produce the most favorable control period closing balances
2. Ensure adequate financing is available and when it will be required to meet a cash deficit
3. Ensure cash surpluses are anticipated and hence fully utilized
4. Take appropriate control action to maintain financial stability in the on-going situation as the actual cash flow position unfolds
This is in preperration to send Doug Heins a proposal that incorporates Including Judas webcast promotions with Intercommedia's concerts. Since some of the details are proprietary in nature, I will say more on this when the deal is safely completed.
After talking with Mick Bates, the invovation coordinator for Taylor University, I realised the need to create a consolidated pitch that clearly and quickly communicates Including Judas' value. Since Including Judas has more than one type of customer I’ll be pitching to, I’ve prepared more than one pitch. They all say the same thing and contain three main points…
1. Web Receipt and Delivery
2. Digital Content Creation
3. Message of Hope
… but they are written in a language specific to each audience and focus on the attributes of the three points that audience would care about.
Media Industry Managers:
Including Judas is attempting to create a portal to digital streams of both live and archived concerts to produce passive income through hands-off web delivery. In an era of pervasive media, we see this as the best method to work with available technology to deliver a means of production to our artists that allows for the promotion of their message distributed in a universal platform format with built-in rights management control that is unobtrusive and enticing to the consumer.
Artists and Producers:
Including Judas is attempting to form a coalition of artists interested in receiving passive income from their shows after they have been performed. By archiving concerts in a digital format, Including Judas can offer pirate-proof streaming access, selling a digital ticket to a digital concert to anyone, anywhere. We see this as the best way to use existing technology to send a pervasive message of hope to the world without sacrificing profitability.
Consumers:
Including Judas is on its way to becoming the most expansive internet portal for the webcast of concerts. Our artists understand that to bring their message to you, expensive CDs on occasional concerts miles away isn’t enough. Instead of having to drive a long distance or miss a concert, you can access it in real time or anytime from any computer on the internet. And by downloading full songs or accessing previously archived concerts from an artist’s section of our website, you can tell whether it’s worth the money to go see them in person.
I have sent all these pitches to Mick for his review and will continue to perfect and practice them.
Cash never equals profit minus depreciation.
Reasons profit and cash on hand may differ:
1. Cash flow from operations is basically profit before charging depreciation
2. In any year in which capital expenditure is incurred, the total cash flow of the firm could be negative despite having made a profit
3. In any year in which there is no capital expenditure, the total cash flow will be higher than profit by the amount of the depreciation
4. In any accounting period in which inventories increase, there cash outflow will not be reflected in profit, since the cost of inventory is not listed until it is sold.
5. In any accounting period during which the value of unsold inventories decreases, there will be a cash inflow that is not reflected by an increase in profits
6. In any accounting period during which there is an increase in the amount of credit extended to customers, cash flow from operations will be reduced by this amount
7. In any accounting period in which there is a reduction in the amount of credit given to customers, cash flow from operations will be increased by this amount
Inflation’s effect on cash flow:
1. The value of capital expenditures will increase past the set depreciation
2. The value of inventories will increase irrespective of volume
3. The value of credit given to customers will be greater than that taken from suppliers
Some products, such as popular music records, are short lived leaving little time to get cash flow in balance if things begin to go wrong. Including Judas will be able to avoid this problem by offering less expensive recordings priced correctly for the market over a longer period of time. Including Judas will also receive passive income from webcasting concerts that has already occurred.
Cash equivalents are “readily convertible to known amounts of cash and so near their maturity that their market value is relatively insensitive to changes in interest rates.”
Management will always try to do one of the following when planning cash for the short term:
1. Plan the management of future cash inflows and outflows so as to produce the most favorable control period closing balances
2. Ensure adequate financing is available and when it will be required to meet a cash deficit
3. Ensure cash surpluses are anticipated and hence fully utilized
4. Take appropriate control action to maintain financial stability in the on-going situation as the actual cash flow position unfolds
This is in preperration to send Doug Heins a proposal that incorporates Including Judas webcast promotions with Intercommedia's concerts. Since some of the details are proprietary in nature, I will say more on this when the deal is safely completed.
After talking with Mick Bates, the invovation coordinator for Taylor University, I realised the need to create a consolidated pitch that clearly and quickly communicates Including Judas' value. Since Including Judas has more than one type of customer I’ll be pitching to, I’ve prepared more than one pitch. They all say the same thing and contain three main points…
1. Web Receipt and Delivery
2. Digital Content Creation
3. Message of Hope
… but they are written in a language specific to each audience and focus on the attributes of the three points that audience would care about.
Media Industry Managers:
Including Judas is attempting to create a portal to digital streams of both live and archived concerts to produce passive income through hands-off web delivery. In an era of pervasive media, we see this as the best method to work with available technology to deliver a means of production to our artists that allows for the promotion of their message distributed in a universal platform format with built-in rights management control that is unobtrusive and enticing to the consumer.
Artists and Producers:
Including Judas is attempting to form a coalition of artists interested in receiving passive income from their shows after they have been performed. By archiving concerts in a digital format, Including Judas can offer pirate-proof streaming access, selling a digital ticket to a digital concert to anyone, anywhere. We see this as the best way to use existing technology to send a pervasive message of hope to the world without sacrificing profitability.
Consumers:
Including Judas is on its way to becoming the most expansive internet portal for the webcast of concerts. Our artists understand that to bring their message to you, expensive CDs on occasional concerts miles away isn’t enough. Instead of having to drive a long distance or miss a concert, you can access it in real time or anytime from any computer on the internet. And by downloading full songs or accessing previously archived concerts from an artist’s section of our website, you can tell whether it’s worth the money to go see them in person.
I have sent all these pitches to Mick for his review and will continue to perfect and practice them.
