Marketing Plan Financials in Plan English – Sales Cash Flow – Part 15 of the 2009 Marketing Plan Series

In this final section of our “Marketing Plan Financials in Plan English” sections and our final part of the “Marketing Plan Series”, we discuss the topic of Cash Flow Analysis.  This part of the marketing plan financials is there to demonstrate how your marketing group/division will maintain a cash positive nature based on budgeting and where you might need cash infusions based on sales projections. As important as when you will break even, you must be able to show how, on a monthly basis, you will manage the cash flow to support the business and not sink it from an overly ambitious strategy and action plan.

Similar to the Cash Flow Statement in a Business Plan

In our Business Plan Series, we covered the basic financial statements of the business plan, including the cash flow statement. Here is the plain english explanation from that post:

The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company. For example, the heading may state “For the Three Months Ended December 31, 2007″ or “The Fiscal Year Ended September 30, 2008″. For many, looking at a cash flow statement it looks a bit weird but it provides a different, yet critically important view of the business.

For this focus on the marketing plan, you need to create a subset of this that eventually rolls up into the business plan to support it and give detailed projections.

Three Sections of a Marketing Plan Case Flow Statement
For the purpose of the marketing plan cash flow statement that flows up and reports to the master cash flow statement, there are three sections that must be created:

SECTION 1: Operating activities
Converts the items reported on the income statement from the accrual (you book the sale but you might not have the money yet) basis of accounting and includes the following:

• Cash receipts from sales or for the performance of services
• Payroll and other payments to employees
• Payments to suppliers and contractors
• Rent payments
• Payments for utilities
• Tax payments

SECTION 2: Investing activities
Investing activities include capital expenditures – disbursements that are not charged to expense but rather are capitalized as assets on the balance sheet.  Investing activities also include investments (other than cash equivalents as indicated below) that are not part of your normal line of business.  These cash flows could include:

• Purchases of property, plant and equipment
• Proceeds from the sale of property, plant and equipment
• Purchases of stock or other securities (other than cash equivalents)
• Proceeds from the sale or redemption of investments

SECTION 3: Financing activities
Financing activities include cash flows relating to the business’s debt or equity financing:

• Proceeds from loans, notes, and other debt instruments
• Installment payments on loans or other repayment of debts
• Cash received from the issuance of stock or equity in the business
• Dividend payments, purchases of treasury stock, or returns of capital

Don’t Forget to Include an Expense Budget

Because you will be estimating cash inflows for various product lines you must account for the expenses that are incurred related to them. This must include enough detail to track expenses month by month and follow up on plan-vs.-actual analysis.

That’s a Wrap!

Well, this concludes our 15-part series on writing a marketing plan. We hope you have learned new things and relearned things forgotten long ago. We will continue to add addendum posts to the marketing plan series but only to add dimension and real life examples to support the information we just published. We hope you have enjoyed this series and will come back for more. Let us know your feedback in the comments.