![]() Tyee is also on the faculty at Portland State University where he teaches courses in taxation and financial accounting. His focus is on maximizing after tax cash flow used for growth by small to mid-sized businesses. Tyee is a Principal at McDonald Jacobs where he provides Business Advisory Services to entrepreneurs and their accountants. It's hard to argue with a strategy of increasing sales and reducing expenses, but you can also see how collecting faster from customers and waiting longer to pay bills will effect the short-term cash situation. When you have a forecast model setup to first forecast EBITDA and then forecast the changes in above accrual and deferrals, it aids in visualizing the levers you have to improve cash flow. In future articles I will get "under the hood," of the forecasting process to explain how I go about forecasting A/R and A/P balances for this purpose. In order to adjust an EBITDA forecast for a change in say, accounts receivable and accounts payable, you have to first forecast the A/R and A/P balances for each future period. To convert EBITDA in your forecast to operating cash flow, you'll have to adjust for changes in any of the four items above your business has. Your business may have one, all, or none of the above items depending on how you operate. Common examples would be insurance payments and rent.
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