5.3. ERMUSR 06-14-2005 - Laserfiche WebLink

Home Browse Search

MONTHLY CASH FLOW INTRODUCTION In reviewing the Cash Flows Report last month, the question was asked "Why are there such large changes in the cash balances from month to month?" To better answer that question, I have prepared a Monthly Cash Flow Projection Report that can be used to identify the swings to be expected in upcoming months and explain the swings for prior months. This report takes the Income Statement results and then adjusts for any noncash items (such as depreciation and accrued interest), and the cash items that result from the balance sheet accounts (such as money going out with Accounts Payable, and money coming in with Accounts Receivable) to arrive at the ending cash balance. The months of January, February, March, and April have the actual numbers reported, and the months of May through December are projections. You can see that for each of the water and electric funds, there is an expected increase of approximately $200,000 at year's end. However, there is considerable fluctuation throughout the year to get there. The Electric fund starts at 2.2 million and consistently drops down, reaching .6 in September before it begins the climb back up to 2.4 in December. The 1.6 million fluctuation is a result of capital items and inventory being purchased early in the year, and paying larger purchased power costs in the summer months before the revenue for those same months is actually received, and also the large bond principle payments in January and February. The Water fund sees smaller fluctuation, decreasing only .6 million from January to July before starting to climb again. The expenses related to water are more consistent and do not vary as greatly as the electric expenses do when the demand is increased. Water's largest cash outlay is in February with the bond principle and interest payments. The biggest fluctuation in water is the connection fees, which are very difficult to predict. Last meeting we reviewed the Cash Balance Projections for the next 10 years that Bryan had prepared. The projections were made using the Springstad studies original projections, and then modifying them for the actual audited results and any known changes in future years. This Monthly Cash Flow Projection Report is a further breakdown of those annual cash projections in a monthly format and is consistent in predicting the same results. While we cannot predict the future with absolute certainty, we can make fairly accurate assumptions to base our projections on, and then we can use it as a measuring device throughout the year. This will be a tool to use in monitoring our cash balances and preparing for the low points so there are no surprises.