When I’m in the LOC borrowing season (the period when usage on the LOC is highest), I let my lenders know at frequent intervals. I don’t do this every week, as most bankers don’t care, even though they appreciate being top of mind. Instead, I’ll share projected cash balances near the beginning of the LOC deep borrowing season. Further updates occur during my monthly meetings when I go over the financials with them.
If I anticipate any unusual cash activity, I’ll share another update. Again, this is out of professional courtesy. While they never ask for these numbers, I take every opportunity to build trust in our relationship.
The One-Page Cash Projection Report
There is nothing out of the ordinary with what I share with the banker. I don’t share my entire projection model with them. Maybe the first time they see the reporting, I’ll pop the hood on my Quantrix model. The only reason to do that is to share how the assumptions were created.
The one-pager is just a simple worksheet with two graphs. The job-to-be-done answers the question, “How close are we to our LOC limit?”
- While redundant, I include the data table so the reader can ascertain the actual numbers. The LOC cushion is the difference between the revolver’s limit and any usage, if any.
- The first graph merely visualizes the data on the left. My readers certainly know the fixed numbers probably have a +/- error factor of $100k to $250k.
- The last graph shows the LOC capacity over the 90 days.
In summary, one page works. The purpose is to stimulate a conversation — if warranted —whether you or the bank starts it. The goal is never to impress the banker. The objective is to be clear, truthful, and transparent. Trust, or more of it, is a result of this communication. Even if you’re not close to hitting the LOC limit, the banker will never be upset if you share this simple, transparent reporting.
