Cash Management

From the customer value table to the bank account

Take out your Week 12 customer value table and find the row for the home team. It is the buyer and the payer. It pays Judy's company NT$60,000 per appearance, 30 days after each game. Now find the rows for the performer and the translator. They do their work on game day and expect to be paid for it.

The performer's first half-fee, her travel and the game-day logistics, which the home team's own event staff handle, are paid in the week of the game, before game day. So the money leaves before it arrives. For about a month after each game, Judy's company carries the cost of the appearance while the home team keeps its money.

This is normal in business, and it is also how busy companies run into trouble. A company can have bookings, happy customers and signed agreements. It can still be unable to pay a bill due this week, because the money for those bookings has not arrived yet.

In Week 5 the company began a 12-week test of Option A · Expansion (expand cheerleading and sports-entertainment talent management). Its goal tree set a red line: company cash never falls below NT$100,000. This week checks whether the two home games respect that line. It checks two cases: the plan, in which the home team pays on time, and what actually happened, when the fee for game 1 arrived eight days late.

This chapter continues the practice scenario used since Week 4. It is invented for learning, and so are all its amounts. This week's question is: when does money enter and leave the company, and can the company keep its promises to people in the weeks between?

Where this week fits

Week 12 showed who pays for a game-day appearance and who carries the risk. Week 13 adds dates. It asks when each payment arrives, when each bill is due and what happens when those dates do not match. The result is a cash calendar. Week 14 uses it to ask who waits for their pay when a customer pays late, and what that does to fairness and trust.

Four money events on one timeline

One appearance creates several money events. They happen on different dates, and each answers a different question. Managers get into trouble when they treat them as the same thing. The table follows game 1, which was played on the Saturday of test week 4.

A contract amount is what the parties agree to exchange. It matters, but it pays no bills. A receivable is money a customer owes after the company has delivered. It is a claim for payment, and claims can be delayed, disputed or reduced. Cash received is the only one of these events that gives the company money it can spend, and it needs a bank record with a date.

A customer advance works the other way around. The bank balance rises before the work is done, so the company holds cash that it may have to return. If the game were canceled, part or all of the advance might go back to the home team. An advance helps with timing, but it is money with a promise attached.

For accounting students (optional)

The international accounting standard for revenue, IFRS 15, uses more precise terms (IFRS Foundation, n.d.-a; International Accounting Standards Board, 2022). The appearance is a performance obligation: a promise to deliver a distinct service.

Revenue is recognized when that promise is performed, on game day, not when the agreement is signed or the cash arrives. A right to payment that still depends on something other than time, such as the home team's approval, is a contract asset. A customer advance for a service not yet delivered is a contract liability. The real treatment for any company depends on its own reporting rules and professional advice.

Four measures that answer different questions

Revenue, profit, cash flow and liquidity are related, but each answers its own question. The table shows the question and what each measure says about the two home games.

Liquidity is the measure that decides whether people get paid this week. Here is a short illustration, separate from the main example.

A company signs a contract worth NT$100,000. Before the event it must pay NT$70,000 for travel, performers and production, but it has only NT$40,000 in the bank and no advance. The project would earn money in the end, yet the company cannot pay the bills due before the event. That is a liquidity problem, and a good contract does not solve it.

The standard for cash flow statements, IAS 7, sorts cash movements into three groups (IFRS Foundation, n.d.-b). Operating cash flows come from the main business, such as the home team's payment and the performer's fee. Investing cash flows buy or sell long-term assets, such as equipment. Financing cash flows come from owners or lenders, such as a loan from Judy to the company.

Revenue Model and accounting revenue

In Week 1 you met the Revenue Model, one of the course's four management questions: how value becomes money, and when. The Revenue Model is a design choice: who pays, for what, on which terms and on which date. Accounting revenue is a number in a report. Cash received is an event on a date, and profit is a summary of a period.

Zott, Amit and Massa (2011) reviewed research on business models and describe them as systems of activities that create value and capture part of it. Payment terms are part of that system, so a change in payment terms is a change in the Revenue Model.

The cash calendar: a week-by-week check

A cash calendar is a table that shows, for each week, the cash at the start, the money expected in and out, and the cash at the end. Beside each amount it records who pays or is paid and on what condition. An annual budget shows totals for a year. A cash calendar shows whether the company can get through each week until the next reliable payment arrives.

Each line of the calendar should answer three questions.

• Who and what? Name the payer or the person being paid, and the service the money is for. A line called "income" hides who could be late.
• When, and how sure? A date written in a signed agreement is more reliable than a date mentioned in a meeting. A date that someone only hopes for should be labeled as a hope.
• What if it moves? For each receipt, ask what happens if it arrives late. For each payment, ask whether it can move without harming someone.

The calendar then shows two numbers that matter most. The lowest cash point is the smallest balance in the period. The distance between that point and the floor, called headroom, shows how much room the company has for a surprise.

Worked example: a cash calendar for the two home games

This calendar follows the two home games of the Option A test, week by week. The rows are test weeks 1 to 12, plus the first week after the test (week 13 of the calendar), when the second fee arrives. Each week runs from Monday to Sunday, and days are counted from the Monday of test week 1 (day 1).

The direct cost of one appearance is therefore NT$35,000. Two trips cost NT$22,000, well within the NT$60,000 travel budget.

One kind of cost is left out of the calendar on purpose. The test also uses about NT$4,000 a week of Mina's salary and the company's tools. The company pays these whether or not the test runs, and its other work, such as content and sponsored videos, covers them. So they do not change the cash that the test moves. They still matter for judging whether the test pays for itself, which the contribution-margin section below takes up.

The plan: the calendar when the home team pays on time

Check the totals. NT$120,000 comes in and NT$70,000 goes out (two games at NT$35,000), so cash ends NT$50,000 higher than it started: 180,000 − 70,000 + 120,000 = 230,000.

In the plan, the lowest cash point is NT$130,000, at the end of test week 8. Cash stays there from game 2 until the game 1 fee arrives on the Monday of test week 9. The headroom is NT$30,000.

Notice where the low point falls. It is not on the day of game 1. It comes four weeks later, after the company has paid in advance for a second game while the first fee is still on its way.

The plan also contains a quiet dependency. The payday on Tuesday of test week 9 comes one day after the game 1 fee is due. If that fee is late, the payday has to be paid from the company's own cash.

What happened: the game 1 fee arrives eight days late

In the practice scenario, the game 1 fee did not arrive on day 57. It arrived on day 65, the Tuesday of test week 10, 38 days after the game instead of 30. The game 2 fee arrived one day early, on day 85, the Monday of week 13. Test weeks 1 to 8 do not change. The table shows test week 8 to week 13 in two versions: if the company had paid everyone on payday, and what it actually did.

If the company had paid everyone on payday, the lowest cash point would have been NT$110,000, from Tuesday of test week 9 to Tuesday of test week 10, NT$10,000 above the floor. As it happened, the lowest point was NT$120,000 over the same days, NT$20,000 above the floor. Both versions end at the same place, NT$230,000, once both fees are in and everyone is paid.

Check the two numbers. Before payday, cash was 130,000. Paying all 20,000 gives 130,000 − 20,000 = 110,000. Paying only the game 2 amounts gives 130,000 − 10,000 = 120,000.

Who was asked to wait, and why?

The company asked two people to wait one week. The performer waited for the NT$6,000 second half of her game 1 fee, and the translator for NT$4,000 for her game 1 hours. Judy's reasoning had two parts. First, she did not know when the home team would pay, so she wanted to keep cash near the NT$130,000 it had held since game 2. Second, it felt natural that game 1 costs should wait for game 1 money.

Now read the calendar. Paying everyone on time would have left NT$110,000, above the red line. The floor was never at risk. The waiting protected a cushion that Judy preferred, not the limit the company had written down.

That is a real management choice, and sometimes a reasonable one. But its cost fell entirely on the two people with the least power, and the agreements with them said nothing about waiting for the home team to pay. Week 14 starts from this decision.

The calendar also shows how thin the headroom was. With everyone paid, one more unexpected cost above NT$10,000 in test week 9 would have crossed the floor. A calendar that shows headroom in advance lets the company prepare an answer, such as a short owner loan or a deposit rule, before anyone has to wait.

Who waits: receivables and payables

Operating working capital is the money tied up in day-to-day operations. It includes money customers owe the company (receivables), money the company owes others (payables) and, in companies that sell goods, stock waiting to be sold. Judy's company holds no stock, but it still ties up money: at the end of test week 8, the home team owes it NT$120,000 for two games already played.

Research on larger firms shows why this matters. Deloof (2003) studied large Belgian companies and found that how long they took to collect from customers and pay suppliers was linked to how profitable they were. Nicolas (2022) studied small French firms and links short-term limits on money, including money tied up in operations, to lower investment. The practical lesson for a small company is simple: money waiting in a receivable cannot pay a translator.

Receivables are claims that can be delayed, disputed or reduced. Payables are obligations to real people and suppliers. Paying a payable late keeps cash in the company, but it moves the waiting onto someone else. When Judy's company delayed the translator's NT$4,000, the translator, not the company, was financing the home team for a week. That transfer should be named and decided openly, not hidden inside the calendar.

Contribution margin: what each appearance adds

A variable cost changes with each unit of activity, here each appearance. A fixed cost stays the same over a planning period, whether or not there is a game. In the scenario, the performer's fee, travel, the translator and the partner's logistics are variable. The NT$4,000 a week of Mina's time and tools is fixed, because it is paid whether or not there is a game.

Contribution margin is the price of one unit minus its variable costs. It shows how much each appearance contributes toward the fixed costs. For one appearance in the practice scenario:

The break-even point is the number of units at which total contribution equals fixed costs, so there is neither profit nor loss. The test's fixed costs are NT$4,000 a week for 12 weeks, or NT$48,000. Break-even is 48,000 ÷ 25,000 = 1.92, which rounds up to two appearances. The two home games contribute NT$50,000, so the test covers its fixed costs with NT$2,000 to spare.

This connects the two views of the same test. The cash calendar ended NT$50,000 higher, which is exactly two contributions, because the fixed costs were paid by the rest of the business. The break-even view charges the test for its share of those costs and leaves NT$2,000. Both are correct answers to different questions.

Break-even depends heavily on the assumptions, so test other cases.

• Lower price. In Week 12, the teams were also offered a performance-only version at NT$48,000, with no translator. Its direct cost is NT$31,000, so the contribution margin falls to NT$17,000. Break-even rises to 48,000 ÷ 17,000 = 2.8 (here NT$48,000 is the 12-week fixed test cost, not the performance-only price), or three appearances.
• More appearances. A third appearance at the full price would add another NT$25,000. But as Week 11 showed, a third team's request for an appearance in test week 8 would push Mina to 11 of her 10 test hours in test week 7. Capacity, not price, would limit that gain.

Two cautions keep the calculation honest. First, the margin looks better than it is if work is left out. Judy's own hours spent on payment conversations do not appear anywhere in this calculation. Second, a positive contribution margin says nothing about timing. Each appearance earns NT$25,000, yet game 1's money was still missing on payday, as the late-payment case showed.

Payment terms, cash buffers and financing

Payment terms decide who finances the work. A deposit, paid when the agreement is signed, funds early costs and shows that the customer is committed. A milestone payment links payment to work completed, such as half after the first game. Payment after the service, like the 30 days in the scenario, protects the buyer and makes the seller wait.

In Week 12, the second team asked to pay 45 days after its game. On a cash calendar, its fee would arrive about two weeks later than the home team's. For those extra two weeks, the company would carry the NT$35,000 cost of that game from its own cash.

A cash buffer is cash held on purpose to protect named obligations. The NT$100,000 floor is a buffer. Miller and Orr (1966) built a model in which cash moves up and down unpredictably and the firm acts only when cash reaches a lower or an upper limit. The floor works like that lower limit.

The size of a buffer should depend on what it protects. In this scenario, the floor protects the rest of the company: salaries, rent and other commitments that are not in this test calendar (invented). A floor that is too low leaves no room for a late payer. A floor that is too high keeps money idle that could fund useful work.

The late-payment case adds one more lesson. If a manager feels safe only well above the written floor, that comfort level should be written down too. So should a rule for who waits when cash falls below it.

Liquidity and solvency are different. Liquidity is being able to pay each bill when it is due. Solvency is being able to meet all obligations over the longer term. A company can be solvent and still face a liquidity squeeze for one week, which is what the late-payment case shows.

Financing is a separate decision from payment timing. A loan from Judy, a bank loan and a customer advance all bring cash in, but each comes with its own obligation: repayment, interest or a service still owed. Each belongs on its own line in the calendar.

Froot, Scharfstein and Stein (1993) argue that when outside money is expensive, a company should manage its risks so it can still fund its most important plans. For a small company, that may mean asking for a deposit instead of borrowing later.

Paying across a border

Week 4 showed how to compare settings by mechanisms such as who approves and who pays. Payment across a border adds its own mechanisms. The performer lives in Korea, so her fee may travel by international transfer, with a fee, an exchange rate and a bank cut-off time. A transfer sent on payday may arrive a day or more later.

Two sources describe these conditions at the level of countries. The Bank for International Settlements reports that cross-border payment systems still differ in operating hours and message standards (Fitzgerald et al., 2025). The OECD's scoreboard on small-business finance tracks, among other things, how many days business payments arrive after the agreed date in many countries (OECD, 2026). For the calendar, the lesson is practical: record the date the money must arrive, and send it early enough to get there.

AI in financial administration: check against the source

Week 3 set the course rule that a person stays responsible for judgment when AI is used. The risk specific to this week is a tool that reads emails and fills in the cash calendar. It might record "30 days" as a certain date when the agreement says "30 days after the home team approves the invoice". The control is reconciliation: comparing each number in the calendar with its source record, listing any differences, and having a named person decide which is correct. NIST's guidance on generative AI (Autio et al., 2024) supports this kind of control: keep the source, compare against it, and let a person correct or stop the output.

Cash questions for the three options

The worked example tested Option A · Expansion. Option B · Boutique is a small cross-border talent and advisory service for a few clients. Option C · Content-centered return is a return to content, advertising, food service and personal brand. Each has a different cash pattern. This week does not choose between the options; in Week 17 you choose one and defend it.

Class practice: a four-week cash calendar

This practice is done without AI tools. Your teacher will tell you which worksheet to use and how to submit it. Use the case numbers your teacher gives you, or take four weeks of the worked example, change two numbers and label them as invented.

1. Set up the calendar. Write the opening cash and the floor.
2. Fill four weeks. For each week, write the cash in, the cash out and the closing cash.
3. Find the lowest point, then move one payment. Circle the lowest closing cash and write its headroom. Then move one expected receipt one week later and write the new lowest point.
4. Decide who waits. Name the first obligation that becomes difficult, one response, the person who carries its cost, and whether the response protects the floor or only a cushion above it.

Key points and what you bring to Week 14

• A contract amount, a receivable, cash received and a customer advance are different events. Only cash received pays bills.
• Revenue, profit, cash flow and liquidity answer different questions. Liquidity decides whether people are paid this week.
• A cash calendar shows the lowest cash point and its headroom above the floor. In the plan, the low point was NT$130,000, at the end of test week 8.
• When the game 1 fee arrived eight days late, paying everyone would have left NT$110,000. The company asked two people to wait and stayed at NT$120,000. The floor was never at risk.
• Contribution margin (NT$25,000 per appearance) and break-even (two appearances) show whether the test pays for itself. Neither shows timing; the calendar does.

For Week 14. Bring your cash calendar and its late-payment case. Week 14 begins where this example ended: the performer and the translator have been asked to wait one week for their game 1 pay, to protect a cushion rather than the floor. You will build a people system table that shows who contributes, who decides and how people can speak up when money is tight.