Cash Management : The Case Against Procrastination : Here’s A Winning Working Capital Formula

Are You Controlling Cash Flow In Your Business – Here’s The Why and How!




OVERVIEW – Information on how the working capital formula is a key part of cash management in Canada




Is Cash Management in your business in control... of you? , or are you in fact managing with a working capital formula and solutions that work. When it comes to business cash flow it's not a time for inaction or procrastination.

Let's dig in.

The irony has never been lost on us when it comes to what 'academics' might say about how great your liquidity position is in, given the way accountants, textbooks, and even banker measure working capital . It all starts when you're told you have a ' high' working capital (current asset to current liability ratio).

Naturally you want to be in a position where you liabilities are low, but does having high levels of receivables and inventory create a winning scenario ?We sure don't think it does , because all that might mean is that you're mismanaging or perhaps simply unaware of the quality of asset turnover in A/R and inventory.

Using inventory specifically your warning signs might be as follows:

Sales are down and inventories are building up - Not good!

Inventory is outdated and somewhat unsalable - Not good!

Inventories are building up - Not good


And then there is your receivables position. Your A/R is of course your most liquid asset next to cash itself; in essence the heart of your liquidity.
Here are your potential problem sign warnings:

Customers are paying you more slowly relative to your terms of payment - Not good!

Potential bad debts loom on the horizon based on serious delinquency in your A/R


If your business has the right levels of current assets solutions to a working capital might be more abundant than you think. They include:

Selling receivables (A/R Financing)

Inventory finance

Canadian commercial bank lines of credit

Asset based (‘ABL ‘) lines of credit that are non bank in nature and monetize all your current assets - plus your equipment!

Tax credit monetization, i.e. financing your SR&ED claims

Working Capital term loans

Supply Chain / P O Finance


In utilizing any of the above solutions it’s all about timing. Here's where you need skill and attention to details such as timing your payment inflows, managing payable and term loan commitments and of course keeping costs in line.

Unfortunately some businesses have it easier than others. Service businesses that require low investments in capital and little or no inventory are often cash flow ' winners'. Tech businesses with high margins and low capital investment also can be cash flow machines.

If you're not in the above industries as an example you're going to have to master a solid working capital formula. That's simply because you need cash to run operations, buy assets, and finance working capital in A/R and inventories. Your ability to manage and exhibit good cash flow management will affect the type and quality and rate and structures of financings available.

If you need help in winning the cash flow battle when it comes to mgmt and financing of assets

seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with a winning finance solution and working capital formula.



Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :


7 Park Avenue Financial = Working Capital Finance Solutions






Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

5 Guaranteed Business Working Capital & Cash Management Solutions For Liquidity - Canada

Are there any ' guarantees' in Canadian business financing? A guarantee is something that ' assures a particular outcome ' . So we're not 101% sure we can give you that iron clad guarantee , but we will show you 5 proven methods of enhancing cash management and working capital solutions in Canada .

Strategy # 1 - Not optimal, but again it's all about choices. So our tip/strategy is to consider sale of fixed assets you own but might not be getting full use of in your day to day operations. Naturally you would not consider selling assets you need on a day to day basis, but are there some unproductive assets around? There just might well be.

You naturally want to ensure that these assets are fully owned by your firm and not encumbered by any liens or bank security agreements. In some cases a reasonable strategy might be to replace e the asset with a less costly one, or used perhaps?

Strategy #2 - The sale - leaseback. This strategy, as we have noted before is just the opposite of acquiring and financing new assets. You already own the asset and it should be free and clear of any security arrangements. By working with a Canadian lease financing company you would enter into an arrangement whereby you sell the equipment back to the lessor and lease it back.

These transactions are generally done at what is known as fair market value, so you expect to not be able to get all the money you paid for the asset of course. In some cases an actual appraisal might be required, which typically would be in the 1-2k range depending on the size of the asset.

Generally speaking, the sale leaseback or a bridge loan on an already owned asset is a strategy worth considering when it makes sense.

Strategy 3- Inventory. That’s always a tough one for Canadian business owners and financial mangers to wrestle with. Financing inventory is a challenge and although there are some specific financiers able to monetize your inventory generally this is in connection with a total financing of your business. Financing and monetizing inventory works best, in Canada, in our opinion, when its part of an asset based lending arrangement or working capital facility.

It only makes common sense also that you could consider selling off any obsolete or slow moving inventory, again, if that makes sense and is possible.

Strategy # 4- Other assets. There are sometimes other hidden assets, in that business owners might no typically consider such items as patents, or tax credits as financeable items. But they are and can be monetized for their true value.

Well, we're here, last but not least, Strategy # 5. And to be honest it’s our most recommended one for small and medium business in Canada. It’s simply the monetization of your receivables via a receivable finance facility.

Why is this favorite strategy? Simply because for a starter you are not taking on any additional debt, you are just ' cash flowing ' assets that are already there. And these sort of facilities allow you to grow your business lock step with your sales. So working capital and cash management grow as you grow your revenues.

Our recommended facility is C I D - Confidential invoice discounting, allowing you to bill and collect your own receivables, unlike you competitors who are using this strategy and having to involve their client base re notification, etc.

Well, there you have it. 5 methods or solutions to cash management and working capital. Are they guaranteed? We are saying they work, and that’s all. Will all of them work and be appropriate for your firm. Doubtful, but we are pretty confident that somewhere in our toolkit of solutions is a working capital mechanism just for your firm. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in evaluating options.



Stan Prokop - founder of 7 Park Avenue Financial -


http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :


http://www.7parkavenuefinancial.com/working_capital_cash_management_solutions.html