Financing Working Capital In Canada . Recognize These Implications Of Cash Flow Finance?

Get out of that ‘ Horses And Bayonets’ Mindset When It Comes To Working Capital Finance Solutions & Approaches


OVERVIEW – Information on financing working capital in Canada . Business owners/managers must understand the implications of their actions when it comes to cash flow finance . Here is why!



Financing working capital for your Canadian business. Are you still in the ' horses and bayonets' era when it comes to understanding the solutions available for cash flow finance, and the implications of not having the right solution in place?

And excuse that ' horses and bayonets'

comment about being old fashioned and out of touch... we just made it up... NO.. really.. we did...

Working capital management is a critical success driver for any business. And it not really overly necessary to focus on the word management, it’s simply about adopting a style or consistent manner in which you run your business on an on going basis.

So how do you know when you are successful at financing working capital properly? Are there some benchmarks? There are and some of them might include the fact that you actually have positive cash balances on hand most of the time, although we point out that if you have a bank or non bank line of credit that revolves properly positive cash balances aren't always necessary. But what is key is that your working capital facility revolves up and down, a lot, and regularly!

Two other very solid bench marks for knowing you are doing the right thing (or not) is to ensure you understand and have acceptable receivables turnover and inventory management. (If your firm does maintain inventories)

Accounts receivable are your next closest asset to cash. So make sure you know how to measure A/R success or failure, and one of the best ways is to perform a simple ' days sales outstanding ' calculation on an ongoing basis, typically monthly. Bench mark that result against your stated terms to clients and voila! you'll vey quickly know whether you are winning or losing.

You also want to ensure you have access to short term borrowing facilities based on current assets. They can be bank or non bank in nature, and typically include solutions such as:

Bank business lines of credit

Comprehensive asset based lending facilities

Receivable finance / Invoice financing

Inventory finance programs

Purchase order/supply chain financing

Monetization of tax credits - i.e. your SR&ED claim

When you don't have solutions in place and are unable to meet your general obligations serious problems ensue - at their most extreme you can be judged unable to meet your liabilities - i.e. bankrupt!

How then do cash flow problems present themselves or happen? It's not as complex as the Canadian business owner or financial manager might think. You might be in fact enjoying the double edged sword of ' fast growth '. That typically means you're carrying more inventory and receivables than ever... and exhausting your actual cash resources.

And the ultimate irony? Your accountant tells you that you're actually profitable! It just doesnt feel that way... mainly because cash flows only eventually catch up to profit . Key word: eventually!

Speak to a trusted, credible and experienced Canadian business financing advisor on how you increase liquidity when sales, receivables and inventory demand it.

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW FINANCE EXPERTISE