Have We Got A Story For You ! Ready for the Honor System in Business?!
OVERVIEW – Information on the importance of cash flow finance for the Canadian business owner and tools and solutions to aid in working capital business financing.
Business financing and cash flow finance in Canada. We've got a story for you on this one - even we couldn't believe it. It was an article in the English press that... are you ready for this... called for an honor system of sorts for companies to pay each other promptly!
Yes, you heard it right... the honor system in business! It had evolved into something called the ' PROMPT PAYMENT CODE ' which had firms signing up to commit they would pay promptly. While we in Canada can only aspire to such a trend... (or legislation)! it's simply tough for us to imagine businesses being nice to each other and actually paying promptly.
Well, putting the PROMPT PAYMENT CODE aside the article also pointed out that 25% of all firms experience cash flow problems and challenges that hurt their performance. A lot of that, it was pointed out, revolves around the ability of a company to seriously assess their payment terms and client relationships in the context of cash flow
There are a lot of solutions to cash flow financing for the Canadian business owner and financial manager. One of the immediate ones is clearly simply putting a finance solution in place that solves the ' slow payment ' problem with your clients, hampering your ability to run, much less grow your business.
Invoice finance, aka ' factoring', aka ' receivable discounting ' is one solution to that problem. That as well as other finance vehicles such as asset based non bank non bank lending facilities, as well as of course Canadian commercial bank business credit lines can do the job very well.
Those solutions, as noted above, simply take business assets such as receivables and ' cash flow' them into operating working capital. Naturally day to day cash flow financing can also be utilized to even finance a company purchase, which is usually finance by a combination of term debt and operating debt.
Many Canadian business owners and managers are also not aware that their long term receivables and contracts can also be ' cash flowed' into a business financing solution. Naturally every business has its own somewhat unique cash flow need - that might be an acquisition or, say in the case of a staffing company, the need to meet payroll! Employees love to get paid.
So why business owners should be seriously concerned about their ability to both assess and solve some of the challenge we've spoken of here? The answer is that having a handle on your overall business liquidity helps you measure the difference between cash flow and profits (they’re different!), which is key to any of your short term or senior lenders also. You're also in a position to evaluate investing in assets to run/grow your company.
Taking a good look at your cash flow statement (its page 3 of your financials - right after balance sheet and income statement!) allows you to assess how you are operating and turning assets, what you have spent or received on asset purchases or sales, and what you have borrowed or paid out. Having a good handle on all those gets your closer to cash flow nirvana!
Availability of cash flow solutions for your business allows you to be less concerned about cash flow survival. Immediate solutions include:
Receivable financing
Bank and non –bank business credit lines
Sale leasebacks
Tax Credit Financing
Unsecured cash flow loans
Contract/PO finance
Do we ever seen Canadian businesses signing up for our version of a PROMPT PAYMENT CODE OF HONOR? Well , we’re going to dream, but in the meantime seek out and speak to a trusted, credible and experienced Canadian business financing advisor>who can get you ‘ less concerned’ about business financing and cash flow and working capital solutions in Canada.
7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW FINANCE AND BUSINESS FINANCING EXPERTISE
Stan Prokop
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