Carrying On Without Cash Flow Is Not An Option ! Analysis and Solutions For Canadian Business

The Importance Of Cash Flow Focus in Canadian Business

Information on business cash flow analysis and working capital solutions in the context of Canadian business financing .

Carry on? Without business cash flow? That's not an option for Canadian business owners and financial managers. That's why the analysis of their cash and working capital needs, in the context of solutions available is so critical in today’s business environment.

So are we all in agreement? We mean of course that no company has the ability to on a long term basis operate successfully without cash. That shortage is often the reasons why many companies fail.



However, the balance sheet and the income statement, as we always preach, dont necessarily tell you the full story of your company's goings on! A cash flow statement, that’s the third part of every financial statement package will, however, truth be told you can perform a fair bit of solid analysis way before your accountant or your accounting system delivers that document to you.

So why do you want to be so attuned to that cash flow anyway. Simply because whether it’s the short, intermediate or long term it’s a true measure of your solvency. And that solvency is what keeps your creditors and lenders and suppliers either happy or dissatisfied with your payment ability.

In more sophisticated firms a real measure of cash flow is often ' free cash flow '. Simply speaking it’s the true cash flow calc which then subtracts your capital expenditures to come up with that ' free cash flow '. Investors in public companies look at that one a lot, and quite frankly since the small to medium sized business in Canada doesn’t pay dividends or have to report earnings and cash flow we dont really consider that one quite relevant in the context of today’s discussion .

So what is important then? Several other great tools area available. Just one of those is the cash return on sales analysis tool. Take your cash flow from operations and divide that by your net sales over that same time period. Let's say the number works out to 10%. What does that mean? Simply that 10% of the sales you generate provide cash to the company. At the end of the day the number is relative to your company because it tells you how efficient you are in turning sales into cash.

Another great tool to check out is current cash debt coverage, which we'll leave for another day’s discussion.

At the end of the day there are ultimately 5 reasons why companies fair - they have too much debt, they are caught in a vicious cash flow cycle, they have current assets that aren’t turning, or fixed assets and too little capital come into play.

To solve these challenges Canadian firms have a variety of solutions - they include bank lines, asset based lines of credit, receivable and inventory financing facilities, tax credit monetization, and securitization. Oh and don't forget the proper use of equipment finance.

Speak to a trusted, credible an experienced Canadian business financing advisor on business cash flow analysis and solutions available to your firm today.






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 . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :

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

Time Runs Out In Business Financing – Working Capital Management Analysis & Strategies

If you're like most Canadian business owners you're somewhat skeptical of either the press or perhaps the agenda's of financial institutions you deal with or borrow from .

Yesterday we got one of those newsletters from a bank - the content was mixed... We’re quoting here : ‘Automotive industry rebounds .... Business confidence down... business barometer mix down sharply...business credit trending up ...'

Talk about some mixed signals... and how do we interpret those type of messages in our own business situation and needs when it comes to working capital management and the analysis of that all important business life blood... cash flow?

How you manage your working capital, and how you borrow for it are one of the most important aspects of running and small and medium sized business in Canada. Simply things like billing and collecting your A/R promptly and matching those payables outflows make or break any business.

What are the factors that affect your need for cash flow and what are some analysis and financing techniques to accelerate working capital management. That’s effectively called the cash flow cycle. Did you know for example that many larger firms actually manage their growth, they use simple formula's that any small and medium sized business owner and financial manager can use to determine how fast they can grow based on their operating profits and their ability to manage receivables and inventories without over borrowing . Frankly, you should be doing what the big boys do also, and it’s not as hard as you think.

The three things that affect your need for working capital are your profits, how fast you collect from your customers, and the ability to control operating costs and overheads as you grow. The big corporations call this formula - the ' Sustainable Growth Rate ' - as a business owner you need to accept that growth can often mean running out of cash.

So how do business owners ' accelerate ' working capital management strategies to optimize growth. First, as we said they can use some basic formulas to determine how fast they can growth without outside financing. When outside financing is required a number of options are available - probably more than you thought.

They include receivable financing, working capital facilities that are non bank in nature and combine inventory and a/r financing , and true asset based lending which monetizes on a daily needs basis our current and fixed assets .

External cash flow can also be provided by lesser known, but very viable vehicles such as purchase order financing, securitization and even the financing of any SR&ED tax credits if you're in the manufacturing or tech space. Capital can also be conserved by effect lease financing strategies that finance assets you need on a short term or long term basis.

So, we've been told business is about a bottom line. What's ours today? Pretty simple. Use tools to measure your cash flow needs, plan for growth with working capital management and analysis in mind, and take advantage or cash flow techniques that are traditional and non traditional in nature . Speak to a trusted, credible and experienced Canadian business financing advisor on what it takes to implement strategies that work for your firm.




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_management_strategies_analysis.html