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What Does A Business Turnaround Specialist Do?
What is a business turnaround plan when it comes to financing ? It's all about a strategy and that covers a lot of issues, but our main focus today is ' cash flow '
All business owners and their financial mgrs. recognize the importance of cash flow and working capital at critical times in their business. For most companies that cash is generated from accounts receivable and inventory sales that come from sales revenues . Of course the ultimate failure for lack of cash flow is business failure.
So understanding what the turnaround requirement is when it comes to funding your business often simply comes down to the solutions that are available to put in ' the fix '.
It's not always ' intuitive ' to realize cash flow deficiencies , especially when sales revenues are growing ; fast growing sales can mask a lot of financial problems ! The good news is that there are some basic technical fundamentals to help you assess the problem . Think of that type of analysis as being a business cash flow doctor.
When looking for outside help in someone that understands your financials and business look for someone that has a solid track record and experience, and can facilitate cash flow turnarounds by offering up solid and sometimes creative working capital solutions.
One way of taking a look at the seriousness of your cash flow challenge is a technique known as 'DOOMSDAY RATIO '. So What is that ratio and what is its significance? It's simply a ratio ( we at 7 Park Avenue Financial have always called it a 'relationship ') of your cash on hand divided by current liabilities.
The final result is really one of the most powerful and effective solvency ratios ( or relationships ) that a business owner can utilize. Business people might be aware of two other similar ratios, the current ratio and the quick ratio. The current ratio included the firm's current assets, including accounts receivable and inventory.
The Quick ratio did the same but excluded inventory. While not all 'non-financial' folks might not like taking this detailed a look at their financial statements this hard look at your numbers will often reveal key insights into business financing turnaround needs.
The business owner can quickly see that the doomsday ratio focuses solely on Cash! We can call it a very 'demanding' ratio because it focuses solely on the liquid gold within the company, cash!
Although your firms accounts receivable and inventories are somewhat close to being cash, and no matter how well they are managed those two current assets aren't cash yet, and everyone knows the day to day business challenges of converting receivables and goods into a final cash customer payment.
Really the best way to look at the Doomsday ratio is to view it as an ongoing measure of the firm’s cash 'buffer'. The bottom line is that it will show the business owner what 'cushion' of cash the firm has. Business owners could even choose to monitor the ratio daily, as it could very well warn against impending shortages of working capital.
Many business owners know that it is also not productive to carry cash on hand, particularly in today's low interest rate environment. So it makes common sense that the doomsday ratio may in fact be less than the number '1' , but at least we have a number that, on an ongoing basis, we can monitor.
Each business over time has a philosophy and business practice around how much cash is kept on hand. Naturally it's also obvious, and important to know that if you reduce your operating line of credit with you cash you still have the full liquidity of your operating line, but you aren't paying any interest to borrow. That's a good strategy also.
How Can Your Business Accelerate Cash Flow
One method is to consider a receivable financing strategy - one that factors or sells your accounts receivable as your firm sells it's product and services. Our recommended solutions for clients of 7 Park Avenue Financial is a ' CONFIDENTIAL RECEIVABLE FINANCING ' solution, allowing you to bill and collect your own receivables while generating cash as you sell ! That strategy allows you to generate cash , and maintain that positive ' DOOMSDAY RATIO'!
In summary , take a look at any relevant financial analysis technique to monitor cash flow/working capital for your business.
What Is Your Business Turnaround Financing Plan ?
And don't forget to see that CASH FLOW doctor who can implement solutions such as:
A/R Financing
Working Capital Loans
Bridge Loans
Sale leasebacks
Non bank asset based revolving credit facilities
Tax credit monetization
Purchase Order Financing / Supply Chain Financing
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who has a track record of business finance success and turnaround expertise for refinancing your company properly.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
