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Inventory is outdated and somewhat unsalable - Not good!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






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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

That ‘ Positivity ‘ Feeling . Cash Flow Financing & The Secret To A Working Capital Formula For Canadian Business

Unlocking The Mystery Of Cash Flow Solutions For Companies In Canada !


Information on a solid working capital formula and solutions for cash flow financing in Canadian business.



We're not even sure ' Positivity ' is even a word... but... if it is... it seems like a great description for what Canadian business owners and financial mangers are looking for when it comes to cash flow financing and knowing the working capital formula they are searching for has finally arrived .

We pretty well never get tired of explaining to clients that sales and profit growth, unfortunately, does not equal cash flow in the same amounts! Over the long run, yes, but in the short run... never. And when there is a very serious lag in that gap it’s important to understand the activity in between, and, as importantly the solutions you can undertake to beat the cash flow gap.

When we talk to clients about the working capital formula and solutions we're the first to point out that those cash flows from profits are a key source of cash. At the same time cash flow financing solutions are:

Receivable financing

Inventory financing

Asset based lending

Sale leasebacks

Tax Credit Monetization

Purchase Order / Trade Finance



And, dare we say it, bank lines of credit and term loans.


As the business owner quickly finds out, it’s a two pronged challenge, knowing how to finance those working capital needs, and knowing you have the solutions in place when you need them. I.e. timing.

The good news here is that although revenues can often fluctuate widely the business person should be able to have a strong sense of expenses

So... back to those sources of financing. Again, we're talking about an evolution over the life of your business, and when you are a relatively new business or start up the challenge to finance cash flow is a lot more elusive. At the end of the day sources of financing at this point in your business history often tends to be your own funds. The proverbial ' friends and family ' and access to working capital via credit cards, personal collateral etc.

As the business matures a solid form of cash flow financing actually becomes your management of 2 key aspects of your business"

Receivables
Payables

As your accounts receivable ((and inventory by the way) grows these can be both managed, and financed. Hopefully both!

Very few term loan solutions are available for cash flow ' Positivity '. And given the fact that term loans bring debt to the balance sheet and require fixed repayments that's not necessarily a bad thing.

Many Canadian business people assume the Canada Small Business Loan program can bring working capital and cash flow ‘positivity’
It can't, as this program only finances assets, leaseholds, computer software, real estate, etc.

An action list or summary that we often provide to clients challenged for cash flow solutions includes the needs for a cash flow budget outlining the amount of financing you need and how it will be repaid,

And our final advice today... simply that when you are starting to be quoted as saying ' cash is tight ' it might be a little bit late sometimes. Speak to a trusted, credible and experienced Canadian business financing advisor on cash flow 'positivity ‘solutions.

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW FINANCING SOLUTIONS





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/working_capital_formula_cash_flow_financing.html