Working Capital Management Is A Numbers Game When Cash Flow Financing Needs Are Now

Empower Your Company With Working Capital And Cash Flow Solutions. Financing The Gap!


Information on working capital management techniques when you need cash flow financing . Plan now for financing needs tomorrow .






Your company’s working capital is the amount of funds which is working to solve your short term operating needs. A good way to look at this is to think of all your current assets as your gross cash flow, and if you subtract your current payables and loan payments due, etc you then have a net working capital amount.


How your firm manages those current assets, and the amounts you have invested in that part of the balance sheet will ultimately determine what cash flow financing options are available to your firm, traditional or otherwise. Your ability to turn over those current assets, i.e. A/R, inventory, etc is what impresses a lender, as they view that turnover as ultimately repaying working capital loans, operating facilities, asset based loans, etc.

Most business owners don’t see it this way, but your cheapest form of borrowing is actually your short term liabilities such as payables. The challenge though, is that those payables have short timelines with respect to being due, and your firm needs the working capital management solutions to address that need.

The irony that we have always found in working capital discussions is that the often used ‘current ratio’ is somewhat meaningless. It doesn’t do a lot to reflect what is happening now or in the future. Very simply speaking, most accountants or analysts look for a current ratio of 2:1, or more. So is a 4:1 ratio fabulous then?? Not really if your inventory is in work in process and your receivables are slow or uncollectible!


Accounts receivable and inventory are the two main asset classes in your working capital. No surprise there. Your ability to monetize (borrow against) them is ultimately your cash flow financing savior.
So, as we are constantly preaching, it’s all about the timing of your working capital and cash flow needs. It’s that constant pattern of inventory turning to receivables turning to cash that dictates your success or failure in working capital management. A few very basic calculations that every business owner should know are your days sales outstanding in a/r, as well as your inventory turnover. They are simply arithmetic calculations.


Because of those two great assets, A/R and inventory you not only want, but are often forced to consider borrowing against these assets. In Canada this is accomplished in a variety of manners. They include bank lines of credit, non bank asset based lending facilities, receivable financing on its own, and occasionally inventory finance on its own merit. Even your SRED tax credits or purchase orders can be financed if applicable . You make a smart decision when you utilize one of the above solutions with a focus on borrowing what you need and using and managing daily to that need.


The problem we run into all the time is when clients approach us when they need funds urgently, typically when the overall risk is greater because of their current solvency situation. The bottom line is to determine the minimum amount of cash you need, include a buffer or bulge type scenario, and plan your working capital management and cash flow financing in a proactive manner. Some early warning signs of cash flow issues include declining cash balances ( obviously ) , extreme bulges in new orders , supplier payment issues , over 90 day receivables, etc.

In summary, don’t over borrow, and don’t under finance at the wrong time. Speak to a trusted, credible and experienced Canadian business financing advisor on solutions available today in cash flow finance for your company’s needs.




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_management_cash_flow_financing_now.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

Canadian Solutions To Your Working Capital Management And Cash Flow Loan Needs

Are there real world solutions to your business working capital management challenges? Is there a solution to your cash flow needs? Is that type of loan even available?

Today we'll be the finance doctor and we'll start y asking you if you have any of these symptoms : Is your firm growing too quickly , to the point where you are forced to focus on daily cash flow needs almost all the time . And are you also finding that you seem to be selling more and making less, from a net profit or income perspective. Do you even have a cash flow budget in place that allows you to assess your supplier payables, and lastly, but certainly not least and perhaps most serious... are you finding it unable to make certain loan or term obligations that your busines has?

It would appear to us, clearly, that you require a ' prescription ' for those symptoms, and that prescription is simply a working capital solution that works specifically for your firm.

Expanding too quickly allows you to stay ahead of the competition of course, but brings with it something the finance folks call ' overtrading ' which is a cash conversion cycle of negativity when those commitments we referred to cant be made because of the high investment in receivables, inventory, and fixed assets you have made to grow your business .

In other words you have the assets, but they are all tied up, leading to a case of poor liquidity. And we must be honest here; if you didn’t have the assets or sales potential there is almost no way we can help. So your ability to bring liquidity and monetize your assets focuses strongly on identifying how you are able to convert assets to cash.

So, never the ones to be accused of just talking abut the problems, lets talk about the solutions we spoke of.

It always comes down to current assets, so you require a solution to be able to monetize sales quickly, and convert A/R and inventory in working capital management success.

In Canada your alternatives are several, and quite frankly these would apply to almost any business anywhere. Many clients that come to us focus on what they term a ' cash flow loan ‘. Is that available, yes... is it recommended maybe. It’s a term loan for permanent working capital. Naturally that comes with more debt and fixed interest payments, so that is many times not an optimal solution.

Our preferred solutions to the working capital management challenge are the following: Confidential invoice financing, asset based lending, purchase order financing, and inventory financing. These solutions come in a variety of combinations depending on the size of your working capital requirement, as well, as the general financial profile of your business - i.e. are you currently financial challenged , or are all aspects of your business simply great . (It’s rarely the latter when we talk to clients.

In summary, investigate the benefits and mechanics of the 5 solutions we have outlined. Determine which ones work for your firm, and speak to a trusted, credible and experienced business financing advisor on your ability to secure in short order the cash flow and working capital you need to run your business successfully.

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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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