The Operating Cycle - My Washing Machine Or My Business Cash Flow ? !

The 'operating cycle is a distinct part of any business. Frankly we believe that most business owners intuitively know it exists - they just didn't know it had a name.

The operating cycle is the repetitive pattern of a turnover of a businesses current assets and liabilities. Let's examine that in a bit more detail. In essence each business establishes within their company, and probably within their industry, a repetitive pattern of turnover.

In the first phase of the operating cycle a business, unless it is a service business, buys inventory and materials which they will resell to customers. Normally these goods are obtained on credit. The company buys product, and obviously has an account payable to that supplier. So we find that company paying their supplier, cash goes down and inventory goes up. So far so good.

In phase two of the operating cycle the company sells product to a customer. More often than not it sells on credit - this generates accounts receivable - the good news is that the company can finally record sales, or revenue.

In phase three, the final phase of our operating cycle, the company collects the receivable and converts the entire process we have gone through back into cash.

Yes, our analysis is over simplified, and of course behind all these processes the company has administrative and sales costs that back up the entire operating cycle. All of these costs are in some manner related to the final sale and have some sort of contribution in that regard.

We also need to remember that through the entire process bank loans or working capital facilities regularly turn over. Hopefully !

Each company and industry has a different operating cycle - within each industry some companies are clearly doing better than others. How is your company doing?

One of the best know ways to measure a firms operating cycle is a formula created by the DUPONT COMPANY many years ago - not surprisingly the formula is called the DUPONT FORMULA!

The formula looks at relationships, or ratios, in the balance sheet and income statement and provides solid ways of measuring the operating cycle and how it affects a company's profit, and operations. It provides a lot of insight into how a company can improve profitability by emphasizing asset turn over and showing how it's important as sales.

Even a non- financial person should be able to understand this - we are simply saying that if a company can buy something, sell it, and collect the money fast and start all over that will increase profits over a company who takes twice as long to repeat that entire process. Sales are not always the be all and end all! A company, using DUPONT, can show that even if they make a little less on each sale, but turn over inventory and receivables faster, can do as well or better than the competitor.

In summary, a true understanding of the operating cycle allows a business owner or financial manager to focus on expenses, asset turn over, and margins, and see the inter - relationship of all these three components of a business. Understanding and improving your operating cycle with the right type of financing will make your firm a leader, not a laggard, in your industry.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS CASH FLOW FINANCING



Stan Prokop is the founder of 7 Park Avenue Financial. See

http://www.7parkavenuefinancial.com

The company originates business financing for Canadian companies, and is a specialist in lease financing, working capital financing and acquisition financing on behalf of clients.
For more information, or questions ->

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

Ready To Reboot Your Computer Financing Strategy? Make Equipt Leasing Your New Friend With Benefits For Tech and Software Finance Needs

Avoid A ‘ Forced Fit ‘ . Make Leasing Work For You, Not Against Your Firms Goals


Information on computer financing in Canada . How does the business owner / manager address tech finance software and hardware leasing issues .



There's probably no better time for a (business) friend with benefits than when it's time for computer financing. The whole area of tech finance, whether its computers, software , etc just begs for some solid help, and it's often proven that leasing finance solutions come through just when you need them most - in the world of costly and complex technology assets

We maintain to clients that you need though, to make lease finance work for you, it shouldn’t be a ' forced ' solution.

The whole area of lease finance gives you a positive outlook that you at least have a chance of beating the high price of technology, the fear of obsolescence , and that constant looking over your shoulder ( via the internet ?) at what your competitors are doing .

And let's face it, your boss, or maybe you're the boss are looking to cut expenses, not increase them or take on debt. Fundamentally, whether they admit it or not, most Canadian business owners and financial managers want to acquire the best asset without burning through those valuable credit lines and other accesses to capital.

The good news for Canadian business is that the whole spectrum of technology is in fact financeable, and, as we've noted that includes software, which is a surprise to some. Software is typically financed as a full lease to own scenario, so the key benefit quite often is simply the fact that you are matching the benefits of the software with the cash outflows of a lease finance scenario.

We're making the assumption here that the business owner, CIO, or financial manager has done what most refer to as a ' lease vs. buy' scenario. Here the business person takes into account the life of the asset, all the software licenses and support they will need for the asset, as well as the final outcome re: disposition of the asset. THIS JUST IN - IT'S A SHOCKER! - Computers don't last and don't hold their value! Many experts and industry analysts actually estimate that you'll have another 25,000.00 of costs associated with the acquisition of, for example, of $ 100,000.00 of new technology.

There has naturally been a dramatic change that can't even be properly being described in tech assets for your firm. Today its not just servers, pc's, laptops, netbooks, etc, new focus is on cloud computing and wireless solutions. And all that can still be financed. It always seems to come back to the funding.

It's often the use of lease finance that becomes the solution for the ' budget breaker. Continuously replacing tech assets often calls for budgets to be ' broken ' and that's where leasing plays a key role, eliminating the challenges of fiscal deadlines and fixed spending plans. Some stats from leading IT guru firms indicate that over 50% of all companies, large and small have lease lines of credit available for the financing of their technology. Those solutions include the two main forms of tech finance, capital ' lease to own' scenarios, and operating ' lease to use ' solutions. It's important you pick the lease ' friend with benefit' that suits you most.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with a reboot of your tech and software financing 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/computer_financing_tech_finance_software_leasing.html

3 Questions ( And Answers ) On Factoring In Canada. Your AR Receivable Finance Questions Answered .. Finally !

Fundamentals of Factoring in Canada


Information on factoring in Canada . What every business owner needs to know about receivable finance and ar finance costs and strategies .




We get a lot of questions on factoring as a business finance solution in Canada. The concept, background, and mechanics of financing just your AR is somewhat misunderstood we think. Let's share some basics for the sake and benefit of those firms considering this method of business financing.

1. Where is factoring at in Canada? First of all there seems to be a general consensus that this type of finance vehicle for your business is one of the faster growing and certainly feels like it is getting more popular everyday. The reality is that it's been around for many, many years, and in the case of being around period it’s been around for hundreds of years in North America, Europe, etc... Kind of reminds us of that saying in the fashion industry, ' what's old is new again ...'!

As a potential user of A/R finance it kind of makes sense to know who you are working with. In Canada the market is somewhat smaller and fragmented, with firms offering AR finance being either small or mom in pop in nature, or to the other extreme subsidiaries of some very large U.S. and Global corporations. Talk about a choice!

It's also important for you to distinguish between firms who offer this financing as a part of their overall solution, or if you're dealing with a specialty firm, for all the right reasons! We've always preferred to work with an expert ourselves!

From our perspective it kind of feels that Factoring got a lot more popular after the 2008 recession. That's not hard to disagree with because of the way the business credit totally dried up at that time, with thousands of small and medium size firms finding they have a lot less access to business credit. Canada’s chartered banks clearly no longer dominated all of Canadian business financing, that’s for sure.


2. What size and type of Companies utilize factoring? Here’s where it get's interesting, and not doubt speaks to the fact of this new found popularity. Why? Small firms use factoring, start up firms use it, SME firms utilize it, and guess what.... some of the largest corporations in the world utilize AR receivable financing, although it takes a new name higher up the food chain, often referred to as a ' Securitization '. At the end of the day it’s all about taking A/R off the balance sheet immediately, replacing it with cash, and taking on a finance charge for that privilege of enhancing your balance sheet with cash.

3. When does Factoring work best? Several business situations arise that drive the popularity and success of this finance solution. Primary is the inability of the borrower, small or large, to get traditional bank type financing.

But we remind clients also that even start ups qualify for receivable financing, and many firms that are actually doing quite well ( too well in fact because they are growing too fast ) also embrace this finance , cash flow and working capital solution. It's also a great way to assist in the restructuring of a company that is having any one of a number of business challenges that preclude it from accessing working capital elsewhere.

Is that everything you need to know about AR Receivable financing in Canada? Probably not, but it’s not a bad start and business owners and financials managers should speak to a trusted, credible and experienced Canadian business financing advisor for more info and assistance on this widely misunderstood finance solution .

7 PARK AVENUE FINANCIAL
CANADIAN FACTORING EXPERTISE






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/factoring_receivable_finance_ar.html
















Stan Prokop

Protect Your Company From These Trouble Signs ! Liquidity, Business Cash Flow And Financing Funding Tips

Getting Out Of Trouble With Business Finance Solutions


Information on tell tale signs of business cash flow and liquidity problems. Here’s the fix for financing and funding challenges.



Business financing in Canada. Keeping an eye on what's happening with your company’s overall financial position isn't a bad thing, and understand what the problem and fix might be is even better.

And even better suggestion for Canadian owners and business mangers is to be able to spot the tell tale signs of trouble... you guessed it... before they seriously begin. And the ultimate goal of course is to be able to have the knowledge to zero in on some solutions that make sense.

Let's over off our ' TOP TEN ' today, starting with general liquidity. While very few businesses of a small to medium sized basis carry, or are able to care a lot of cash on hand they should be able to have a strong sense they can convert the right assets into cash when they need them. Focus in on course on your working capital assets, but dont forget those ' treasures in the garage ‘... business assets that might be owned and have the ability to get refinanced if necessitated.

Tell tale sign number two is low cash flow, and that arises out of your ability to turnover working capital accounts properly. That can be more aggressively handled by utilizing bank lines of credit or working capital facilities that are a combination of receivable and inventory financing. Firms requiring larger facilities should explore asset based lines of credit.

Tell tale sign number four - shrinking profit margins. This is critical as your ability to monetize sales with good profit margins will ultimately lead to more positive cash flow, and profits.

Our 5th sign is more of a warning that you should be billing and recording your revenue properly, and promptly. Bill clients as soon as you are able to ... investigate programs such as cycle billing, allowing you to continually generate sales and focus on the collection of same!


Tell tale sign # 6 - debt load. Watch your leverage and manage your finances with a viewpoint of matching short term finance needs with short term assets - typically receivable and inventory. Debt is good and positive use of leverage even better, but focus on the amount of debt you can realistically handle.

When it comes to trouble sign # 7 we're talking about ensuring your accounting is complete and up to date. Investigate the proper and best method of showing inventory on your financials, and managing inventory as it flows through your business cycle.

Don't over expand - that’s a sure sign, # 8 in fact that you have a handle on your overall financials and borrowing ability. Dont lose the opportunity to acquire a competitor, or be taken advantage of one by your poor financial condition.

Tell tale sign # 9... It’s all about the turns, and we're talking about firms that have an inventory component to their financials. Monitor quality of inventory and the turnover of same. That inventory translates into revenue recognition and receivables, super charging your cash flow situation.

Trust us that slow paying clients are a sure sign of forthcoming business financing and funding problems. That’s # 10 on our list. Receivable financing and bank organization won't view slow paying clients as a great asset for future financing. It’s all about staying on top...of your clients.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in both spotting, and solving your company funding and liquidity issues.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS FINANCING & FUNDING EXPERTISE




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/liquidity_business_cash_flow_financing_funding.html

Recognize These Symptoms? It Time For New Business Financing And Capital Strategy Options !

Canadian Business Financing – Techniques and Solutions


Information on business financing options in Canada . Get the right capital and strategy for your company’s needs

Business financing in Canada. Or lack thereof?! Are there some symptoms for finance capital options we can look for, and fix? We think there are.

Here's one for you. How many business owners would associate overdue receivables, poorly moving inventory, or under used fixed assets as a symptom of too much financing. We're pretty sure that few business owners (or even their financial managers) would associate those symptoms with having too much capital!

Then of course there is the other side of the coin, which is what clients always are looking for - business financing solutions. So what would some of those symptoms be? They are pretty obvious more often than not:

Little or no cash on hand

Vendor payment issues

Manufacturing timing / shipment issues (You can't make ' em fast enough!)

Also, by the way, if you feel you are getting too little of a return on investment on all your assets its pretty clear that might be a symptom of a capital strategy problem.

It's safe to say that the right amount of cash flow, working capital, and other assets would probably fix any challenges your firm is facing. Naturally every business is different; for example a service company requires little fixed assets and tends to be more cash flow based.

Here is one for you. Did you know that some analysis around your fixed capital can actually help you solve your problems? Take a good look at your long term debt and equity on the balance sheet and measure that relationship once in awhile - yearly would be a minimum timeframe.

We're still looking for some other symptoms though, right. Here's some more. If you feel on an ongoing basis that you’re experiencing large increases in receivable and inventory growth you are strong candidate for some hard analysis of some new financing and capital options. It's those 'investments ' in receivables and inventory that devour your cash flow, forcing you to address new financing options. For the SME owner those large growths in A/R and stock actually mean you will probably be able to take less out of the company in the form of dividends, mgmt. bonuses, etc.

By the way, if you are looking at new purchases of assets ensure those assets will generate profits, not eat up capital or create losses. That's just common sense.

New Business financing options can be addressed if you have a strong handle on a very few basic calculations - those include some rudimentary things like expense per day, receivable turnover, inventory turns, etc.

Oh, and by the way, lenders of short term and longer term capital are looking at those same things in your balance sheet, so being able to talk to those issues will help you... a lot.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with capital options in the short or long term (and crisis) situations.

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_financing_capital_strategy_options.html

Here’s 10 Answers And Tips For Government Guaranteed Loans In Canada . The SBL Small Business Loan .. Works!

Government guaranteed loans in Canada seem to present a bit of confusion to many clients and business owners we talk to. The gov’t small business
Loan, commonly called the 'SBL ' is a solid financing mechanism, if, and only if, you understand the requirements and benefits of the program.

If we have to summarize where things go wrong in the program it pretty well comes down to key issues as follows:

What amount of equity does the borrower have to put into the deal?

How does the credit status of the borrower affect the loan approval?

What documentation is needed for the program?

Does your business or venture have to be profitable?

Where does the government actually fit into the loan process - P.S. It doesn't !

Is the program the same everywhere?


Lets highlight 10 key questions we're often asked and we’re e quite sure the above issues will be covered off nicely.

1. Is the loan in anyway a grant? Absolutely, positively not! While there are various ' grant ' programs in the Canadian business environment, the SBL loan program is a term loan, fully repayable. The concept of ' free money ' is titillating, but that’s certainly not what we're talking about today.

2. What exactly is ' SMALL ' when it comes to the program? Small in fact means for existing businesses or start ups that your revenues can't exceed, or be projected to exceed 5 Million dollars. Simple as that.

3. How does owner personal credit factor into the program? The answer is that the borrower, i.e. the owner or owners of the business must have reasonable personal credit history. Canadian credit bureaus rate us on a score basis, and in the case of SBL loans a score of 650+ is recommended.

4. What is required in a loan submission? From a documentation point of view you need a business plan or strong executive summary, and some solid financial projections. For non finance types these can easily be prepared by your accountant or an experienced Canadian business financing advisor.

5. Where in Ottawa do you apply? The answer is, you don’t. The program is underwritten by Ottawa, actually INDUSTRY CANADA, but the program is administered on a daily basis by Canada's banks. IF YOU CAN FIND A BANKER WHO KNOWS AND UNDERSTANDS THE PROGRAM!

6. How does the guarantee work? The loan is substantially guaranteed by the government, to your bank, and allows Canadian business owners and financial managers to access loans and financing they otherwise might not qualify for.

7. How does the program work? That’s a bit of an all encompassing question, but the quick answer is that you submit and work with a local banker to complete your transaction, and the loan is funded through your business operating account. The guarantee owner’s sign for on these loans is 25%, which is clearly a highlight and major benefit of the program.

8. What collateral is required? The collateral of the transaction is essentially what you're borrowing against, which is typically equipment, computers, software, and leasehold improvements. You can actually buy real estate under the program, but that's a bit rare in general.

9. What’s my rate? That’s the typical client question, and the good news is that the program has great rates for start up, young, or small firms. The rate is 3% over prime, which, as stated, rivals that of larger corporations in many cases.

10. What’s the repayment term? Typically its 5-7 years, and no prepayment penalties kick in if your loan is properly structured.


Who can help you achieve success under the government small business loan program? Your accountant or a Canadian business financing advisor can work with you to provide the right package, ensure that you qualify, and utilized industry and program knowledge to guarantee business financing success.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your needs around Canadian government guaranteed loans.

7 PARK AVENUE FINANCIAL
CANADIAN SMALL BUSINESS LOAN FINANCING EXPERTISE




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/government_guaranteed_loans_small_business_loan.html

Changing Times In Business Credit ! 10 Things You Should Know About ABL Asset Based Lending Finance

Changing Times In Business Credit ! 10 Things You Should Know About ABL Asset Based Lending Finance


Information on the newest form of business credit in Canada, the ABL Finance asset based lending facility


Business credit in Canada. Wasn't it Bob Dylan who chimed that the ' times they are a changin'.. and nothing could be further to the truth when it comes to ABL asset based lending in Canada as a new alternative for financing your business.

Asset based lending , similar to the term ' cash flow ' gets a lot of somewhat confusing definitions . So to be clear, we're talking about a true non bank asset based line of credit.

Confusion comes when business owners and financial managers refer to equipment financing, or just a receivable financing scenario. We're talking about the whole kit and caboodle! which is the ability to borrow, under one facility when it comes to a business credit line. So that of course gives you a revolving line that is margined against A/R, inventory, equipment, and even real estate, if that is part of the mix.

Historically, when ' times are good ' the good folks at Canadian chartered banks do a great job of business financing. Simple problem though, is that we find it more and more difficult to remember when times were great... they seem only constantly challenging to most of our clients.

So, enter ABL asset based financing, giving your business true cash flow generation ability.

Let's cover off 10 solid basics.

Who is using ABL? Quick answer, pretty well everybody. That covers start ups, turnarounds, firms in special loans, companies that, excuse us... are ' growing too quickly ' for traditional lenders, and yes, finally, some of the largest and most profitable and solid corporations in Canada . Enough said.

Does ABL finance really allow companies with challenges to actual work thru the turnaround? The answer is a resounding yes. Because cash flow and profits aren’t the total focus anymore, as they are with , say , our banks , the ABL solution allows you to use asset leverage to support your reorganization of emergence from a Special loans type scenario .

The question: Can Asset base lending support seasonality in business? Again, affirmative. In fact seasonality is completely covered in this form of business finance; you only pay for what facilities you use when you use them.

How important is ABL in Canada? How long has it been around? More and more Canadian business owners and financial mangers are exploring financial alternatives, and while the majority of Canadian business thinks of the banks as JOB ONE when it comes to financing, there are alternatives and it's prudent for you to know about them.

What are the clear advantages of an asset based line of credit? First of all it suits a very of business finance needs, it is not term debt, it allows for maximum borrowing against your assets, and it often provides a new discipline to your mgmt team as a bit more reporting on receivables, inventory and equipment is often required .

What are the requirements of a true ABL facility? First of all, you of course need assets; this doesn’t really work for a service business per se. Clients must have solid financial accounting to back up the reporting, and while owner guarantees are often taken, just as with our banks, lesser emphasis is places on the PG's. (Personal guarantees)

What doesn’t work in ABL? First of all, you have to absolutely ensure you're working with the right partner. Also, owner views on values of inventory, equipment, real estate, etc have to be realistic.

How are valuations on your borrowing calculated? The answer is that it’s the same manner as would a bank, i.e. a borrowing certificate formula applied typically to A/R, inventory, and equipment. A/R is typically 90% advance, while inventory ranges from 25-75% based on the nature of your inventories and their overall marketability.

Can you buy a company using an ABL strategy? Absolutely, positively, yes. Financing an acquisition using the assets of the firm you are purchasing is a creative way to finance a merger or acquisition type scenario.

Was Bob Dylan right about those ' times a changing....’? We think so when it comes to your ability to access a newer type of financing that gives you maximum borrowing power. Speak to a trusted, credible and experienced Canadian business financing advisor on how your firm can implement a better borrowing strategy based on your firms industry and circumstances.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS CREDIT AND ASSET BASED LENDING EXPERTISE


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_credit_abl_asset_based_lending_finance.html