YOUR COMPANY IS LOOKING FOR WORKING CAPITAL
FINANCE SOLUTIONS!
WORKING CAPITAL CASH MANAGEMENT FINANCING SOLUTIONS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Working capital management in Canada must make some business owners and financial managers surely feel sometimes that ' the end is near '. It definitely doesn't have to be that way when it comes to fixing cash flow problems when you're focusing on techniques and solutions for ' the fix ' in the amount of cash you require. Let's dig in.
SHORT TERM CASH NEEDS FOR DAY TO DAY FUNDING FOR YOUR COMPANY'S LIQUIDITY
We're the first to admit sometimes that the term' cash is king' is somewhat of an overworked cliché, but when you're in the real world ( where we work and toil every day) achieving cash flow to run your company, pay your bills, satisfy your creditors and, oh yes, grow your business is .. Suffice to say... challenging! It's all about that relationship between current assets and current liabilities on your balance sheet - putting you in that positive net working capital position if managed properly. That relationship is referred to in finance textbooks as your ' current ratio' and measure the short term obligations of current assets and liabilities and is a solid measure of a company's financial management prowess.
SEASONAL CASH BULGES OR CASH FLOW CRUNCHES
In many cases, a large part of cash problems revolves around what we could term ' bulges' or ' seasonality' in a business or industry. It's simply those times when revenue outpaces sales you would normally have at that time of year - perhaps due to a large contract, order, etc. In the case of retailers, it simply might mean Xmas!
At the other end of the extreme are start-up businesses who are struggling to achieve the sales growth they have projected, all the while trying to contain those fixed costs they have.
REVENUE RECOGNITION / PROGRESS BILLINGS
One other key area of cash problem strife is the concept of ' progress billings '. We meet with many clients who have to bill their customers in stages - typical scenarios are a down payment, interim billings and final payment. This whole process can almost always reach 90 days if not longer depending on the industry and your company's cash position.
THE CASH FLOW FIX
So how does the owner/manager address these issues? To the extent they can, it’s very valuable to put a cash flow budget/estimate in place based on your historical experience. This will help you explain to banks and commercial lenders the reality of your situation and the amount of working capital you need.
CANADIAN BUSINESS FINANCING SOLUTIONS
Solutions that ' fix' working capital management problems include:
A/R Financing
Inventory finance
Working capital term loans
Commercial bank lines of credit
Non-bank asset-based lines of credit
Monetization of tax credits
Those solutions bring no long term debt to the balance sheet and help make your firm cash flow positive. They are short term liabilities, not term debt.
MANAGING PAYABLES IS A KEY PART OF CASH FLOW MANAGEMENT
Don't forget also that a key part of the accounting ' cash flow equation ' is accounts payable management. Delaying payables in a positive manner (negotiating better terms and better discounts and pricing) aids cash flow big time. How do you think big firms are so successful - it's because they have ' clout'.
PROFITS DO NOT EQUAL CASH FLOW - IT'S ALL ABOUT ASSET TURNOVER!
Remember also that in the nether world of accounting profits don't equal cash flow, and the more inventories and receivables that you have in place simply means more financing with the above-noted mechanisms are necessary. Naturally, your ability to turn over accounts receivable and inventory faster simply means better working capital management and positive cash flow via management of those assets and liabilities as well as monitoring payment terms for your clients.
CONCLUSION
Management of working capital is all about your cash conversion cycle, which simply speaking is the amount of time that it takes a dollar to flow through your company from making a product with raw materials or providing a service to collecting cash from that generated revenue.
If you are looking for a turnaround in managing working capital and cash flows seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can ensure your ' to do' list is achievable in business financing success.
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Stan Prokop
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