YOUR COMPANY IS LOOKING FOR RECEIVABLES FUNDING!
SMALL BUSINESS ACCOUNTS RECEIVABLE FACTORING SOLUTIONS
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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
Account receivable financing in Canada, via a business factor more often than not has the business owner/financial manager weighing the cost versus benefits of this method of growth financing. How can the owner/manager both reduce costs and enhance benefits? There are numerous ways... so let's dig in.
WHAT IS THE DIFFERENCE BETWEEN FACTORING AND ACCOUNTS RECEIVABLE FINANCING?
We get that one a lot at 7 Park Avenue Financial - The simple answer is that financing accounts receivable via banks involves your company ' assigning' all your accounts receivable to the bank - with a non-bank factoring solution known as factoring from factoring companies the paperwork specifies when your company sells its accounts, versus an assignment of receivables. In both cases, businesses draw down on funds based on levels of a/r. Both solutions provide what you are looking for - Immediate cash!
ASSET TURNOVER IN YOUR BUSINESS RECEIVABLES IS THE KEY TO SUCCESSFUL CASH FLOW
The ability to manage your receivables effectively, while maximizing the benefits of receivable finance is the ultimate ' business whammy'! Part of the reason is that the investment you have in A/R is often the largest liquidity component in your business. So managing that investment you make in sales will reflect directly on relations with your suppliers, lenders and clients.
WHAT IS THE BEST FORM OF FACTORING RECEIVABLES FOR SMALL BUSINESSES
We advise clients that they should also consider CONFIDENTIAL RECEIVABLE FINANCING which allows them to eliminate their clients from the whole notification process that is typically associated with traditional receivable financing that came to us from business practices in the U.K. and Canada. In Canada, we're a little different, eh?! Receivable factoring is a type of financing that works for thousands of firms every day and is the fastest-growing part of alternative finance asset-based lending solutions.
WHEN A/R FINANCING DOES NOT WORK
When does account receivable financing via a business factoring company go awry? It's when the owner /manager considers it as a total cash flow machine, (which it is) but then lets other aspects of the company receivables investment get off track. So while they get immediate cash flow from A/R financing they become lax in collecting accounts and granting credit. Remember that in the majority of ' Recourse' A/R financing in Canada you're still responsible for bad debts, so don't act like a drunken cowboy when granting credit, special terms, taking on ultra-large orders, etc.
The opposite of all that is running your focus properly, combining the benefits of AR financing ( instant cash flow, unlimited working capital, ability to take on larger orders, easier approval than bank financing ) with proper Receivables management.
We note to our clients that both non-recourse factoring and recourse factoring are separately available based on your decision to carry credit risk or sell it off.
3 KEY ISSUES FOR MANAGEMENT OF A/R
So what is that 'proper' management focus? It's:
A good credit-granting policy
Proper collections and follow up on accounts
Good financing reporting on at least a monthly basis (i.e. aged accounts, etc)
Taking your month-end a/r and determine how well you turn over current assets such as account receivables and inventory should be ' JOB 1' when it comes to monitoring ongoing financial performance.
AN EXAMPLE OF MEASURING THE BENEFIT AND COST OF A/R FINANCING
EXAMPLE: Your annual sales are 2,500,000.00 and your year-end AR is 88,750$ -
That means you are turning your accounts over 28 times a year. The goal is to always make that number larger, relative to general benchmarks in your industry when you consider invoice factoring solutions. It's a short term solution to your working capital needs.
THE CLASSIC BENEFIT OF ACCOUNT RECEIVABLES FUNDING
The classic benefit of account receivable financing in Canada is the ability to take on larger orders from creditworthy accounts, things that your competition might not be able to consider. They can't consider that because investing in new sales requires the cash investment in your current asset accounts that you could otherwise not make. So unless you're Apple Computer selling billions on a cash sale basis it's a challenge that business owners in the SME COMMERCIAL area face every day.
CONCLUSION
Receivable financing provides valuable cash flow to firms and is a solid funding source. The cost of factoring a/r is a fee and not an interest rate and utilizing this form of working capital funding improve day to day business operations.
There are numerous types of factoring and the terminology can often be confusing to new clients - so they should get expert assistance in determining the type of AR finance that works best for their firm and industry. At the end of the day, the quality and turnover of your AR base will help determine your best pricing and type of facility most suited to your company and industry.
The cash crunch is typical for every firm, large and small. Your investment in growth and accounts receivable levels will impact your ability to cover short term obligations such as payroll, equipment leases, investments in r&d, etc.
Don't overlook the benefits of proper working capital financing - including immediate cash, short term inflow of capital to fund operations, and the ability to take on larger orders and contracts with new or major clients.
It's time to get started on the balance sheet challenge to growth - If you’re interested in turning your firm into a cash flow machine consider account receivable financing via a business factor firm in Canada. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in matching A/R financing with solid ways to reduce the costs of that type of business finance.
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Stan Prokop
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