YOUR COMPANY IS LOOKING FOR CASH FLOW FINANCING!
Understanding Cash Flows! / Business Cash Flow Finance Financing Needs
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
Business cash flow finance. We're going to shock you, but your firm is probably NOT a cash cow. That term is reserved for the probably 1% of all Canadian larger corporations that no longer require a lot of new investment in their firm - so that's why if they are running their business well ( collecting receivables and turning over inventory ) they become cash flow generators - they are always generating positive financing inflows. And yes, we're jealous.
EVERY BUSINESS NEEDS CASH !
So if you're not our friendly CASH COW then what in fact are you? That reality is in fact pretty clear, your firm is not a large mature corporation, you're growing, perhaps you're even a start-up, and you need... cash!
A great mentor of ours is often quoted as saying ' you're not a real business person until you've sweated a payroll '. That’s the extreme part of running a business on a day to day basis - the negative cash position versus ' positive cash flow '!
HOW DOES THE BUSINESS OWNER DETERMINE THE AMOUNT OF CASH THE COMPANY NEEDS?
So how in fact does the Canadian business owner or manager determine his or her cash flow financing needs, and when those needs are determined what solutions are available? You're looking for reliable indicators and even more reliable solutions! In fact, it’s this method of looking at and solving your business challenges that will be one of the most reliable indicators of your long-term business survival and success. Managing cash also revolves around the cost of financing and interest payments. Interest rates are always a subject of discussion when clients at 7 Park Avenue Financial discuss their finance needs.
Having access to solutions and resources around working capital simply allows you to meet your current financial commitment and grow your business. We don't think there is one perfect solution for all firms when measuring and managing this aspect of your business. But if you use tools to gain solid insights into your current situation the solutions will become a lot more obvious!
CASH FLOW FOR DAILY FUNDING NEEDS
At the crux of the business finance challenge is your ability to operate on a daily basis, not typically a term debt requirement. So while your balance sheet and profit and loss statement tell you the amounts of your assets and your ' paper profit ' respectively it's a cash flow analysis that really opens the kimono on your business! Over the long term, your financials will always point to where your business is winning and losing and the amount of cash you are using and generating.
Why does your banker, other lenders and lessors, etc focus on cash flow? Simply because over time it’s a strong measure of your survival. Many people will tell you to calculate your ' CURRENT RATIO' to determine your working capital and solvency. That's actually a very poor measurement in our opinion only because it doesn't measure asset turnover and the actual changes in the working capital accounts of A/R and inventory. On many an occasion we've profile the story of the American dept store W.T. Grant - as it filed for bankruptcy it has a lot of assets and a lot of ' paper ' profit. The only thing it didn’t have was cash and asset turnover; resulting in the bankruptcy. The bottom line? Net income rarely equals cash on hand! The cash generated from asset turnover drives liquidity.
WHAT IS ' OPERATING CASH FLOW?
So what tools do you in fact use to assess your true working capital and cash in flow situation? The most reliable is probably operating cash flow, which simply takes your profit or loss and then assess the changes in your receivables and inventories. Quick example? Let's say your sales grew by 15% but your receivables and inventory in our example grew by 40%. You're using cash, and you're far from CASH COW status. On the other hand if your sales, for example, are flat, but your a/r and inventory levels are down over the previous compared period you're well ... along the way to becoming a Cash .... Well, we think you get the story! Your financial statements will point to where cash flow from financing activities came from. Many business owners do not look at the cash flow statement,which is the third part of your financial statements after the balance sheet and income statement/profit and loss.
HERE ARE SOME BUSINESS CASH FLOW FINANCING SOLUTIONS!
Solutions in Canada to address business cash flow financing include:
A/R Financing
Inventory Loans
Access to Canadian bank credit/term debt
Non bank asset based lines of credit
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loan / Short term working capital loans
Royalty finance solutions
Government Of Canada Small Business Loan Program - The Guaranteed federal business loan
CONCLUSION
Any one of combination of these, used properly, monetizes assets and doesn’t increase debt. Structured properly they put THE FIX in your business financing challenges. Whether your business is a startup or a larger corporation - public, or private your financial health will always depend on the ability to fund daily operations. Over the long term, the focus is often your ability to capitalize on growth opportunities but understanding how much funding you need and having the confidence in managing your assets is key to business success.
While you can choose to ensure you have an understanding of those textbook type definitions of working capital / current assets / current liabilities, etc it's your ability to manage the balance sheet and reflect the proper turnover in accounts receivable, payables, inventories, etc.
Long term financial health is important - short term health is critical. Don't get confused around cash flow and working capital - both important, both different. The simple explanation around that is that in the short term your working capital accounts supply daily financing while over a long period of time - a year for example your financials should demonstrate your ability to generate cash.
In the short term business cash should always be a focus for the successful day-to-day running of your company - over the long term, your capital structure will be dictated by sales and growth needs. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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