YOUR COMPANY IS LOOKING FOR SOLUTIONS FOR YOUR BUSINESS OPERATING CASH FLOW PROBLEM!
How To Improve Cash Flow Issues & Working Capital For Small Business
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Financing & Cash flow are the biggest issues facing businesses today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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SOLVING BUSINESS CASH FLOW PROBLEMS
Here's to not losing your keys. We're talking about the keys to unlocking business operating cash flow and the solutions that come with that Canadian business financing challenge. Cash flow problems should be identified as the obvious early warning sign of business failure!
We're big fans of confusion because hopefully, it enhances our reputation of providing clarity around issues such as business cash flow difficulties! That term is often confusing to many business owners, and financial managers and impacts your ability to pay recurring bills and other business expenses and overhead costs / overhead expenses. Even issues such as revolving around customer churn can impact your financial plan.
WHO IS LOOKING AT YOUR CASH FLOWS
The reality is that you will ultimately be judged by others, i.e. suppliers, bankers, lenders, lawyers, and other professionals as to how well you manage and understand that business concept around yor ability to fund your business and pay interest on funds borrowed on any outstanding balance. That cash flow plan is really one of the most important documents in your business. Where confusion reigns is that it is often intermingled with profits, income and revenue, which really are all pure accounting terms.
CASH DOES NOT EQUAL PROFITS - SPOILER ALERT!
As we have pointed out in the past, cash does not, we repeat, does NOT equal profits in a business model, The short example is that your firm probably has a payroll this week, but in fact has not collected monies owing to you for sales you have made previously, perhaps a month or so ago.
WHAT DOES A CASH FLOW STATEMENT TELL YOU ABOUT YOUR BUSINESS?
As we have pointed out, although you have recognized that revenue you, in fact, have not been paid from existing customers. The short comment... it's pretty simple - You don't pay bills with revenue, just cash! Understanding the 3 parts of a business financial statement, the cash flow statement will help business owners understand the flow of funds in their business.
When the small business owner demonstrates he has true control over his business he enhances his or her reputation with a lender, whether that is a banker, a commercial finance company, a lessor, etc. Even your ability to accept credit cards or online payments via your bank or accounting system these days is a funding bonus! Collecting interest on late payments from clients is not the best way, and is a challenge as you wish to maintain goodwill and avoid financial problems with key customers. 30 days certainly is no longer the norm these days!
In some cases, a nominal price increase in your products or services can cover additional financing charges to carry accounts receivable and inventory levels you require.
So what keys can the small business use to dig deep and unlock the financing power within your firm? And how much cash does your business need? One way is to maximize the management of accounts payable and trade credit. Properly and effectively managing that time lag between your receipt of goods and services to payment enhances operating cash flow, increasing it. Naturally, you don't want to abuse supplier credit.
Managing fixed assets properly is another key to unlocking working capital around your financial statements. Watch your fixed assets to sales ratio, and you might even consider a sale-leaseback on unencumbered assets.
A huge cash trap for which you need a great key is inventory. Monitor inventory performance and the amount of product you carry to ensure a good cash reserve.
THE KEY TO UNLOCKING CASH FLOW POWER / MORE CASH FOR SMALL BUSINESS OWNERS
Lastly, and perhaps most importantly, the key to unlocking business funding power is in your receivables - as in when your customers pay! A good customer is hard to find!
HOW DO BUSINESSES SOLVE CASH FLOW PROBLEMS
Have a solid credit policy and ensure your A/R is financed properly, either through a bank account/business credit line, or third parties such as a commercial receivable finance company payment provider and invoice factoring. That latter strategy can turn your company into a real cash flow machine if managed properly through proper analysis of your cash flow statements and a good cash flow forecast - your credit replenishes as you generate new sales!
The ability to invoice clients quickly through your accounting software is also a key funding advantage for your business - Money sooner is better than money later!! Keeping realistic payment terms with key customers is important to allow clients to pay faster. Some small businesses may have to resort to a short-term solution such as a working capital loan.
CONCLUSION - HOW TO SOLVE CASH FLOW PROBLEMS
Keep in mind that you're the one in control of those keys to unlocking business operating cash flow for small businesses. Financing solutions are also available to enhance those ' keys ' - Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor about those cash flow solutions that might work for your firm.
FAQ: FREQUENTLY ASKED QUESTIONS
How do businesses solve cash flow problems?
Companies can solve cash flow problems by preparing accurate cash flow forecasts - Many industries have seasonal business operations - Seasonal businesses can improve cash flow management by monthly business budgeting and ensuring the firm has access to a line of credit. Invoicing quickly when products or services are delivered. The ability to stretch out payables while maintaining good vendor relations is key . Maintaining a focus on expense reduction and accepting online payments and credit cards where possible is important.
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