YOUR COMPANY IS LOOKING FOR WORKING CAPITAL AND CASH FLOW 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 is not about having money to run your business; it's about running your business to have money." - Warren Buffett
Stop letting your cash bleed away - master Working Capital Management.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Business Funding and working capital financing solutions – Save time, and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
MANAGING WORKING CAPITAL
Business credit challenges in Canada often revolve around your firm's overall working capital management.
Addressing improvements in cash flow management via internal management and external financing solutions can make or break a business in Canada.
Challenges of Small and Medium-Sized Businesses in Accessing Business Credit and Working Capital Management
If you’re in the SME (small to medium enterprise) commercial sector, that’s often even more of a challenge, as the big guys seem to have solutions and access to capital crawling all over them.
We wish! Does that always have to be the case? We don’t think so; let’s dig in! Effective working capital management is crucial for maintaining a company's financial health.
THE HIDDEN CASH FLOW CRISIS IN YOUR BUSINESS
Every business owner knows the feeling of walking on a financial tightrope sometimes—between high interest rates, rising costs, late payments, and supplier pressures, it feels like a knife fight in a phone booth!
Let the 7 Park Avenue Financial team turn cash flow challenges into growth opportunities by unlocking cash in your sales and assets on the company's balance sheet.
DID YOU KNOW?
- 82% of business failures are due to poor cash management / negative working capital
- Effective Working Capital Management can reduce costs by 10-20%
- Companies with optimal working capital have 15% higher valuations
- 60% of CFOs prioritize Working Capital Management improvement around the company's assets
- Supply chain finance to pay suppliers can reduce costs by 3-5%
UNDERSTANDING CAPITAL MANAGEMENT
Definition and Importance
Working Capital management is a cornerstone of a company’s financial strategy. It effectively uses its current assets and liabilities to ensure operational efficiency.
It involves managing the company’s working capital, which is the capital used to run and manage its regular operations.
Effective working capital management is essential for a company’s day-to-day functioning, as it helps businesses make routine payments and ensures the smooth performance of business operations. By balancing current assets and liabilities, companies can avoid liquidity issues and sustain their financial health.
Key Components
Capital management can be divided into several key components, each playing a vital role in maintaining a company’s financial stability:
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Liquidity Management: Ensuring a company has enough cash resources to address its business needs. This involves monitoring cash flow and maintaining an adequate cash reserve to meet short-term financial obligations.
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Accounts Receivable Management is the process of managing the balances that debtors owe to a company. Effective accounts receivable management ensures timely payment collection, which is crucial for maintaining a healthy cash flow.
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Accounts Payable Management: Managing the money due and owing by a company to its vendors. Companies can improve their cash conversion cycle by negotiating favourable payment terms and optimizing payment schedules.
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Inventory Management: Managing a company’s main asset used to generate sales revenue. Effective inventory management minimizes the risk of overstocking or stockouts, ensuring that working capital is not unnecessarily tied up in unsold goods.
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Short-term Debt Management: Ensuring a company has enough liquidity to monetize short-term operations. This involves managing short-term loans and credit lines to maintain financial flexibility and meet immediate financial needs.
By focusing on these key components, businesses can achieve effective capital management, which will improve their financial performance and stability.
UNDERSTAND YOUR FINANCIAL STATEMENTS
Cash flow management is a crucial aspect of understanding financial statements, as many of a business's cash flow needs are actually' hidden' in its financials!
it’s your job to identify and fix them. While a healthy number of clients we meet seem to initially only focus on revenue/sales management, often the root of the problem is in your current asset accounts - i.e., inventory and receivables.
WHAT ARE THE ROOT CAUSES OF WORKING CAPITAL PROBLEMS
So, it’s the job of business owners / financial managers to identify those root causes and implement improvement.
In the case of accounts receivable, it’s all about a sound credit-granting policy and account collection—if your company is growing, that is even more important, as short-term assets such as your inventory and accounts receivables ‘ eat’ cash!
Accounts payable management is also key to increasing funds flow. A 12-month period is typical for assessing financing and turnover performance.
Addressing solutions for the ‘appetite’ we’ve just spoken of is critical to business survival. Monitoring the company's working capital position is essential to optimizing the cash conversion cycle (CCC) and managing potential trade-offs, such as the risk of damaging supplier relationships while enhancing liquidity.
THE CURRENT ASSETS AND CURRENT LIABILITIES RELATIONSHIP IS KEY
Net working capital is a key metric in cash flow and working capital management focusing on current assets and liabilities.
Liabilities? Didn’t we just say it’s all about the A/R and inventory?
We did of course, but it’s easy for the business owner/manager to forget that effective management of payables stops cash outflows, and the more you get your key vendors and suppliers on your side is a classic win/win.
WORKING CAPITAL CYCLE
Inventory Cycle
The inventory cycle represents the time it takes for a company to acquire raw materials or inventory, convert them into finished goods, and store them until they are sold.
During this stage, the company’s cash is tied up in inventory. Though it starts the cycle with cash on hand, the company agrees to part ways with working capital, expecting to receive more working capital in the future by selling the product at a profit.
The inventory cycle is a critical component of the working capital cycle, directly affecting a company’s cash flow and working capital position.
Effective inventory management is essential to minimize the risk of inventory becoming obsolete or unsold, which can negatively impact a company’s financial health.
By understanding the inventory cycle and implementing effective inventory management strategies, companies can optimize their working capital cycle, reduce the risk of inventory-related losses, and improve their overall financial performance.
This involves regularly reviewing inventory levels, forecasting demand accurately, and maintaining a balance between supply and demand to ensure that working capital is used efficiently.
In conclusion, mastering the inventory cycle is key to effective working capital management, enabling businesses to maintain a healthy cash flow and strengthen their financial health.
FINANCING RECEIVABLE AND INVENTORIES
How you finance your A/R and inventory ties directly into your overall access to business credit for working capital management and growth.
That’s why taking some time to understand some key terms, such as your cash operating cycle, is, in our opinion, a million-dollar investment of your time. Simply speaking, it’s the time it takes for a dollar to flow through your business.
A line of credit solution with good management of asset turnover is one key solution to your business needs.
Effective management of the company's working capital is crucial to maintaining liquidity and meeting short-term obligations, improving financial health and operational efficiency.
When assessing external small business credit solutions its all about flexibility and cost.
CANADIAN BUSINESS FINANCING SOLUTIONS
The solutions around working capital credit come from a small handful of external financing solutions.
A/R Financing
Inventory Loans
Access to Canadian bank credit
Non bank asset based lines of credit
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loans
Royalty finance solutions
Purchase Order Financing
Short Term Working Capital Loans/ Merchant Advance
Securitization
Any one or a combination of these solutions delivers cash flow in the immediate short term for small business enterprises.
Effective cash flow management is essential to efficiently using these financing solutions. It enhances a company's earnings quality through better resource utilization.
They come with different costs, operate differently on a daily operational basis, and in some cases are limiting, while in other cases (Asset-based credit lines) offer unlimited growth financing potential.
KEY TAKEAWAYS
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Cash conversion cycle optimization delivers the most immediate impact
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Inventory management directly affects working capital efficiency
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Accounts receivable processes determine cash flow stability
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Supply chain financing options maximize available capital
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Credit policy adjustments create sustainable improvements
CONCLUSION
Looking for an iron-clad guarantee in business credit?
Here's one. We guarantee that if you don't manage and finance your current assets properly, you'll be out of business fairly quickly. Is this probably not the guarantee you were looking for?
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with working capital management solutions to ensure you have the funding requirements / right financing and financial health you desire.
FAQ
How does Working Capital Management increase profitability?
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Reduces financing costs
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Optimizes inventory levels
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Improves supplier relationships
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Strengthens customer payment terms
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Enhances operational efficiency
What immediate benefits can businesses expect?
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Better cash flow visibility
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Reduced operating costs
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Improved supplier terms
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Enhanced credit management
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Stronger negotiating position
How does it help during economic uncertainty?
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Provides financial flexibility
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Reduces dependency on external funding
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Improves business resilience
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Strengthens supplier relationships
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Enables quick response to market changes
What competitive advantages does it create?
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Better pricing power
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Stronger supplier relationships
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Enhanced customer service
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Improved operational efficiency
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Greater market adaptability
How does it support business growth?
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Frees up capital for expansion
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Reduces financing needs
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Improves investment capacity
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Strengthens market position
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Enables strategic opportunities
What is the ideal working capital ratio?
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Industry-specific ratios vary
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Generally aim for 1.5 to 2.0
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Consider seasonal factors
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Monitor trending changes
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Benchmark against competitors
How often should working capital be reviewed?
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Monthly monitoring recommended
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Quarterly detailed analysis
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Annual strategy review
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Event-driven assessments
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Continuous improvement process
What tools help manage working capital?
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Financial management software
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Cash flow forecasting tools
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Inventory management systems
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Credit management platforms
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Supply chain finance solutions
What role do suppliers play?
