A Working Capital Facility . Feeling Awkward About Business Cash Flow

Business cash flow in Canada. We see business owners and managers struggle to sometimes just grasp the term, let alone the solutions that are required to achieve a proper working capital facility that meets their needs. Should there be a need to feel ‘ awkward ‘ about cash finances – we don’t think so and here is why. Let’s dig in!

In any industry there are of course some specialized terms – the tech ones seem a bit overwhelming to us as times! In finance the concept of ‘ cash flow ‘ mesmerizes’ many owners / managers. And the additional reality is that lenders, bankers, and others will often judge you and your business on your grasp of that concept.

So a lot of people talk ‘ cash flow ‘ (us included!). Not everyone has a handle on it. While the ‘ true’ cash flow statement is in fact PAGE 3 of your financial statement ( right behind the balance sheet and income statement ), the term if very well confused by many because they somehow think its the same thing as ‘ profit’ , ‘ income’ , ‘ revenue’, etc. It is not those!

The fundamental way to explain it is one that most businesses in the SME sector can relate to – payroll. Your company has delivered a product or service, you are waiting to get paid, and there is not enough cash in the bank to pay salaries! That’s the crux of the business cash flow.

When the Canadian business owner and manager are in fact in control of cash flow they have a strong handle on some of the most important aspects of their business- and when you can ‘ scorecard’ your working capital situation and put solutions in place to accelerate cash inflows ( and decelerate cash outflow!) you are truly mastering your business.

You can feel a lot less awkward about the challenge we’re talking about today by simply understanding your ‘ cash cycle ‘ and putting in finance solutions that match it. The cycle is managed and scorecarded simply by spending time in understanding how your purchase products, when you pay for them, what credit terms you offer, and how diligently you enforce those terms.

As you can see, its all about ‘ timing ‘ Businesses go under in Canada in many situations because business is in fact great – in fact its so great they run out of cash . That pipeline of funds is simply blocked as the investment you have made in inventory, receivables and equipment intensifies.

What are then the solutions to our conundrum? They include:

Bank commercial credit lines
Inventory financing
Receivable Finance
Asset based lending
Monetizing any tax credits
Purchase order/supply chain financing

Make sure you spot the road blocks we have talked about. Address those red flags by one or several of the solutions about. Seek out and speak to a trusted , credible and experienced Canadian business financing advisor who can assist you in feeling less ‘ awkward’ about business cash flow!