Cash flow financing in Canada. Is there in fact a ‘ happiness formula’ for solving and managing through cash flow problems? In our opinion it’s really a combination of management as well as sourcing the proper solution based on your firms particular situation.
Let’s examine some tools, tips and strategies around what we might consider a ‘ Happiness Formula ‘! in Canadian business financing.
A good way to address the topic is to focus on 3 sub topics – understanding what is in your financial statements, using that information to work through your cash flow cycle, and, finally, financing cash producing assets… properly.
We have said it before, and of course we’ll say it again, too many business owners and financial managers focus on their financial statements from a viewpoint to looking primarily at their income statement, perhaps then the balance sheet.
Guess what though; probably the most important way to view cash flow management and to identify working capital problems is in that third part of your financials, its the ‘ Cash Flow Statement ‘. For us old timers it was also aptly called ‘ Sources and Uses ‘ and we’re talking cash of course! We love the line ‘ Cash … where got … where gone’!
So what we are saying is that this particular part of your financials can lead you to our sought after ‘Happiness Formula.
The simple part of looking at this statement is the fact that it quickly identifies the gap between profits and cash – and as most business owners know they are often, if not always, NOT the same!
The bigger that gap is of course a solid place to and time to start thinking about solving working capital problems.
So how do you in fact secure the proper cash flow financing in Canada. And dont forget that its not just about surviving in business; its about growing your business. That growth will simply enhance the value of your company.
The cash flow statement will properly identify your overall business or operating cycle. In fact its even a precise calculation that you can use to track how long 1 Dollar flows through your company, from order to collected receivable. The longer the time gap the more working capital problems and challenges you have.
Cash flow financing come from two areas, borrowing, or simply turning your assets such as A/R and inventory over. Naturally you also want to manager your fixed assets so they are in a proper relation to your overall equity and capital structure.
And those solutions to cash flow finance in Canada? They are varied – they include chartered bank facilities, asset based non bank lines of credit, receivable and inventory financing that are again non-bank in nature. Additional sources are monetization of tax credits or the sale and leaseback of owned assets.
Still searching for the Cash flow Happiness Formula? Speak to a trusted, credible and experienced Canadian business financing advisor today.