Cash flow financing. The potential failure of your business… thats most likely the final result of not have a business finance cash flow strategy with appropriate solutions and financing in place .
So what are some of those solutions; but even more importantly can you recognize when cash flow is decelerating, and can you accelerate it via internal and external means. That’s the conundrum facing Canadian business owners and financial managers today.
We’re often surprised , even shocked when we meet clients to have a great business and entrepreneurial sense, have great services and products, yet at the same time have no real focus on cash management and working capital solutions.
They seem to have a solid plan for their company’s future, but no real plan on the cash flow. So, yes, they are growing, but also heading into cash flow crisis 101!
Hindsight is great in business, however when the business financing challenges get to big in the present its because they quite often werent addressed, right about now.
In general the SME (small to medium enterprise) in Canada fails to recognize that growth is bad. Of course it’s great also, but its ‘ bad ‘ only because you’re now using and requiring more cash than you ever did. So all of a sudden that need for working capital, coupled with slower receivables or bulging inventories are moving you to crisis mode.
Naturally your failure to address these issues then enters you into a world where you’re potentially unable to pay existing lenders, and the last thing youre
able to focus on is expansion capital. So being smart on growth and dumb on cash flow and working capital is… you guessed it, not a good thing.
Cash comes into your company via product and service sales and the accounts receivable that result. The outflows are as tough to manage – they include salaries, a/p, fixed asset additions, lease and loan payments, etc.
The key factors that result in a cash flow crisis are numerous – they might include overextending sales to poor credit risks, slow collections with no key focus on a/r management , financial losses to due low or negative margins, or serious declines in sales .
Can the Canadian business owner accelerate cash? Yes, he or she can. Along with solutions such as receivable financing, asset based lines of credit, bank credit facilities, and inventory financing and tax credit monetization you can monetize your balance sheet without additional debt.
Even smarter solutions exist within your company walls, they include managing A/R better, invoicing promptly, slowing a/p to maximum extent possible without offending key suppliers, or encouraging pre payment on larger orders or contracts.
You can also set up very simple data points to measure your progress or problem areas. That includes monitoring cash to sales ratios, cash on hand to ending receivables, etc
So, growth? We’re all or it. Just remember though that hand in hand should come a solid cash flow financing and business finance management strategy that you can work internally and externally.
Speak to a trusted, credible and experienced Canadian business financing advisor for solutions to your firms finance needs.