Is Receivable Financing and Business Cash Flow All That Important?

OVERVIEW – Information on the cost of Not utilizing effective receivable financing for Canadian business. An account receivable cash flow is essential to the patients health!

Receivable financing and the management of that asset is a key source of business success. A solid account receivable cash flow strategy allows the business owner to actually ‘ visualize’ success. What options are available to owners /business managers and how to external methods of financing you A/R work? Let’s dig in.

It’s very safe to say that nothing should ever be taken for granted when it comes to financing your business – especially for those firms in the small to mid market (SME) commercial area. Knowing the criteria that is set by banks or other commercial lenders is key.

Some of those factors include:

The amount of equity or investment you have in your business

Industry risk issues

The ability to generate profits

Management experience

A solid business plan or at a minimum a reasonable and realistic cash flow forecast

Again, very safe to say that if business assets/personal collateral don’t meet minimum requirements or if the sales projections are too unrealistic we can only assume financing will be very difficult to achieve .

Understanding the relationships in your numbers is key – This can be done easily without getting to technical. Key areas to focus on are debt to equity, working capital and cash flow ratios, and asset turnover relationships such as collections and inventory turns.

How does a solid receivable financing strategy help ensure cash flow then? For a starter it provides maximum flexibility around how you run and grow your business. As businesses grow they are, whether they like it or not, forced to invest more funds A/R. . . When managed properly your receivables often become your largest source of working capital.

The ‘ battlefield’ for working capital revolves around your payment terms and the ability of your business to manage those terms while at the same time extending credit and growing sales. What many business owners don’t realize is that carrying A/R too long will over time diminish return on equity. The key here is your ability to collect, or finance a receivable and then reinvest it in the business.

When you finance your receivables those ‘ numbers relationships all of a sudden make sense: Your cash conversion cycle comes down, your days sales outstanding improve, and new found cash begins earning more profits

The key to understanding the costs and benefits of an A/R finance solutions revolves around understanding that a solid facility no longer limits your firm’s ability to grow.

Receivable financing comes in the form of bank facilities or commercial non bank facilities. When bank financing can’t be achieved our recommendations is a CONFIDENTIAL RECEIVABLE FINANCING facility that allows you to bill and collect and finance your own receivables without any notice to customers, suppliers, competitors, etc.

If you’re visualizing ‘ cash flow ‘ seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your needs.

Writer Stan Prokop
7 Park Avenue Financial :

http://www.7parkavenuefinancial.comAccount Receivable Cash Flow
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :

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Oakville, Ontario
L6J 7J8

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