Reducing The Cost Of Receivable Finance In Canada

OVERVIEW – Information on account receivable financing in Canada. How the business owner/financial manager lower and manage business factor costs while increasing cash flow and working capital

Account receivable financing in Canada
, via a business factor more often than not has the business owner/financial manager weighing the cost versus benefits of this method of growth financing. How can the owner/manager both reduce costs and enhance benefits. There are numerous ways… so let’s dig in.

The ability to manage your receivables effectively, while maximizing the benefits of receivable finance is the ultimate ‘ business whammy’! Part of the reason is that the investment you have in A/R is often the largest liquidity component in your business. So managing that investment you make in sales will reflect directly on relations with your suppliers, lenders and clients.

We advise clients that they should also consider CONFIDENTIAL RECEIVABLE FINANCING which allows them to eliminate their clients from the whole notification process that is typically associated with traditional receivable financing that came to us from business practices in the U.K. and the United States. In Canada we’re a little different, eh?!

When does account receivable financing via a business factor go awry? It’s when the owner /manager considers it as a total cash flow machine, (which it is) but then lets other aspects of the company receivables investment get off track. So while they get immediate cash flow from A/R financing they become lax in collecting accounts, and granting credit. Remember that in the majority of ‘ Recourse’ A/R financing in Canada you’re still responsible for bad debts, so don’t act like a drunken cowboy when granting credit, special terms, taking on ultra large orders, etc.

The opposite of all that is running your focus properly , combining the benefits of AR financing ( instant cash flow, unlimited working capital, ability to take on larger orders, easier approval than bank financing ) with proper Receivables management.

So what is that ‘proper’ management focus? It’s:

A good credit granting policy
Proper collections and follow up on accounts
Good financing reporting on at least a monthly basis (i.e. aged accounts, etc)

Taking your month end a/r and determine how well you turn over current assets such as A/R and inventory should be ‘ JOB 1’ when it comes to monitoring ongoing financial performance.

EXAMPLE: Your annual sales are 2,500,000.00 and your year end AR is 88.750$ –

That means you are turning your accounts over 28 times a year. The goal is to always make that number larger, relative to general benchmarks in your industry.

The classic benefit of account receivable financing in Canada is the ability to take on larger orders from credit worthy accounts, things that your competition might not be able to consider. They can’t consider that because investing in new sales requires the cash investment in your current asset accounts that you could otherwise not make. So unless you’re Apple Computer selling billions on a cash sale basis

it’s a challenge that business owners in the SME COMMERCIAL area face everyday.

If you’re interested in turning your firm into a cash flow machine consider account receivable financing via a business factor firm in Canada. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in matching A/R financing with solid ways to reduce the costs of that type of business finance.

Author: Stan Prokop – founder of 7 Park Avenue Financial

Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of 90 Million $$ of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171