How To Recover From Cash Flow Shortage Shock

OVERVIEW – Information on the business cash flow problem and challenge . How does the owner/financial manager address working capital shortages via solutions that make sense and are cost effective

Your business cash flow problem seeks a solution. The age old situation of a working capital / cash flow shortage often is a ‘ shock ‘ situation to many Canadian business owners and financial managers.

Every business goal pretty well revolves around creating profits. As that process works itself through your business you should be constantly trying to both manage cash and improve asset turnover.

The business owners ability to manage, and finance working capital allows it to generate equity, pay taxes and employees, keep supplier relations positive, etc.

A great way to look at your business is to constantly be focusing on what we call the ‘ operating cycle ‘. It’s essentially the ‘ journey ‘ that a dollar takes as it travels through your business.

Two drivers in understanding your cash and working capital are your:

1. Revenue recognition

2. Accounts payable management

While not often directly understood, most busines owners /managers understand that managing payables is a key part of the cash cycle. You increase your cash from operations by delaying payables to the extent that you can, given you don’t want to damage supplier relations.

If your business isn’t a retail or online business you have an investment in accounts receivable. Numerous financing solutions exist to allow you to better access real cash, as opposed to the A/R and inventory build up on your balance sheet that is not liquid.

Those solutions include:

Unsecured bank lines of credit
Secured bank revolving facilities
A/R non bank financing
Asset based lending
Tax credit financing/monetization (financing your SR&ED claims if applicable)

If our businesses were a straight line with totally repeating ongoing transactions a lot of cash flow shortage shock would go away. Unfortunately that is rarely the case, so seasonal and bulge situations often occur, often along the lines of the ‘ cash flow shock’ we talk about.

The owner /managers ability to forecast seasonality and bulges in business will always alleviate working capital shock.

At the end of the day the most common solution to the business cash flow problem is the ability to ensure you have a borrowing facility in place that allows your company to address future cash flow uncertainty.

If your firm has profits, historical cash flow, and acceptable financials chartered banks and business credit unions are the solutions.

As long as you have business assets (receivables, inventories, equipment, orders/contracts) numerous non bank solutions exist to allow you to feel that you have cash flow availability.

If you’re looking to avoid cash flow shock and ensure you have access to financing solutions that address the right stage your company is in ( start up, mature, high growth, turnaround, etc ) 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 financing needs.

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


7 Park Avenue Financial
Canadian Business Financing