The term ‘ cash flow ‘ is widely used and somewhat widely misinterpreted. Its a specialized term in business and has often confusing definitions. The most pure form is the cash flow statement for any firm. At its simplest its a ‘ cash in’ and ‘ cash out’ analysis. Key to this analysis though is the timing of the receipt of funds. Any good business cash flow statement or projection will show projected inflows and outflows over a period of time – usually annually.

We mentioned wide misinterpretation. That is because it is often confused with other accounting terms such as ‘profits ‘, ‘ income ‘, and ‘revenue’. Naturally real cash is the life blood of an business. We don’t pay our bills with ‘ revenue’!.

So, yes, our firm makes things, we sell them, and eventually we receive payment. During that time we are paying out cash to employees, suppliers, and also waiting to get paid ourselves. We are only able to pay our bills as a business with real cash!

When businesses prepare a cash flow statement they list their monthly expenses, both fixed and estimated, and then focus on anticipating when customers will pay invoices, thereby generating cash. Naturally there has to be some solid work around any assumptions in that whole process – for example:

Are the projected sales going to be realized

Will the payments from those sales be made on time

How much can be drawn out of the business in the meantime

As most business owners who have borrowed already know this type of document is probably the most important one that the bank or finance company wants to see.

Business owners therefore need to properly understand the total ‘ cash flow cyccle ‘ That cycle consists of purchasing inventory, booking receivables around the sales that are made, and then collecting hose receivables. Simply right? Not really, the true challenge is in the following: ‘ TIMING’!

Many textbooks in finance have been written around the mis-timing of the cash flow cycle – where large and once great companies went bankrupt by misunderstanding the subject of our article.

Most lay people find it very difficult to comprehend that a company that is profitable can go bankrupt. As we have discovered that can absolutely happen as financial managers confuse profits from a sale from receipt of cash from a sale. If the cash pipe is ‘ blocked ‘ problems will occur!

In summary, any business owners or financial managers understanding of the business cycle and proper cash flow will add value to the success of the business from a financial perspective.

Stan Prokop is the owner of 7 Park Avenue Financial. The firm originates business financing for Canadian firms, and is a specialist in business financing and working capital and cash flow financing alternatives.

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 905 302 4171

Office = 905 829 2653

Email =

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 100 Million $ of financing for Canadian corporations .

‘ Canadian Business Financing With The Intelligent Use Of Experience ‘

Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.

Stan Prokop

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7 Park Avenue Financial
Canadian Business Financing