The way in which you manage and solve business cash flow finance and working capital in your business… well… makes or breaks you. It’s as simple as that. Ironically many business owners and financial managers spend a tremendous amount of time in and on their business doing everything EXCEPT addressing those two aspects of their business. And the result? Well quite frankly, you don’t want to know!

The management and solving of business cash are tremendous indicators of how well you are running your company. In the eyes of lenders, owners and anyone else that has a vested interest in your firm your ability to address working capital management makes is a critical part of the ‘ scorecard ‘ on your business.

When we talk about business cash flow it’s a combination of two things, your ability to manage in the short term, i.e. operate, pay employees, buy products and services … as well as a longer term focus on viability and meeting lender commitments.

Furthermore, if you have a handle on today’s topic you’re in a position to spot future problems, then not having to fight those business cash brush fires that seem so common when we talk to clients.

Part of the problem in the way owners and external folks look at and address the issues is the simple fact that information is coming from different places. Some look at the balance sheet, some look at the income statement, and few, yes few look at the cash flow statement.

Case in point? Many years ago when we toiled in the bowels of corporate finance we got in financial statements from a client. But it was just the balance sheet and income statement. We were asked how the cash flow was by my management. We replied ‘ there was no cash flow statement’
The response ‘ why don’t you create one?’

We can pretty well assure you that if we hadn’t done that already the business owners hadn’t also. With the balance sheet and income statement in front of us we jotted down net income and depreciation from the income statement. Then we went to the balance sheet and measured the changes in receivables and inventory – thereby giving us the most pure indicator – operating cash flow. Voila – we were done. Quite frankly this was all so long ago, (and we’re getting older) that we don’t remember if that clients cash flow was positive or negative. Suffice to say it was a key indicator of our ability to deal with the client – i.e. lend funds.

Using simple ‘ ratios’ in your financials (we like to call them relationships)
you can get a strong sense of how you’re doing and further be able to anticipate upcoming cash flow challenges.

That of course allows you to implement solutions – In Canada they might include:

Commercial bank credit lines
Non bank asset based credit lines
Receivable financing/factoring
Tax credit monetization
Securitization

All of those come with different costs, take a short or long amount of time to implement, and have different effects on how you can grow your business.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in solving the mystery, aka the measurement and solving of business cash flow finance problems.