Working Capital Finance – Your Problem – Our Solutions for Solving Cash Flow Challenges
It would be great to hear our clients say they have no issues in working capital finance and challenges, and that solving cash flow problems is the least of their worries. Unfortunately we haven’t met one customer that seems to be comfortable sharing that with us.
Let’s look at the root of some of those working capital challenges; what are the problems, what caused the problems and then talk about why you are probably reading this… you want working capital solutions.
It’s of course great to have sales – and sales and profits are even better. In general when you have those you have the essence of a healthy business. But those are in effect what we could call paper transactions and it always comes back to 100 year old clichés such as ‘ cash is king ‘ and ‘the sale isn’t made until you’re paid ‘.
That cash is required for all those mundane things, paying suppliers, paying employees, and meeting your obligations on loans and leases.
Your challenge is typical, how you do create a flow of cash in the long term, as well as addressing short term bulges to ensure you have liquidity.
Naturally when you have a good handle on cash flow everyone views you in a positive light, most importantly your suppliers and lenders.
The solutions to cash flow challenges often come out of inability to plan or address the right type of cash flow solution. You run the risk of liquidity problems when you current assets aren’t able to be converted in a timely manner into cash – those assets are typically receivables and inventory.
There isn’t a day when we don’t run into a textbook type of working capital finance challenge – it’s as simple as requiring product to satisfy regular or new large orders, generating invoicing, and then waiting 30, 60 or 90 days for payment. That is the textbook challenge when we talk to clients asking us for assistance in solving cash flow problems.
So we have done a pretty good job of telling you what your problems and challenges are – let’s address some real world solutions.
At the core of working capital finance challenges are you inability to access business credit. We encourage all customers to seek Canadian chartered bank business credit when they are in a position to do so. Unfortunately many clients can’t meet business net worth, personal net worth, and liquidity ratios and covenants your bank might require. Also we strongly believe that inventory financing by banks in Canada is increasingly more difficult to achieve.
Don’t borrow – monetize. That’s the best advice and plan we set our with clients to solve cash flow problems. You could get a working capital cash flow term loan, but that just creates additional debt on your balance sheet. Instead, take those assets you already have on your books and monetize them – those assets are the previously mentioned inventory, A/R, and in some cases tax credits due your firm as well as unencumbered equipment.
Liquidity for those assets can be achieved by a receivable financing program, an asset based line of credit, or a short term bridge loan on an asset such as a tax credit or paid for fixed asset such as equipment. Many of these solutions are outside the chartered bank system in Canada and can be accessed by talking to a trusted, credible and experience Canadian business financing advisor.
Your ability to monetize your assets, keep suppliers paid and current and then having the ability to grow your business when you assess and consider monetizing assets into short term liquidity.
Choose Your Sources of Working Capital Finance for Business Credit
You have choices in sources of working capital finance and in business credit solutions.
It is all about understanding the problem and knowing where to go for the solution, so let’s look at those two key issues. Understanding the problem is not something you have to read about, as a business owner and financial manager in Canada you live the capital ‘crunch’ or ‘challenge’ every day.
Working capital is best understood as your operating capital, and you have investments in receivables, inventory, that’s where your investment currently lies, and your goal is to monetize those assets in the best manner possible.
The textbook definition doesn’t really help us out – our accountants and analysts tell us to go to the balance sheet, subtract current liabilities from current assets, and, voila! That’s working capital!
One of the biggest contradictions that you need to understand is the issues of assets, profit, liquidity and turnover. Once you have a handle of those the concept of working capital and, more importantly, the solutions start making more sense.
We hate those textbook definitions we referred to, but we will agree that the calculation we shared needs to be positive – you do need more inventory and receivables combined as measured against payables and other short term liabilities. How you manage those short term assets of A/R and inventory is the challenge.
Many business owners quickly realize that one of their liabilities, i.e. payables, is actually a large asset in measuring capital and managing it. That is because if you can continue to convert inventory into A/R into cash, and slow down payables you are achieving working capital progress.
Is there a perfect way to measure your working capital needs and progress? One of those methods is to check into the ‘cash conversion cycle ‘- It’s a tool you can use to measure how low a dollar takes to flow through your company. It simply takes your inventory and receivable days outstanding, subtracts your payables days outstanding, and there is your final number. It’s a great long tool to understand your progress over long periods of time.
In order to achieve solid cash flow you need to increase turnover – that can be done by accelerating cash flow by borrowing against receivables, or selling receivables via a factoring process.
Your working capital solutions in Canada are limited, but they are very focused and real. Your can increase cash flow today with no ones assistance simply by accelerating turnover of your assets such as receivables and inventory. If you feel your challenge is more of a long term nature a term loan (if larger these loans are called subordinated debt) is the solution.
You can also generate unlimited capital by entering into an asset based lending or facility with a non bank finance firm. Don’t forget that term loans for working capital add debt and obligations to your balance sheet, so we often suggest to clients that the best solution is in fact monetizing your assets, not borrowing more – that where asset based lines of credit work best.
So whats it all about – it’s a case of understanding what it is, looking at how your firm performs in key metric areas of turnover, etc, and then choosing a solution that works best for your firm, whether that is long term in nature, or a bulge type facility that augments your daily cash needs. Speak to a trusted, credible and experience working capital business financing advisor to determine what choice is best for your firm.
Finance Jobs – Lucrative Career Opportunities in Finance
Finance Jobs in Dubai are extremely lucrative and promising. No Doubt about it. Having opened its doors to banks, financial institutions and investment banks from across the world, Dubai also set up a specially designated area called Dubai International Financial Centre (DIFC), on the lines of it’s highly successful Special Economic Zones. To take advantage of zero taxation and many other benefits accorded to companies operating in UAE by the government, scores of companies operating in the Finance space, worldwide, have rushed in. Various International & Local Financial Companies offering:
* Retail Banking Solutions Companies have set up shop across the length and breadth of The UAE, to take care of consumer banking needs.
* Similarly, taking advantage of people’s needs to invest for their future, and given the vibrancy and dynamism of the Stock Exchanges in the region, several Investment Banks and Financial Advisory firms have started operations. These offer a gamut of investment options and advice for many products such as Mutual Funds, Real Estate, Stocks, Futures, Commodities, Debentures, Bonds, and Oil.
* Corporate Banking Solutions are offered by several Banks to large and medium sized companies operating out of Dubai, in the Middle East and North African region (MENA).
* Accounting is required by every small, medium and large company for various purposes like profit and loss statement of accounts, payroll processing, payments and collections, tax calculations, loan payment calculations and benefits and perks calculations.
This activity has led to the creation of hitherto non-existent careers & opportunities in sectors such as Investment Management, Banking & Accountancy. Job Positions like:
* Investment Advisor, Commodities Broker, Foreign Exchange Broker, Equities Trader, Platform Consultant, Investment Analyst, Investment Marketer, Investment Fund Manager, etc. have become hot considering the earnings potential in investment products.
* In the same way, Banker, Teller, Corporate Financier, Credit Analyst, Financial Adviser, Corporate Sales Representatives, Product Manager, and many more have become much wanted in the Banking sector.
* Accounting Technician, Chartered Accountant, Chartered Certified Accountant, Chartered Management Accountant, Chartered Public Finance Accountant have come into their own due to many new companies establishing base in Dubai.
A 100% Tax free income and lucrative perks such as Family Accomodations, Car, Gas, Home flight tickets, Club Memberships, school education for kids, etc. have made job seekers from every part of the world wanting a Dubai finance job in Dubai. These perks of course, depend largely on the type of job and seniority level too.
Now let’s see, how do you secure a finance job in Dubai for yourself? If you do not live in Dubai or the UAE, then how do you find out the vacancies there? How do you apply? How do you know which are the Finance specialist recruitment agencies to apply to? Which are the biggest and best companies offering these lucrative jobs?
Well, the answers to these questions are quite simple. You need proper guidance and help. Luckily, you’ve come to the right place. Follow the systematic and time-tested path towards acquiring your DREAM Finance Job in Dubai. It is a well thought out, multiple action plan that will lead you to your goal.