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Invoice Cash – Immediate Cash for accounts receivable

Guest post by: Stan Prokop

Article Overview: Information on how invoice cash, also known as factoring or invoice discounting can assist Canadian firms with working capital turnover and cash flow generation.

Invoice Cash – Immediate Cash for accounts receivable

Invoice cash - What is the problem and what is the solution? The problem or challenge is a classic one for Canadian business owners and financial managers. It is that sales are growing fast, but, guess what? The receivables associated with those fast growing sales and converting into cash. In fact they are tying up your working capital for 30, 60, and sometimes 90 days. How can you tell if this is happening? Well we are sure it's fairly intuitive to most customers, but you can actually do a very basic calculation on this to verify. We also tell our clients there is one easy way to fix the problem,

We advise our clients to track something as simple as the ' Turnover of Working Capital ' - Take your sales for the time period, example, month, or year , and divide by you working capital which is calculated by current assets minus current liabilities . If your ratio is trending higher you will find that you are having more working capital challenges.

Our clients often ask for solutions though, not a financial ratio as we have presented above! Invoice cash, also known as factoring or receivable discounting is one solution to the above working capital challenge. This solution also assumes you have been unable to get any, or enough, bank financing to fund your business.

How does this solution work - it's a simple process of generating your invoice as you sell your product, and then on a daily, weekly, or monthly basis (it's your choice) sending these invoices to the factoring or invoice discounting firm. They will on a same day basis send you approx 90% of those funds immediately. You have just generated IMMEDIATE cash flow for your business. The other 10% of the invoice is paid to yourself when your customer pays, minus a ' discounting fee ' , which is a carrying or financing charge for the factoring firm .

Canadian business owners need to ensure they have the right facility. We encourage clients to get the type of facility where they continue to bill and collect their own receivables during the factoring process. Also, the Canadian business landscape relative to invoice cash/ factoring firms is much different than in the United States.

As a Canadian business owner or financial manager contemplating a factoring facility you should consider the following key points:

-What fees are you paying - ensure your fee is clearly understood and has no miscellaneous costs

-Ensure you can bill and collect your own receivables - many factor firms will want to take over to some degree your invoicing and collection function

-Ensure you are dealing with a firm that understands the Canadian landscape - many firm are simply branches of U.S. organizations

-You should ensure that your capital requirements can be met and that the firm can fund companies in your facility size range. More cash flow means more growth, more profits, and more competitive success for your Canadian company. That is a good thing!

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Article Tags: accounts receivable, cash flow, factoring, invoice cash, working capital



Related Forum Posts
Re: Improving Cash Flow - Thanks for your information. guide on how to avoid the problems of over trading. <-- Where is this guide? Any URL? guide on debt factoring and invoice discounting: the basics. <-- Where is this guide? Any URL? I just want to learn more about this. I am also looking for a good article on: What exactly is Cash Flow? Ways to improve cash flow at individual level and organizational level? I think it is a problem of thinking and mind sets problem. If we can change the way of spending, we can have more Cash. Robert
Sound Cash-flow & Balance Sheet - Cash is most important, if you are loaded up with good money, you just need to allocate it to right place, get the right price and make the profits. Your employees will be happy to work with you when you show good enough balance sheet of your accounts, it matters in big way, also customers want to see your company doing well.
Improving Cash Flow - How do I improving Cash Flow? What the best way to improve it to another 100% growth YOY? Has anyone does this or achieved this using online marketing? Thanks, Roberts
Re: Apologizing for my absence, and an update... - Apology accepted and thank once again for reviewing my copy of [i:3v8lr26m]Offline Cash Magic[/i:3v8lr26m] report
Best incentive to offer employees - What's the best incentive to offer employees? Is it more health benefits? More vacation? Health club memberships? Paying for training? Cash / non-cash bonuses & rewards? I'm preparing a new package for my company and would love to get your thoughts! Thank you in advance!


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