Turn $500,000.00 Of Promises Into Cash In 4 Hours . Financing Receivables Via Invoice Discounting A

Financing receivables in Canada

Financing receivables in Canada. Trust us, it's not magic . The concept of invoice discounting and receivables lending practices in Canada allows Canadian business owners and financial managers to turn sales into cash ,, pretty well in 4 hrs .. ! In case you haven't thought about that a lot, 4 hrs is better than waiting 1, 2, and yes sometimes almost 3 months for your sales to turn into customer receipts of payment . Talk about bridging the gap!

Surely business owners can't be surprised when they hear that the majority of firms tend to drag their feet when it comes to paying their bills . In the world of corporate financing slowing down payables is actually part of the formula for cash flow calculations ! And be honest, you cant be surprised about that one since the your firm is probably itself in that same majority of firms who in a calculated manner only pay suppliers at the last minute .

At the root of the matter though is the fact that the slow down in receipts from your clients creates a problem for your firm . Can it be fixed ? Absolutely .

We'll quickly add that your own firm can do a lot internally to accelerate cash - that can be done by stressing payment terms with clients and maintaining a focused ( but professional ) approach to collecting your accounts . That type of policy also prevents you from hearing about invoice or product or service problems much too late in the business cash flow cycle .

While many firms want a positive busines relationship rather than have their valued customers on ' credit hold ' its safe to say this is a tough balancing act to manage . One U.S. survey, and we're pretty sure it is the same in Canada had 1000 of the largest corporations in America acknowleding they were paying suppliers more slowly . We already told you the reason why of course . Another survey indicated by the way that 50% of all ' small guys ' were experiencing cash flow ' concerns'! No surprise, right .

Naturally the concern of the SME business owner and manager revolves around ' will I lose a client if we have a strict credit policy '. We dont think so , but at the same time that is yours to decide . We would add by the way that profits of lack thereof rarely takes down a company, but running out of cash ... does .

So, our ' magic solution ' on turning , in our example 500k of promises into cash . Its invoice discounting. It's basically getting cash before your client pays you, and it's done via legitimate receivable lending firms, typically non bank in nature in Canada.

Your receivable or receivables are purchased when you issue the invoice, and typically, 4 hrs or so later you have cash in the bank. In Canada a typical advance rate is 90%, so if you have 550,000.00$ in sales you would receive approx 500,000.00$ in cash. Oh and by the way, that remaining 10% is yours when your client pays, less the financing cost.

Accounting for all this is quite simple , using one invoice as an example you would CR a/r and DEBIT cash and invoice financing expense . Mission accomplished!

The largest corporations in North America use a more formal program that typically is called ' securitization ' whereby they move their a/r off the balance sheet to a third party in exchange for immediate cash . Boy does that balance sheet look good. No A/R and plenty of cash.

The benefits of financing receivables should by now be pretty obvious - it comes down to customer retention, not running out of cash, better supplier relations , and the ability to feel you have a sense on future sales and growth financing .

Speak to a trusted, credible and experience Canadian business financing advisor on how your firm can benefit from invoice discounting. It's not magic, just experience and knowledge!

by: sprokop

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