Receivable Funding In Canada . High Noon Issues In Business Financing For A/R

The essence of A/R finance couldn't be simpler. It's simply a bridge to allow you to receive cash/working capital prior to payment from clients. The world of accounting allows you to classify this as a ' current asset ' , which simply means you have to collect it within a year, which, unfortunately is the same timeframe that your clients seem hell bent on paying you in!!

When you're financing your accounts one of the key factors to keep in mind in discussions with your banker or your commercial finance firm is the idea of revenue recognition. You need to remember that you must be able to clearly demonstrate that the product or service you have delivered is in fact ' recognized' and that there is an assurance that the customer has an obligation to pay you. So selling on consignment or on a contract type basis with milestone payments presents real problems when it comes to financing your accounts.

We do work with many businesses who do in fact sell on a ' contract ' type basis, and we would add that if the milestones are clearly defined. And that you've delivered on your commitment to the client, you are still in a position
to finance AR.

Receivable financing fast become one of the most popular methods of business finance. Using a 10k invoice as an example the Canadian business owner / manager receives approx 9.8k immediately on invoicing, with the 200 dollars considered a discounting or carrying charge. It's as simple as that if you're dealing with the right party.

Whether you finance your A/R or you don't the issues of cash discounts is an important one. They are not a reduction of your price offered to your clients; they are simply an incentive for the client to pay you earlier. If you are financing your A/R a huge amount, if not all of the cost of financing your business can be reduced by using cash flow from AR financing to take discounts with your own key suppliers.

Understandably, (because it's a cruel world) many of your clients will try and take as long to pay as possible. Major corporations in Canada use their size and buying power clout to their advantage by paying smaller firms in either 60 to 90 days. That enhances their own cash flow in a big way. The financing of your A/R via a bank facility, or a commercial invoice discounting facility allows you to fight that battle, and if you have priced your products and service with that delay in mind you'll be a strong competitor in your marketplace and industry.

These then are some key issues that affect your management and financing of A/R. There are others which we will cover off in the future, but seek the advice and services of a trusted, credible and experienced Canadian business financing advisor who can assist you with your business funding needs. You'll then be a formidable competitor when HIGH NOON rolls around. Stan Prokop - founder of 7 Park Avenue Financial – http://www.7parkavenuefinancial.com Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info re: Canadian business financing & contact details : http://www.7parkavenuefinancial.com/receivable-funding-business-financing.html

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