How To Manage Your Company's Cash Flow in Turbulent Times

By Canadian Western Bank

Cash flow’s high on the radar for entrepreneurs in both sunny times and stormy skies. That’s why every day calls for a hundred per cent chance of good cash management practices.

Ready your business for any kind of economic weather. Bank on these go to tips from CWB’s Samuel Cummings, Vice-President and Market Lead (GTA West District)

1. Improve your liquidity – especially in a higher interest environment.

Cash is king, regardless of the economy. Here are some ways to free up money for your business:

• Budget for higher interest rates in your projections.

• Renegotiate terms to ensure you’re collecting payment faster –or renegotiate terms with vendors to push out payables.

• Focus on potential incentives for your terms (such as a 1-2 per cent discount or reduced freight costs).

• Consider liquidating stale or slow-moving inventory.

• Delay certain projects or expansion plans (if it makes sense).

• Have regular conversations with your banking partner about your goals and options.

2. Consider the role of “good” debt.

We often talk with our clients about how to capitalize on their position. For example, one debt-adverse client invested in some equipment over the last couple of years. After working with them, we put together a financing solution that freed up liquidity and created a tax efficient debt structure. They came to see it how that debt benefits them. When you think about taking on good debt – tax-deductible debt – you’re not looking at a term of 12-months or less. Typically, the window for good debt is 10 years or more.

3. Struggling with the higher interest payments of a variable rate loan? Be proactive.

The first step is to understand what the costs are. Then you should have a conversation with your Relationship Manager. We’ll look at different things with you – perhaps there are refinance opportunities or ways to bridge the short-term pain of higher rates. Some clients have passed on these additional costs to their customers. Every business is different, as is the advice we provide. So reach out to your financial partner early, have a conversation, and let’s work together to put a plan in place for you.

Get cash management support from the bank for business owners. Reach out to business banking experts like Samuel Cummings at CWB’s Mississauga location: (289) 998-2688.