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Cash Flow Projections, Controls, Key To Surviving Early Stage Growth

By Adam Bello |

Remedial Actions – Do's and Don'ts
High tech enterprises can take the following steps to keep cash flow on course:


Control cash.
Forecast cash flow.
Implement working capital improvements.

In dealing with key suppliers, develop working relationships that allow for extended payment periods to stretch funds. Once agreed to by both sides, create a policy and stick to it. This will prevent preferential decision-making with any one supplier, and will avoid cash crunches with all of them.

In motivating debtors to speed up payment periods, negotiate discounts and incentives for early payment inside standard terms.

If chasing overdue accounts receivable, consider a collection agency. Even after agency fees (generally 10 per cent of the collected amount), receiving the capital can bring new breathing space, while freeing up staff to work on new opportunities.

Factoring, the purchase by a financing company of your invoice or work order at the outset of work with a reputable company, can provide the capital injection. This can also allow the financial flexibility to pursue a major sale or contract, and build a track record in the process.

Implement tactical cost reductions.
Use leaseback strategies, by selling equipment and then leasing it back to create new cash flow. Embracing leasing options also provides the opportunity to break out of credit card habits. McAlister adds, "When it comes to purchasing a new piece of equipment, many entrepreneurs make the entire purchase on their credit card because it's easy and they don't have to think about it. Instead, they should consider the opportunity to lease the equipment. This becomes a source of financing, freeing up funds for other needs. You should be willing to break your comfort zone for payment, by asking questions about payment options, negotiate better deals to keep the costs down, and look for opportunities up front to make the most of the budget."

Source tactical financing support.
Speak with bankers, accountants, and lawyers for referrals to industry (technology), professional, and angel investors. Even if those sources say no, ask them for referrals to better suited financing partners.


Assume your white knight investor will come.
Focus on technology without focusing on sales and finance.
Be greedy when investors are approached.

If you are unwilling to commit to an investor by offering a realistic share in the profits, especially if they are providing bail-out funding for restructuring, you may lose opportunities to grow as a company.

Use Canada Customs and Revenue Agency (CCRA) as your financing source, such as ESD (Electronic Service Delivery), GST, PST, and Employer Health Tax (EHT). Maintain proper bookkeeping and deduction systems for taxation can help avoid costly mistakes, even after the company becomes insolvent. One company in crisis, Davidson relates, paid employees as contractors, who declared it as net income to Revenue Canada. The company, failing to file an employer number or remit employee service deductions for nearly three-year period, accumulated $500,000 in unpaid service deductions. Even after the corporation declared bankruptcy, Revenue Canada held its individual officers financially responsible for the outstanding deductions.

Site seeing:

York Technology Association (YTA)

Canadian Technology Network (CTN)

Steps to Success

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