Cash Flow Projections, Controls, Key To Surviving Early Stage Growth
By Adam Bello | November 30, 2001
Remedial Actions – Do's and Don'ts
High tech enterprises can take the following steps to keep cash flow on course:
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.
Source tactical financing support.
Assume your white knight investor will come.
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.
York Technology Association (YTA)
Canadian Technology Network (CTN)
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