Tag Archives | working capital

Working Capital from Real Estate

“Many companies own the land and buildings necessary to conduct the day-to-day operations of their business. Oftentimes this valuable asset is included in traditional bank financing packages as the cornerstone of the credit facility. As long as the business progresses as the bank deems appropriate, and all loan and debt service coverage covenants remain in compliance, the working capital from real estate will serve to anchor the lending relationship.

Working Capital from Real Estate

Companies and/or individuals may also own commercial real estate… [This] may provide an income stream or conversely, suffer from under-utilization and needed development. [The banking community typically finances] these transactions as a “onetime” advance which is conditioned for certain renewal requirements… Additional funding is triggered by developmental thresholds that have to be met. [In addition,] the investment opportunity associated with these properties may require balance sheet leverage beyond what the bank is willing to tolerate…”

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Working Capital from Real Estate

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How to Develop a Daily Cash Report

Learn how to develop a daily cash report in today’s blog. Use the Daily Cash Report to report on the daily cash balance and to help manage cash on a weekly basis. This tool is especially useful when entering a situation where active cash management is required for your daily cash flow. The daily cash report template is used best as a tactical, active cash management tool. Knowing your daily cash position as well as your weekly cash commitments will give you added impetus to collect money and/or to generate revenues.

How to Develop a Daily Cash Report

Why use a daily cash report? Often CFO/Controllers when facing a cash crunch manage cash by reviewing the online bank balance. Though easy to do this number is not accurate. It does not take into consideration outstanding checks. Another symptom of a cash crunch is that accounting falls behind in processing information. By preparing this daily cash flow forecast or projection you force the accounting department to stay current with posting transactions.

This tool is also helpful when used in conjunction with the Thirteen Week Cash Flow Projection. It is helpful to think of the 13-Week Cash Flow Report as giving you the strategic big picture needs, while the Daily Cash Flow Report provides a more tactical level measure of your firm’s cash position. You can tie a week’s worth of cash receipts and cash disbursements as reported in the Daily Cash Report to the 13- Week Cash Flow Report….

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For more tips on how to improve cash flow, click here to access our 25 Ways to Improve Cash Flow whitepaper.

How to Develop a Daily Cash Report
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How to Develop a Daily Cash Report

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Recapitalizing Your Company Using Mezzanine Financing

Recapitalizing Your Company Using Mezzanine Financing

“There comes a time in every company’s life cycle when the company and/or the entrepreneur need some more cash. Perhaps the company needs more working capital or some additional money to help fund an expansion. Or, maybe the entrepreneur feels that it’s time to reap the benefit of all those years of hard work. Whichever the case may be, the entrepreneur will be faced with many different financing options. An interesting and often over-looked option is that of bringing in a private equity partner in the form of mezzanine funding. Furthermore, the only option may be recapitalizing your company using mezzanine financing.

Why can’t I just go to a bank?

Let us consider a common business dilemma: 1) lack of working capital or 2) lack of funds for capital expansion. Entrepreneurs by nature are optimists and passionate people, especially when it comes to their companies. They want and need a financial partner that can grow with them. Typically, your first option of choice is your friendly, neighborhood commercial bank. There are several issues that one often encounters here…”

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Recapitalizing Your Company Using Mezzanine Financing

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Financing a Startup

Recently came across an article in the London Times about how to approach financing a startup or new business. Overall it’s a pretty good summary of the basic dos and don’ts. Do know what you can do without today. Negotiate with your suppliers so that you can get better terms on your payables, such as a longer payment period and/or discounts. Don’t take on an equity investor unless they bring something to the table which is absolutely crucial (other than money).

Financing a Startup

One item mentioned, which has been problematic for even my established clients has been the timely billing of customers and collection of accounts receivable. How much working capital are you financing due to large A/R balances? For most startups, poor billing and collections can be a killer combination. For all businesses, it can be quite expensive to continue to finance customers for months after a purchase. Know your accounts receivable turnover. Track it. If it is low or declines over time, find out why. Seek to improve the timing of your collections. Provide your staff with incentives for reducing your company’s days sales outstanding.

Many entrepreneurs focus on profitability (which is important) but neglect monitoring and managing their cash flow. It is important as the financial manager of a startup or smaller company to watch your cash flow like a hawk.

For more tips on how to improve cash flow, click here to access our 25 Ways to Improve Cash Flow whitepaper.

Financing a Startup

Financing a Startup

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Don’t Let Your Business Lose Money for Too Long!

Over the holidays we were asked by an investor to examine a company and determine if it could survive. We reviewed the financial records and met with management. At the end of our review both we and management agreed that we were about a year too late in saving the company! What difference does a year make?

The Difference of a Year

What was different one year ago? The company had a profitable business surrounded by money losing products and high overhead. Action could have been taken to shed the unprofitable business, reduce expenses and grow the profitable sales. Unfortunately, time had run out!

Don’t Let Your Business Lose Money for Too Long!

One year ago the company had positive working capital and a good relationship with their vendors. Over the past year, they consumed their cash and disappointed their vendors to the point that no one was willing to work with them. The best analogy would be to imagine you are flying an airplane and the engine stops. As the plane plummets toward the earth you don’t wait until 1000 feet over the ground to bring it out of a dive! Same thing with a company!

If you find your company in a dive and losing money you should remember two rules:

Rule #1: Don’t Lose Money!
Rule #2: See Rule #1!

It is imperative to take corrective action early in the crisis. Most entrepreneurs do not want to take one step backward. Unfortunately, it is sometimes necessary in order to survive a recession.

Don’t let your business lose money for too long! If you are seeking more ways to make a big impact in your company, download the free 25 Ways To Improve Cash Flow whitepaper to find other ways to improve your cash flow within 24 hours.

Don't Let Your Business Lose Money for Too Long!

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Don't Let Your Business Lose Money for Too Long!

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Forecasting and Your Business

Do you manage your business looking backward or forward? Are you preoccupied with looking at how last month compared with the budget instead of where your business is headed? While examining actual performance against the budget can be a very useful approach to identifying areas of improvement in your organization, it can also take your focus away from planning for your future business needs.

Forecasting and Your Business

It is important to develop and maintain a running forecast model of your business, one that incorporates trends (in sales, COGS, and overhead) as well as other information (addition of a significant new customer, loss of a substantial current customer, anticipated large changes in raw material prices and/or other expenses, or a new building lease, for example). This will help you estimate your upcoming needs for cash and give you the time to adequately prepare.

Connecting Your Financial Statements

You need to have an income statement model. This projects sales based on expected items or services sold and the prices received, as well as expected gross and net margins. Then, tie your income statement to a projected balance sheet and statement of cash flows. You should also consider a running working capital forecast as well as a capital expenditure forecast.

Being able to anticipate future capital needs months in advance can go a long way to improving your company’s performance by allowing you the time to seek out the best terms (in cost of capital as well as other terms). Such a forecast will help you establish credibility with prospective lenders and investors as well as provide an easy means of communication with them.


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Forecasting and Your Business

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Forecasting and Your Business

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