Financial success for a business does not happen automatically. It takes a plan and good people to execute it. It starts with finding businesses that need or would like to have more cash quickly.

Is Cash Flow tight? Would the business like to yield a greater return for their investment in Working Capital? Is there a need to reduce Working Capital Requirements altogether? Would the business like to increase their Gross Margins and their Bottom Line Profits? Is it important for the business to increase the value of their Balance Sheet by lowering Accounts Receivable? Would the answer be mostly "Yes" to all of these questions? If so, find out how this can take place.

The primary premise is to "Sell" certain Invoices at a slight discount in exchange for better Cash Flow, lower Accounts Receivable, etc., i.e. all those attributes referred to in the questions above.

All of the Invoices for any particular Customer of the business are being "Sold" to an Invoice Buyer, a Financial Institution at a discount. The actual discount depends on how quickly the Customer pays it bills. If they pay on time, the discount is less than those who pay their bills late. The Invoice Buyer always provides an immediate Cash Advance (typically 70%-90% of the face value of the invoices) to the business whenever new invoices are being processed. These Cash Advances eliminate a major portion of Accounts Receivablefor this Customer.

For example, assume that 10 Invoices are being generated per week (about 40 Invoices per month) which end up being sold to the Invoice Buyer. Over the course of time the Cash Flow becomes more smooth and improves dramatically, because the Cash Advances are being received weekly instead of waiting for the Customer to pay their bills. The smoothing of Cash Flow occurs more in line with the timing of expenditures for Cost of Goods Sold. The business ends up with a reliable, predictable cash stream.

In fact, these Cash Advances are the primary reason why the Working Capital Requirements are being cut in about half. Since the typical invoice has terms of "Net 30 Days" which means the Working Capitalis outstanding now only very short period of time. One of the reasons the diminished Accounts Receivable also reduces the Working Capital Requirements is the Cash Advances that are received from the Invoice Buyer's investment in transactions during one week covers the Cost of Goods Sold for transactions the next week, and this 2 week cycle repeats about twice a month thereby reducing the capital requirement by half.

The balance due from the Invoice Buyer, less the discount, is fully rebated back whenever the Customer pays its bills. The rebates do not lower the Working Capital Requirements remain Accounts Receivable as before.

Once the business understands how the profitability mechanism works a complete Business Profitability Analysis should be completed for the revenue associated with the best Customer. This will be the least Customer of the entire business assuming their invoices are outstanding for the least amount of time.

If the Business Profitability Analysis shows that the business would increase its profitability, then the business should plan to institute the financing concepts. This is a three stage process. The first stage is to apply for financing and agree to Sell the Invoices for the Best Customer - the same Customer that was analyzed. This financing should remain in effect for a 3 to 6 month period. After that the test should end.

The second stage of the test is to monitor the financial parameters associated with the Invoices being processed. It is important to keep track of the following:

• The Products/Services actually delivered and number of Invoices processed each week (record dates).
• The Cash Advances and Rebates received from the Invoice Buyer each week (record dates).
• The actual expenditures for Cost of Goods Sold for Products/Services (record dates).

Once a month during the Test Period record the Monthly Revenue, Monthly Variable Cost, Cash Flow, Average Working Capital Requirement, and Average Accounts Receivable associated with the Invoices. At the end of the Test Period perform a Business Profitability Analysis using the parameters measured during the Test Period. Compare the actual results with initial Analysis at the beginning of the Test Period.

The third and final stage of this Profitability Concepts Test is to determine what to do next. Once the final Business Profitability Analysis was compared with the predicted pro forma, it is time for the business to make a decision on the worthiness of the financing. If the Analysis compares favorably with the prediction, then the business should "Sell" a few Invoices more from additional Customers and continue the financing. Otherwise, the business should terminate the financing.