Securing Liquidity

I. Liquidity Planning

It is vital for each entrepreneur to have an overview of his company’s financial means at all times through routine liquidity planning.

Liquidity planning deals with the company’s financial solvency. With this, the factor time takes on a special role: a company anticipating high payment receipts but unable to pay obligations currently due such as e.g. salaries or taxes, is initially facing insolvency and consequently the end, even if receipts just four weeks later would provide sufficient (liquid) funds.

Condition precedent for the liquidity of each and every company is therefore the precise planning and control of all accrued receipts and expenses.

Liquidity planning and safeguarding is therefore priority: So compare your anticipated future monthly receipts and expenses! In the table, enter the anticipated receipts and expected expenses three months in advance (estimate column). Throughout the month, the actual receipts and expenses are noted in the Actual column and compared with the estimated values.

Impending deficits (shortages for a month) are identified early. Measures to eliminate this deficit can be taken in time. By entering the actual value, you are comparing your estimates and can improve your planning for the next months.

II. Measures Safeguarding Liquidity

Economic lows, declining buying power, poor payment practices and bad debt losses influence the liquidity of companies. When impending deficits are identified in line with quarterly liquidity planning, the following options are available to eliminate a temporary insolvency:

  1. Negotiating with the bank to achieve repayment deferral, or possibly repayment waiver for existing credits.
  2. Conversion of a sight credit into a long-term credit.
  3. Application for a liquidity safeguard credit.
  4. Credit insurance, i.e. insurance against customers’ failure to pay.
  5. Reduction of business expenses.
  6. Reduction of personal expenses.
  7. Postponing payments.
  8. Creating an efficient dunning process and expediting receipts of a payment.
  9. Quicker issuing of invoices.
  10. Arranging instalment payments.
  11. Reducing stock of merchandise.
  12. Sale of company assets no longer required.
  13. Adding a financially strong (silent) partner to the company.
  14. Debt collection through collection agencies.
  15. If applicable Assignment of claim to a factoring company.
  16. No generous payment terms are granted.
  17. Implementation of an established credit check (use of credit agencies, bank enquiries).
  1. Review of the company concept (products up-to-date, new trends, market niches).