Liquidity planning: vital

2022 was a financially challenging year, with one crisis after another. That had a lot of impact on the economy. Much uncertainty remains for 2023 as well. The consequences of that impact and uncertainty will also play a prominent role next year in keeping a grip on your business and your projects. Not only for achieving results, but especially for liquidity. So it is important to take control.

Liquidity planning as a steering tool

A liquidity plan (or cash flow budget) is an overview of expected income and expenses. A liquidity plan shows per month or per week how much money is coming into your company, how much money is going out, and what that means for the current account balance. It is useful if you include your bank balance as well as your maximum credit, because then you can also see any excess or deficit balance.

5 reasons why you need liquidity planning must make.

1. Being in control
   Having and keeping under control the financial situation within your company as well as your projects is vital. Now more than ever, as it has been lean months and perhaps lean years for many companies, with much of the fat already gone off the bones.

2. Create insight and peace of mind
   Being illiquid often leads quickly to bankruptcy! It happens even to businesses that are making adequate profits or that have rapidly growing sales. How is your business doing? Will you manage to pay your staff vacation pay in May? Will you get through the quiet summer months without financial problems? Will you be able to make that planned investment or will you have to turn to the bank? Can you agree to a longer payment period for that good customer or will you get into trouble yourself? Which supplier are you going to call to postpone a payment? Which customer are you going to call to ask to pay earlier and perhaps give him a payment discount in exchange? A liquidity plan gives you answers to these kinds of questions and helps you create structure and clarity here.

3. Don't be surprised
   The main reason to do liquidity planning for your business is to eliminate surprises. For example: you can now clearly see when a "good" customer is actually going to pay. You also see your own payment behavior. But the importance is greater. By making a liquidity planning you have direct insight into your financial situation and you can therefore also start steering it. The way to handle your money efficiently and effectively.

4. For the bank or your lender
   If anyone is going to ask for liquidity planning, it's your bank. In addition to understanding what your expenses and income look like, banks especially want to see them plotted out over time. That gives them insight into your income and expenses and when you might need extra money. Indispensable in this day and age!

5. Understanding peaks and troughs in credit needs
   Many companies experience peaks and troughs in income and expenses. Especially in steel construction, where project-based work is done, liquidity planning is a necessity. These companies often have a longer period in which mostly expenses are incurred, followed by a period of high income. Peaks and troughs are also caused by, for example, the payment of vacation pay in May and year-end bonus in December. There are also companies that actually shut down for several weeks during the summer months, resulting in no income. With liquidity planning you can calculate the consequences of this for the liquidity position in advance and take the necessary measures.

These are just some of the reasons why liquidity planning is really necessary, and not just when you get stuck. We would be happy to help you get a grip on this.

Get in touch

Are you getting stuck with your liquidity planning? Or do you need help translating planning into practice? Then make an appointment with us without any obligation. We'd love to hear from you! Call us at +31 (0) 40 24 84 041 to discuss your organization. You can also visit our website for more information: www.liemar.nl.