Navigating Liquid Asset Approaches in Volatile Financial Conditions
In today's unpredictable economic climate, managing liquidity has become a crucial aspect for businesses to thrive. Here's a guide on how to effectively manage liquidity, based on the insights we've gathered.
Firstly, it's essential to optimise the Accounts Receivable (AR) process. Sending invoices immediately after work is completed can help improve the AR process, ensuring that businesses collect their dues promptly.
Leveraging technology is another key strategy. Technology can increase visibility, reduce manual errors, speed up decision-making, and make cash work harder for the business. Automated forecasting tools, for example, can improve the accuracy of cash flow projections and alert to potential shortfalls before they become a problem.
Aligning budgets with cash flow forecasts is also important. This practice can help avoid creating strain and make better decisions when things change. Budgeting isn't just about tracking expenses; it also helps make better decisions when circumstances alter.
Building good relationships with multiple banks can make it easier to access funding when needed. Having access to cash or credit enables businesses to move fast when opportunities arise, such as buying a competing business or investing in new equipment.
Liquidity allows businesses to make decisions based on what's best for their business, not just what their cash balance allows. It helps businesses stay stable during downturns by allowing them to continue paying employees and covering fixed costs. Delays in customer payments can put pressure on cash flow, so being thoughtful about bill payments can help manage liquidity by taking full advantage of payment terms and only paying early when it provides a clear benefit.
Treating budgets as living, breathing documents during periods of uncertainty is also advisable. Categorising expenses based on their level of importance can quickly identify areas to cut or scale back if cash flow tightens.
A treasury or cash management system can provide a consolidated view of all cash accounts across banks, currencies, and entities. Improving Accounts Receivable (AR) and Accounts Payable (AP) processes can help manage liquidity by optimising cash inflows and outflows. Automated invoicing and follow-up reminders can help manage overdue accounts without adding extra manual work.
The economy is currently unpredictable, with geopolitical conflicts, shifting tariffs and trade policies, and interest rate uncertainty. Setting up a line of credit before it's needed can help businesses lock in better terms and access cash quickly if something changes.
Joe Camberato, the CEO and Founder of National Business Capital, a private lender marketplace for bridge and growth capital, emphasises the importance of managing liquidity. He says, "Businesses focusing on liquidity management are better equipped to not only survive but also to take advantage of opportunities that others might miss."
The company National Business Capital, founded by entrepreneur Russ Cofano, is a testament to the success that can be achieved through effective liquidity management. By following these strategies, businesses can navigate the economic landscape with confidence and seize opportunities as they arise.
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