We provide comprehensive support in planning and managing your liquidity – from implementing a direct 13-week cash flow forecast or an indirect 12-month liquidity forecast to taking full responsibility for your cash management. If required, we can support you in establishing a “Cash Office” or assume operational responsibility for your cash management together with an Interim Manager.
In restructuring situations, all business activities must be assessed with regard to their impact on liquidity.
In restructuring situations, the first priority must be to financially stabilize the company before working towards a sustainable realignment. In times of crisis, the focus must be on maintaining the company’s ability to meet its payment obligations. To achieve this, it is essential to gain a clear overview of the current liquidity position as well as the expected development of liquidity going forward. All business activities must be translated from their impact on the income statement (P&L) or balance sheet into their respective cash impact – reflected in the cash flow statement.
Sufficient liquidity is the lifeblood of any organization.
Which Instrument Is Suitable for Managing Short-Term Liquidity?
To safeguard short-term liquidity, we recommend implementing a direct 13-week cash flow forecast, enabling you to maintain a rolling view of the next quarter at all times. Typically, cash inflows and outflows are planned on a weekly basis. In certain situations, however, daily planning may even be necessary to ensure the company’s ability to meet its payment obligations.A 13-week cash flow forecast is an effective tool for active liquidity management. Based on this forecast, cash inflows and outflows can be actively managed to ensure that the company remains solvent at all times. This can be achieved, for example, through accelerated receivables collection, making full use of agreed supplier payment terms, or postponing investments. Maintaining a 13-week cash flow forecast can also provide legal protection for the company’s management and executive board by demonstrating that liquidity has been actively monitored and managed.
Cash is King! In turnaround situations, liquidity is the top priority!
How Can Long-Term Liquidity Management Be Achieved?
In addition to short-term liquidity, the company’s long-term funding and liquidity position over the next 12 to 24 months must also be closely monitored. This is typically achieved by deriving the cash flow indirectly from the income statement and balance sheet forecasts. For a longer planning horizon, and to ensure a high level of planning quality, it is advisable to prepare not only a budget for the coming year but also a medium-term financial plan including a projected income statement and balance sheet, as this also allows for seasonal fluctuations to be taken into account.
The level of detail in a 12- to 24-month liquidity forecast is generally lower than in a 13-week cash flow forecast, with cash inflows and outflows typically planned on a monthly basis. Long-term liquidity planning enables potential future funding gaps to be identified at an early stage, allowing appropriate measures to be initiated in good time. Examples include the sale of assets or capital and financing measures. The 12- to 24-month liquidity forecast therefore also serves as a key management and control instrument.
According to the guidelines for preparing a going-concern forecast, a planning horizon of at least two years is mandatory for liquidity planning.
Contact Us for Support with Liquidity Management
We provide expert support to help you manage your liquidity effectively and safeguard it sustainably.
Institutionalizing Cash Management and Establishing a Company-Wide Focus on Liquidity
In many situations, it is advisable to consolidate all liquidity-related activities within a central “Cash Office” with a direct reporting line to senior management. The task force established for this purpose should include employees from relevant business functions such as Treasury, Accounts Receivable, Controlling, and Sales. The “Cash Office” is responsible for both planning and continuously monitoring the company’s liquidity position, as well as actively managing it. By clearly consolidating responsibilities, liquidity is established as a key management metric and receives the necessary attention. This ensures that measures to safeguard the company’s ability to meet its payment obligations can be implemented quickly and in a targeted manner.
What Is the Difference Between Direct and Indirect Liquidity Planning?
In the article “Direkte und indirekte Liquiditätsplanung” (in German), Kurt Safrata and Nino Predota explain how both methods work in practice and when each approach should be applied.
How can we help?
A sudden vacancy? Lack of leadership? A need for a turnaround? Or a need to achieve growth and results?
Our Interim Managers have at least 15 years of experience in leadership roles and are specialized in overcoming challenges similar to yours. They step in and start delivering results from day one with great leadership and drive – exactly when you need it.
For more than 20 years, we have been helping companies in Austria and the DACH region to identify the best Executive Interim Managers and experts available.
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