Liquidity planning: vital for any SME company
After years of booming economy, the global economic situation is slowly cooling down. Regardless of the industry, it is thus important for all companies to professionalize their financial planning. While large corporations are already doing this for quite a while, many medium-sized companies have a lot of catching up to do. The focus of profound financial planning should be on maintaining the financial solvency – known as cash flow management. Maintaining a vital cash flow is crucial for the survival of any company, but it is also under threat from a variety of risks.
Well established business models are under pressure
Prominent bankruptcy cases such as Air Berlin, Germania or Thomas Cook show clearly that business models that have been established for decades can quickly become under pressure. This is not only the result of economic or seasonal fluctuations. Political factors (e.g. Brexit, trade conflicts) or abrupt changes ( digitalization, changes in consumer behavior) also suddenly put companies in a precarious position. Companies that are unable to anticipate such risks with appropriate scenarios ultimately run out of time to attract new investors or implement savings. Large players in the industry will then often receive support from official donors – a measure that SMEs can barely hope for.
Lack of financial know-how threatens liquidity
While large enterprises often have a high number of employees involved in the analysis and planning of financial indicators, SMES only have limited skills when it comes to financial planning. They are unable to compete with the “big players” – a risk that many companies tend to underestimate. But when a company lacks a well-founded plan of how its financial situation could develop in the future, it will be unable to develop realistic action scenarios. As a result, sudden changes in the cash flow are recognized too late and solvency is seriously threatened from one day to the next. The solution to this problem is smart tools such as flowpilot – tools that enable professional cash flow planning with as little effort as possible.