Using A Liquidity Management Solution

Maintaining a solid cash position is important for every company. Without proper liquidity management, even a profitable business can fail to meet its financial obligations. Manual reporting can take a lot of time and is prone to errors. Liquidity management solutions automate this process to make it more efficient and accurate.

Identifying Liquidity Shortfalls

Poor liquidity management can lead to missed growth opportunities, a lack of cash on hand to pay short-term obligations and even potential legal or regulatory problems. In the worst case, a company can become insolvent. A well-implemented liquidity policy helps companies maintain a strong cash position by monitoring the flow of funds, forecasting future needs and identifying possible shortfalls before they occur. This includes reviewing accounts receivable and payable to identify trends and addressing any invoicing or collection issues that may arise.

A good liquidity management solution strategy also involves streamlining accounts payable and invoicing processes to minimize costs, taking advantage of early payment discounts and negotiating favorable payment terms with suppliers. Finally, it involves leveraging banking services such as sweeping, pooling and overlay structures to optimize interest earned on checking/current accounts and invest available funds automatically1. These strategies are all designed to increase visibility and control to maximize liquidity. In addition, it’s important to manage market risks that can impact the ability to access additional liquidity, such as fluctuations in financial markets.

Managing Liquidity Shortfalls

Liquidity management involves managing the risk that your company will not have enough cash to meet its short-term financial obligations. This includes having a contingency funding plan in place and regularly monitoring liquidity triggers to identify problems as they arise. This can include optimizing accounts payable terms to minimize interest expense and ensuring that vendors are paid in a timely manner to avoid payment delays. It can also include reducing inventory levels to reduce carrying costs and minimizing the risk of stockouts. It can also involve identifying and avoiding seasonality and cyclicality in the business and creating a flexible financing plan to address these fluctuations.

A good liquidity management solution will enable your bank to provide you with the services you need to manage your daily liquidity position, including sweeping (physically moving funds from one account to another) and pooling (non-physically concentrating balances but notionally consolidating them to carry out interest computations). This can help you maintain a strong, liquid cash position and maximize your working capital.

Managing Long-Term Liabilities

A solid liquidity management strategy is a necessity in volatile business environments and a key indicator of financial health. This includes closely monitoring cash inflows and outflows as well as ensuring that a company’s liquid assets can cover its debt, short-term investments and spending. Long-term liabilities include debt (accounts payable), lease payment obligations and bonds, among other things. They can significantly impact a business, especially when payments are due in the future. Properly managing these long-term obligations requires proper forecasting and a clear understanding of the company’s financial situation.

cloud core banking platforms also depends on sound policies and internal controls that can help prevent fraud and embezzlement. For example, a treasury management solution should allow for easy concentration of balances across banks and regions, simplify recordkeeping and improve forecasting. It should also enable a company to make data-driven decisions fast. Manual reporting takes time and is prone to error, while automation enables top managers to generate reports in a few clicks.

Maintaining A Strong Cash Position

Having a strong cash position allows businesses to meet their financial obligations in a timely manner, avoid bank fees and defaults, and take advantage of opportunities like new growth opportunities or acquisitions. It also improves their bargaining power with suppliers and creditors and enables them to secure discounts on purchases and financing. In addition to reducing risk, a robust cash position can boost shareholder value. Companies with excess cash can use it to pay dividends or buy back shares, which can improve investor confidence and company stock prices. It can also be invested in short-term assets such as Treasury bills or money market funds, which provide higher interest rates than savings accounts and are safe from inflation.

The key to maintaining a solid cash position is having visibility into how much you have at any given time, and that’s where treasury management systems come in. They can provide near real-time insight into a company’s cash position by subtracting daily outflows from daily inflows and then calculating the result.


Tracking liquidity can help ensure you have enough cash to pay debts, short-term investments and obligations. But holding onto too much could leave investment and growth opportunities on the table. Manual reporting takes a significant amount of time and opens you to human error. Automating treasury processes can free up valuable resources and make your reports available in just a few clicks.

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