Liquidity Management

Liquidity management - irrespective of the liquidity situation of a company - is part of the mandatory programme of corporate management. This applies equally to small and medium-sized companies and large corporations. As a basis for liquidity management, centralized liquidity planning has become an established standard. The implementation of an efficient and automated liquidity planning enables an effective liquidity management with sufficient time for the evaluation and analysis of the results as well as the derivation of possibly necessary optimization measures.

Implementation of professional liquidity planning

Liquidity planning is usually implemented in three phases. The design and concept phase starts with the identification of the main liquidity drivers and information sources. Subsequently, the planning methodology, planning structure and planning process are individually defined depending on the purpose of liquidity planning and the size and development stage of the company. Detailed modelling of the individual planning data is carried out as part of the functional implementation. Cash flows can be determined by means of transfer, calculation, derivation from other plans or supported by statistical analyses ("predictive analytics"). Planning parameters and planning premises should be fixed centrally, if possible, to ensure planning consistency.

In addition to special planning solutions, the technical realization of liquidity planning can also be carried out in the planning modules of any existing corporate performance management or treasury management systems. Connecting upstream systems (ERP systems, market data platforms, etc.) via automatic interfaces represents the foundation for further automation of planning data determination. The system based implementation also provides the necessary infrastructure for the consolidation of the individual plans, the stable supply of information to the management and adequate analysis options for the employees in finance departments.

Additionally, the functional and technical implementation is accompanied by change management to anchor the process of liquidity planning as broadly as possible in the company. Generally, all specialist departments that can trigger incoming or outgoing payments and whose decisions influence liquidity-relevant payment flows should be included.

Optimized liquidity management

During the planning process, particular attention lies on strict compliance with the planning process. It is recommended to work based on a centrally defined checklist. In addition, a binding discussion should be held with all major stakeholders in the planning process. The results of the liquidity planning should be distributed promptly in a simple, visualised and commented report.

The schedule should allow sufficient time for the analysis of the liquidity planning. The quality of planning is constantly monitored and continuously improved by comparing planned/actual data. Plan/plan comparisons allow the identification of trends and initiation of countermeasures at an early stage. The forecast liquidity and liquidity movements represent the foundation for risk analyses and simulations.

Due to the high level of detail and regular performance reviews as part of planning updates, liquidity planning is the ideal starting point for deriving and monitoring measures to optimize liquidity, such as cash management and payment transactions, financial risk management and, in particular, working capital optimization. The broad anchoring of liquidity planning and the common understanding of the forecasted liquidity situation and liquidity drivers enable the effective coordination and implementation of optimization measures.

Our services in the area of liquidity planning and liquidity management:

The experts at FAS provide comprehensive support in the introduction, implementation & optimization of liquidity planning as well as in sustainable liquidity management and the introduction and use of technical solutions.

If you are interested or have any questions, please contact us.


 Jürgen Diehm Partner