Liquidity planning vital for steel building and steel construction!

Don't be fooled. Cash is still King! How much money will still be in your bank account tomorrow, 2 weeks from now or 2 months from now?

Here are 6 reasons why you should do liquidity planning.

1. The "in control" Being and keeping on top of the financial situation within your company and of your projects is vital. Now more than ever, because for many companies these are lean months and perhaps lean years when all the fat was already off the bones.
2. For yourself!
   Being illiquid often leads quickly to bankruptcy, and it happens even to companies that are making adequate profits or that have rapidly growing sales. I experienced it years ago with a client. By using this tool then, this company still exists and they are financially sound.
   How is your company doing? Will you manage to pay your staff vacation pay in May? Will you get through the quiet summer months without any financial problems? Will you be able to make that planned investment or will you have to turn to the bank? Can you agree to a longer payment period for that good customer or will you get into trouble yourself? Which supplier are you going to call to postpone a payment? Which customer will you call to ask to pay earlier and perhaps give him a payment discount in return? A liquidity plan will give you answers to all such questions.
3. A liquidity plan is a steering tool, the early warning
   A liquidity plan (or cash flow budget) is an overview of expected income and expenses. A liquidity plan shows per month or per week how much money is coming into your business, how much money is going out, and what that means for the current account balance. It is useful if you include your bank balance as well as your maximum credit because then you can also see any excess or deficit balance.
4. Don't be surprised
   The main reason to do liquidity planning for your business is to eliminate surprises. For example, you can now clearly see when a "good" customer is actually going to pay. You also see your own payment behavior. But the importance is greater. By making a liquidity planning, you have direct insight into your financial situation and can therefore also start steering it. The way to handle your money efficiently and effectively.
5. The bank or your lender!
   If there is anyone who will request liquidity planning it is your bank. Banks want to know what your expenses and income look like and over time. This gives them insight into your receipts and expenses and when you may need extra money. Indispensable in this day and age!
6. Understanding peaks and troughs in credit needs
   Many companies experience peaks and troughs in income and expenses. Especially in steel construction where project-based work is done, liquidity planning is a necessity. These companies often have a longer period in which mainly expenses are incurred, followed by a period of high income. Peaks and troughs are also caused by, for example, the payment of vacation pay in May and year-end bonus in December. There are also companies that actually shut down for several weeks during the summer months, so there is no income. With liquidity planning, you can calculate the consequences of this for the liquidity position in time and take the necessary measures.

This non-exhaustive list is just a sampling of the number of reasons why liquidity planning is really necessary, not just when you get "pinched."

Why liquidityplanning and non-liquiditybudget?

We prefer to talk about liquidity planning rather than a budget because a budget is just a budget where you are going to put reality next to it. A liquidity plan tells you that you have to stick to this. That's how you're actually going to do it!

Want to learn more about creating a liquidity plan or have other questions? Then please contact with us.