Your company needs to be financially agile. Without that ability, you won’t be able to make rapid changes and adjustments as the market requires. That means you could miss out on some of the most important updates to your company over time. If you want to buy new buildings, for example, you have to be ready when the market is good.
You also need to consider the leaner times, and how the finances of your company could be affected if sales are slow. Do you have the agility to get through that? If not, you could find that your business is floundering or even forced to close. But it doesn’t have to be that way. Your business can get out of that cycle, by managing its liquidity in the right way.
Financial Agility Requires Liquid Assets
In order to be as financially agile as possible, you need to focus on the level of liquidity you have. With sound liquidity management your business will operate more smoothly. You’ll know what you have in liquid assets at all times, and you’ll also know how to make adjustments that will create more liquidity if you need it.
Some assets are more easily made liquid than others, so holding onto the right type of assets and a good mix of them can make a significant difference in whether you have proper liquidity management, as well. But how do you determine what level of your company’s assets should be liquid, and what doesn’t need to be?
The answer is in the type of assets you have and the kind of company you run. Not every kind of company grows at the same rate, and some need more access to larger assets than others. If you work from home or have a virtual-based business, your liquidity management will likely be easier than a company that’s physically based and rapidly expanding.
But having everything in one place when it comes to your financial data is critical to ensuring that you can see what’s liquid and what isn’t, so you can adjust accordingly. Good liquidity management is easier and more convenient when you have one solution for everything and can access it as needed.
Real-Time Data Means Better Financial Decisions
Another aspect of managing your company’s liquidity correctly is having the real-time data to make wise decisions. When you see everything in real-time, it’s much easier for you to recognize problems and opportunities. Otherwise, the data you’re using could be old and out-of-date. Financial aspects of your company and its surrounding industry and market can change quickly.
If your data is days or weeks old, you don’t have the right information to make important decisions. Instead, you’ll be guessing too much based on what happened in the past, which isn’t the direction you want to be looking. When you have strong visibility and good data in real-time, managing your company’s level of liquidity becomes second nature.
Visibility is Vital, Even in the Details
You want to be able to see everything in real-time, not just the main totals. The income and outflow at your business certainly matter, but you want to know more than just those figures. Understanding where all the income is coming from, and what every expense is addressing means you can handle liquidity issues as they arise. The details can make a big difference.
The more specifics you have about your company, the more easily you can make rational decisions that work for your needs. Then you can adjust your liquidity, so you can put more money into long-term investments, buy what you need, or protect your company from a downturn in the market.
Be Prepared, With Strong Liquidity Management
The goal of liquidity management is to have an overarching, holistic view of your company’s finances. By doing that, you’re setting yourself and your company up for a stronger future where you can feel confident. Being prepared with strong liquidity management isn’t the only thing your company needs, but it’s one of the most important aspects of your future success.
Finding the right tools for managing your liquidity is an important part of handling your company’s finances properly. When you have good tools and the right partnerships, it’s easier to see what you need to change and how you can make adjustments quickly. The more planning you do, the better off you’ll be as your company continues to grow.
It’s also important to revisit your company’s level of liquidity at regular intervals, because what worked for you in the past may not be as advisable in the present. With an eye to the future, it may also be time to make some changes in anticipation of what’s to come. Strong liquidity management will give your company the best chance at success, and give you more peace of mind.