Liquidity monitoring and forecasting

In unstable environment companies are seeking to optimize expenses by:

• Negotiating instalments and discounts with suppliers
• Optimizing administrative costs
• Optimizing staff costs
  • Staff downsizing
  • Cost cutting
  • Introducing downtime/standby
  • Switching staff to part-time work

Company executives need to be sure that they will be able to fulfill obligations to contractors, staff, and tax authorities over the next several months. The more accurate a company’s forecast is, the greater chances the company will survive the current crisis and see new optimization opportunities. If liquidity problems seem unavoidable, the possibilities of attracting external financing should be assessed as early as possible.

For timely decision-making, company executives need continuous monitoring and control of financial indicators. We know that it is almost impossible in the midst of a storm to build an adequate financial monitoring and planning system. So, if companies, for some reason, had not managed to devise a liquidity control system before the crisis, now their executives have to make many decisions in the dark. In such situation, it is in our opinion unreasonable to rely on luck alone, so our experts have developed a new company liquidity analysis service that allows:

• Determining the thresholds for revenues and receivables at which certain measures are required;
• Calculating future staff costs that will allow keeping liquidity at a safe level.

We will address the following questions:

• What will be the company’s balance sheet at the end of the year?
• When will the company be ready to finance a new project?
• Will there always be enough money for payments in the next month/quarter/year?
  • Salaries to employees
  • Taxes
  • Debts to creditors
  • Counterparties
• What is the likelihood of facing liquidity problems in the next 6 months and how can it be minimized?
• Where are the weak points in the company’s financial model, and what indicators should be improved first?
• What measures should be taken when implementing extreme scenarios? What can be done to prevent them?
• Should the financing structure be changed? If so, when and how is it best to do it?
• What KPIs should be set for purchasing/sales department?
• What to look for when selecting buyers/suppliers?
• Are there any risks with the current levels of accounts payable/receivable? Will they arise in a few months?
• When can companies face a cash deficit? How to avoid it? If not avoided, then what is the best way to cover it?

We share our tools and in 3 days train your specialists to monitor and test your company’s liquidity. If you want to analyze your company’s liquidity on your own, we will be happy to share our program and experience. The financial model we offer is based on MS Excel. Data entry, control and calculation of results are as automated as possible, with a user-friendly interface. Flexible and reliable built-in systems of control, alerts and protection against unwanted changes help avoiding calculation errors.

Working with our financial model

1. Initial data entry (reporting and forecasting):
   • Revenues
   • Expenses
   • Accounts receivable
   • Accounts payable
2. The program automatically:
   • Calculates
   • Generates a report
   • Creates forecasts
   • Makes a list of liquidity management recommendations
3. Our consultant:
   • Teaches how to use the model
   • Helps to make sense of the calculations and results
   • Answers any additional questions

Result

You quickly get a streamlined internal liquidity monitoring and control system exactly when your company needs it most.

Our experts will calculate your company’s liquidity forecasts once or periodically.

Our experts:

• Review the forecast values for the company’s revenues and expenses
• Develop a cash flow budget
• Find factors affecting liquidity elasticity
• Simulate various scenarios of changes in revenues, receivables, labor costs, etc.

You will get:

• A report with liquidity forecasts
• Probable scenarios
• Recommendations for mitigating liquidity risk