Sustainable liquidity planning - a must for every SME
Sustainable liquidity planning is a central management instrument for every small and medium-sized enterprise. It ensures solvency, enables a realistic assessment of investment opportunities and strengthens the creditworthiness vis-à-vis banks and suppliers. The aim is to detect fluctuations in inflows and outflows at an early stage, to build up reserve capacities and to be able to react flexibly to changes in the market. Structured planning combines short- and medium-term budgets with long-term financial goals and takes into account both operational and strategic aspects.
Why do SMEs find sustainable liquidity planning so difficult?
Small and medium-sized businesses often face a shortage of capacity and resources – there is often not enough staff, time or technology to handle all tasks efficiently. At the same time, their liquidity is highly dependent on external factors, such as customer payment behavior, payment terms, market prices, and the availability of external financing. This combination of limited internal resources and volatile external conditions means that liquidity is difficult to plan for and vulnerable to shocks.
Frequent failures in liquidity planning
There are a number of aspects to consider when it comes to sustainable liquidity planning. These are the biggest stumbling blocks:
No regular, reliable cash flow planning: Consideration of expected payments (turnover) and disbursements (costs, investments). In most cases, only an annual budget is created.
- Unrealistic revenue assumptions and cost plans without sensitivity analysis
- Missing or insufficient buffer zones or liquidity buffers.
- Neglected receivables and liability management, e.g. unreliable payment practices, long payment terms.
- Missing or inconsistent credit line and funding controls.
- Poor collaboration between accounting, purchasing, sales, and management.
- No early warning signals or alarm limits on liquidity ratios.
- Lack of investment relevance and prioritization with regard to cash inflow.
- No regular review of company metrics or dashboards.
- Ignoring crisis or crisis scenarios (no contingency plans).
What is a sensitivity analysis?
A sensitivity analysis examines how changes in individual parameters (such as costs, prices, sales volumes) affect the result of a model (e.g. profit, net present value).
An Example
A medium-sized manufacturer of plastic parts has 40 employees. He regularly struggles with bottlenecks in production because a single machine often comes to a standstill and spare parts are difficult to obtain. As a result, orders are delayed and sales fall short of plan. At the same time, liquidity depends heavily on when customers pay their bills; many customers have long payment terms or come under pressure for larger orders. A sudden payment default or a delay from large customers means that the company suddenly has payment problems despite a good order situation and urgently needs liquidity.
Without precise planning and constant control, such situations are detected too late. And when the situation is clear and unavoidable, the necessary instruments are often lacking because it has to be done quickly.
Financing partners
For sustainable liquidity planning, a reliable, flexible financing partner like Kamuno is essential.
Kamuno's SME loan with its flexible credit line helps to react quickly and allows SMEs to make flexible cash withdrawals within their credit line. This means that liquidity is always available at the right time, without the need for a new application process.
Put your SME on a secure financial footing in the long term with the SME loan from Kamuno.
Kamuno is a company of the Urner Kantonalbank and specializes in providing SMEs with first-class, data-driven financial products and services.