Liquidity of a company: the 5 keys to achieve it

Liquidity

The word liquidity is very important within any business, as it is totally linked to the ability of a company to survive.

The liquidity of a company indicates how capable an organization is of meeting its payment obligations. If you want to know what it is and what are the 5 keys to get it, here we explain it to you.

Also, here we leave you an article so that you know how it can be calculated and

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What is the liquidity of a company?

The liquidity of a company is everything that can be converted into money easily and quickly. This allows you to be able to meet your short-term obligations without any problem.

The most common liquidity assets are, for example, cash both in the box and in the bank, as they can be accessed at any time.

Talking about liquidity is entirely related to the ability of a company or also a person to convert an asset, be it of any nature, into cash.

This speed implies that the process is short-term and does not represent a significant loss of value, but is maintained. Generally, liquid assets are usually easy to sell, therefore, immediacy is part of their characteristics.

We understand a liquid asset as all the assets and resources of an organization, the more liquid an asset is, the easier it is to convert it into cash to be used by the company in question.

Thinking about the assets that would make a company’s liquidity possible may seem easy: real estate, machinery, stocks, and so on. However, these are not liquid assets, as it takes time to sell them and obtain cash.

If you think that selling them at a price below the real one is the solution, you are wrong. This would affect their value, so there would be a loss, which does not occur when they are really liquid assets.

The liquidity of a company basically depends on two factors:

  • The time it takes for an asset to convert to cash
  • The certainty that there are no losses when the transformation occurs

Importance of having liquidity in a company

Having liquidity can bring many benefits to companies, since it allows that there are no economic problems and that it can remain standing for a long time.

The liquidity of a company helps companies to respond and meet their short-term commitments and obligations.

The liquidity of a company makes it possible to cover expenses ranging from the payment of services (electricity, water, gas, internet) to the salaries of workers, who are key to the performance of a company.

This allows them to maintain a healthy financial health and stay current for much longer.

If it is lacking, it is likely that in the long term, the organization will fall into over-indebtedness or even close. Therefore, special attention must be paid to finances to avoid further economic setbacks.

Liquidity credit, the ally your company needs

Currently, the situation is complicated. For this reason, many companies have had to close, as there was no time to foresee that there would be a crisis that would prevent liquidity within a company.

Fortunately, some of them have been able to attack the problem and find solutions, either by reducing expenses or accessing different types of loans, such as liquidity.

In case, unfortunately, you are going through a similar situation due to the COVID-19 pandemic, you should not be discouraged. Remember that there are options available to deal with financial problems and get ahead little by little.

A loan can be an excellent option to achieve the liquidity of a company. This, in order not to stop growth and achieve stability after the economic crisis that we are all going through.

The important thing here is that you get advice on this and look for the best options, that is, financial institutions with a track record and that are regulated, so that you don’t get bad surprises.

Credits, although they are not the only option, are the fastest way to achieve liquidity for a company. This would help you to work on recovery now and start to get your company afloat.

Before requesting financing, find out about the entity, the characteristics of the credit, the mode of payment, terms and everything related to the final contract so that you have the entire procedure clear.

Most finance companies, such as ION Financiera, have one hundred percent trained staff to advise those interested in acquiring a loan, so that they fully understand how it works, what they will get and what the payment plan will be like.

Remember that, although the road can be complicated, you are not alone in the search for solutions. Let yourself be accompanied in the most difficult process to begin to see more clearly the way out of all your financial problems and achieve the financial liquidity of your company.

5 keys to achieving liquidity in a company

The liquidity of a company depends on several factors, but here we will talk about five of the most important for you to work on them and see satisfactory results in a certain term.

1. Keep a financial check

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Having control of finances is essential to achieve the liquidity of a company.

Here it is important to have tools, such as a financial plan, that tell us clearly and concisely where the resources we need to cover short-term and long-term expenses will come from.

This plan must include the means (from where we will obtain the money), the collection and payment terms or the liquidity that the company has.

To achieve efficient management, it is important to differentiate between profits and treasury, since having a lot of liquidity at a certain time does not mean that the company is making profits.

2. Efficiently manage credits

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Loans are almost essential allies to obtain liquidity within a company, as they help quickly to solve economic problems.

The only thing you must take care of is not to fall into an over-indebtedness, that is, you must first study your payment capacity and that of the company to know to what extent you can cover your credits efficiently and without major problem.

Always look for the credits that are most favorable according to your interests and your current situation and focus on key indicators such as monthly payments, penalties and interest.

3. It has properties in your name

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We have already seen that financing is a good option to achieve the liquidity of a company; however, the most convenient ones, such as liquidity credit , demand that there be a property in the name of the person requesting it.

The foregoing, because this type of financing is given through a mortgage guarantee, that is, a property is left as a backup for the entire duration of the loan.

This in no way means that the property ceases to be yours, but only remains as a guarantee that you will pay off the credit. There is only the risk of losing it when there are long delays in payments and a type of reconciliation with the financial one is not sought.

4. Control your company’s stock

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Many times, the liquidity of a company suffers due to its inability to carry out the stock. If the sector to which you belong has a dependency on the stock, it is important to control it and know how to manage it.

When it accumulates due to lack of sales, it is liquidity that we are losing and that we do not know when we will have. This means a risk when the financial situation is not healthy at all.

One of the best options, when there is no liquidity, is to work the stock on demand, that is, only supply those items that people request to immediately have the money in our account and not substantially affect the performance of the company or fall in the uncertainty of not knowing when everything will be sold.

5. Work on your negotiation skills

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One of the keys to achieving liquidity in a company is in the negotiation capacity of the people who are in charge of it.

Study the frequency with which providers are paid, taxes and public services that must be covered so that you clearly know which of them can be done in installments or which can be made more flexible.

This is where your negotiation skills will come into play to achieve favorable agreements for your company and not be so affected by immediate expenses.

These five keys are essential to achieve the liquidity of a company in an effective way and to get ahead in the face of the economic problems that your organization may face due to the different situations that are occurring in the country and in the world.

If you are going through a critical moment, we invite you not to panic and instead start acting. Look for solutions and work on them so that you can get your company afloat as soon as possible.