Thursday, 25 July 2019

Many businesses have much of their value tied up in investments and assets such as real estate, inventory and equipment.

But to succeed, every business must have some liquidity — ready access to cash to cover expenses and make short-term investments.

Liquidity management is a set of ongoing strategies and processes that ensure your business is able to access cash as needed — to pay for goods and services, make payroll and invest in new opportunities that arise.

Why liquidity management matters

Even profitable companies can fail if they don't have the cash available to pay bills. And that happens frequently — many businesses purchase inventory or incur production costs long before their customers pay for those goods, and they must have cash on hand to continue operating in the interim. As companies grow, they usually spend even more on new employees, new facilities, new inventory and new equipment, but if they have to wait too long to get paid by their customers and don't have extra cash on hand, they could get behind on their obligations and end up with extra debt or even in bankruptcy.

A liquidity management strategy means your business has a plan for meeting its short-term and immediate cash obligations without experiencing significant losses. It means your company is managing its assets, including cash to meet all liabilities, cover all expenses and maintain financial stability.

For companies that are over-leveraged, a liquidity management strategy includes developing steps to reduce the gap between the cash available on hand and their debt obligations.

BBVA offers Treasury Management Services to help manage a company's resources effectively, improve cash flow, speed access to information and automate routine processes. For instance, you can make the most of your cash reserves with strategies like automated sweep accounts and sophisticated analysis checking accounts, allowing you to optimize daily cash flow and put idle funds to work.

Learn more about liquidity management and how it can improve your business operations and financial picture by contacting a BBVA Relationship Manager.


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