Keeping an Eye on Liquidity Planning

Why liquidity planning is important for SMEs too and how you can make life easier for yourself
Beate Haumesser author pictureAuthor: Beate Haumesser

You might think that liquidity planning is reserved for large companies. You’d be wrong. Whether you are a start-up, small company experiencing growth or a mid-sized business looking to innovate, securing financing and interacting with lenders could be in your future. If you haven’t had to bother with liquidity planning before, you will at this stage.


Why do I need a liquidity plan?

Effective liquidity planning is essential to successfully managing a company. It provides a structured view of key incoming and outgoing cash flows at the company, normally over a period of between one and three years. A distinction is made between a liquidity plan drawn up for a fiscal year that is set in stone, and a rolling liquidity plan that is periodically adjusted to reflect the latest developments. A rolling plan is used to record changes that, for example, can arise over time from sales and cost variances for the planning period. Annual and rolling plans are ultimately compared with actual cash flows with the aim of analyzing differences and taking measures to safeguard liquidity.

What is the purpose of liquidity planning? Besides the obvious answer that it offers projections for the coming months and years, there are other good reasons for liquidity planning.

Basis for sound company decisions by management

  • One of the duties of a managing director is to keep a constant eye not only on the financial growth of the company but also on its solvency. A structured liquidity plan provides an excellent foundation in this respect and also supplies reliable figures as the basis for every strategic decision.

Evidence for lenders and shareholders

  • Liquidity planning also plays a key role in the search for financing providers to make investments, fund growth or bring new product ideas to fruition. A liquidity plan can demonstrate to the bank how liquidity is expected to evolve over the years ahead – evidence which must be supplied time and again and which rolling planning can provide. Accurate planning underpins a company’s reputation in the eyes of all external parties – lenders and shareholders alike.


Why liquidity planning can be complicated

If you work in a finance department yourself and have dealt with liquidity planning in the past, you are probably all too familiar with the issues mentioned below.

You provide planning templates to all those involved but only incomplete information – or nothing at all – is returned. Entries are contradictory or contain a variety of units and formats. Prescribed exchange rates are not used, there is no coordination between operationally linked units, and so on. If instructions are too complex or requirements too onerous, entities are often overwhelmed and use the information incorrectly.

Several operational stumbling blocks quickly emerge.

If instructions are not fully adhered to and information is delivered in various ways, pulling together a plan is a tedious exercise. Data must be transferred manually, assumptions scrutinized, formats changed. A high degree of commitment is required if you want to keep to specified time frames and avoid the data you are working on being superseded by more recent data. Manual entries must also be checked by another person if errors are to be prevented. Delays are often anticipated and built into the schedule.

Processes are thus uncontrolled and inefficient, and all parties lose momentum. The result is often a liquidity plan based on data which is obsolete and ultimately unreliable.


How can I make my life easier when it comes to liquidity planning?

In the age of digitalization and globalization, one obvious answer to increasing efficiency and improving the underlying data is to use software – ideally a company-wide platform to which all relevant employees have access and which provides reliable data in real time.

But not all companies want to go down this path. Instead, small and medium-sized enterprises in particular would like to go one step further and eliminate repetitive, time-consuming tasks altogether.

  • They shy away from the time and effort involved in investing in an IT project
  • They have no staff resources available
  • They simply want to concentrate on the results, without embarking on a lengthy project and hiring and training new staff.

All these are reasons to hand over some or all of the responsibility for the issues mentioned to a professional service provider, for example by using an outsourcing solution such as Treasury as a Service (TaaS) from BELLIN. Especially when it comes to liquidity planning, there is enormous potential to save resources and at the same time improve data accuracy and planning capability.


Can’t someone take liquidity planning off my hands?

Sure, we can take care of liquidity planning for you. Since 2015, BELLIN has offered companies a service that provides and supports liquidity planning – and other clearly defined services such as financial status, payments, cash pooling and netting – in a professional, secure and reliable manner. We call it Treasury as a Service (TaaS). TaaS provides a professional service that clearly structures and manages the planning process at the company and thus improves planning reliability at the company. Transparency and visibility are also increased, strengthening the company’s reputation with banks.

How does liquidity planning work with TaaS?

BELLIN takes care of all essential requirements, providing web-based access to an application and a certified cloud service as well as data center processes which guarantee the necessary security. Gone are the days of manual data gathering via various communication channels and the tedious analysis of data. Gone too is the uncertainty regarding the source of information and whether data is up to date.

BELLIN provides a standardized planning platform on which all companies of a corporate group can enter planning data in line with standard process instructions. The planning process is documented by BELLIN and thus meets essential compliance requirements in place at companies. Planning templates are standardized and based on the extensive experience of BELLIN consultants worldwide. Neutral categories are used which are relevant to every company. Planning is carried out based on an annual plan or on a monthly rolling basis and is broken down by currency. We set deadlines for the entire process using our planning calendar. Once the period for entering planning data ends and internal coordination has taken place to ensure consistency, all parties can immediately begin various analyses. The various plans can be compared to the actual situation or with each other and examined for differences.

Headquarters can run consolidated analyses and obtain valuable information from the reports which is required for decisions on financing or hedging against exchange rate fluctuations to be made by the relevant entity or at group level. Rolling planning promptly demonstrates changes over time and enables immediate intervention with targeted measures. This reduces the company’s exposure to risk.

We take care of the manual chores and provide the framework; you deal with data entry and analysis. You have a solid basis for carrying out further strategic work.

So why not let us help you come to grips with liquidity planning?



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