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Glossary

Liquidity Planning

Summary

Liquidity planning is an important component of a company's financial planning, focusing on the ability to pay and the provision of sufficient capital. It includes measures to ensure liquidity and supports the long-term stability of a company. Effective liquidity planning enables companies to avoid financial bottlenecks and focus on growth opportunities.

Detail

Liquidity planning is a central part of financial planning and controlling in a company. It ensures that a company is always able to pay its debts and has sufficient financial resources to meet its ongoing obligations. It does not matter whether it is a small or large company - liquidity planning is important for all company sizes.

1. Objectives of Liquidity Planning

Liquidity planning pursues several goals:

       
  • Ensuring the company's ability to pay
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  • Optimization of financing and capital structure
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  • Identification of liquidity risks and bottlenecks
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  • Support in the planning of investments and growth strategies
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  • Improvement of cash management and cash flows

2. Components of Liquidity Planning

Liquidity planning consists of various components that build on each other and complement each other:

       
  1. Determination of liquidity needs: This determines the capital requirements for a certain period (e.g., one year). This includes ongoing costs, investments, repayments of loans, as well as planned reserves and provisions.
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  3. Financial planning: Based on the determined liquidity needs, the appropriate financing structure is established. This involves distinguishing between equity and debt capital and weighing their respective costs and risks.
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  5. Cash balance accounting: Cash balance accounting is used to monitor cash flows and shows the development of liquid funds in the company.
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  7. Liquidity reserves: To cushion short-term bottlenecks, companies should have sufficient liquidity reserves. These can consist of bank balances, short-term investments, or lines of credit, for example.

3. Methods of Liquidity Planning

There are various methods to carry out liquidity planning in a company:

       
  • Static liquidity planning: Static liquidity planning compares inflows and outflows over a certain period (e.g., one month). This method is relatively simple but only offers a snapshot and does not take into account temporal fluctuations.
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  • Dynamic liquidity planning: Dynamic liquidity planning provides a more detailed view of the liquidity situation. Here, cash flows are considered over a longer period (e.g., one year), and the development of liquidity is continuously updated. This allows for a better understanding of liquidity risks and bottlenecks and the derivation of appropriate measures.
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  • Scenario analysis: Scenario analysis makes various assumptions about the future development of the company and the market environment. Based on these scenarios, liquidity planning is adjusted, and corresponding action options are developed.

4. Factors Affecting Liquidity Planning

Various factors can influence a company's liquidity planning:

       
  • Revenue and cost development
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  • Investment and financing decisions
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  • Market and industry development
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  • Changes in the economic environment (e.g., interest rates, exchange rates)
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  • Legal framework and tax aspects

5. Tips for Successful Liquidity Planning

Successful liquidity planning should consider the following aspects:

       
  1. Make realistic assumptions
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  3. Regular review and adjustment of planning
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  5. Involvement of all departments and employees concerned
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  7. Use of suitable planning tools and methods
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  9. Transparent communication and documentation of liquidity planning

Liquidity planning is an important tool for ensuring a company's ability to pay and stability. Through effective planning and management of liquidity, financial bottlenecks can be avoided, and growth opportunities can be leveraged. Companies should therefore regularly review and adjust their liquidity planning to be able to act successfully in a constantly changing economic environment.