How do I recognize my real capital requirements at all times?
And which methods can I use?
In addition to operational liquidity planning, it is essential to prepare strategic liquidity planning based on a longer-term monthly basis with an integrated balance sheet and cash-flow statement.
Because:
- You need to keep an eye on the development of your capital structure to avoid running into an overindebtedness.
- You should be able to take a planning perspective of at least 12 months.
Get aware of numerous net working capital and other effects which influence the actual cash flows.
Such as:
- Long-termed, irregular customer payments.
- Pre-financing requirements.
- Outstanding customers payments.
- Seasonal effects.
- Accumulated pay-outs (e.g. taxes).
- Accruals and deferrals.
Key-Take-Aways:
💡 By determining the actual expected cash flows monthly, the effective maximum capital requirement and its influencing factors are better recognized.
💡 Very often, the actual cash flow can vary heavily in comparison with the expected net result monthly versus a cumulated yearly view.
Want to learn more about how you can use financial models to professionalize your capital requirements assessment? 🔔 We will soon be announcing an event that will support you with precisely these topics. Stay tuned!
