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Liquidity management

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maconda GmbH

Friesenstraße 72-74

50670 Köln

Deutschland

Cash is King - the first trading maxim under the sign of covid

Fast, systematic, transparent.

Cash is king. In crisis situations, this credo counts more than ever. But how do you manage, especially in stormy times when things are going haywire, to keep an overview of cash flows and take the right measures to improve liquidity?

Consistent liquidity planning is the be-all and end-all. It is always a central component of restructuring processes. Liquidity planning is also very important when it comes to determining or ruling out insolvency or the threat of insolvency which would lead to an application for insolvency. However, their use is not limited to crisis situations. Even when companies are sailing in calm waters, it is important to manage liquid funds as well as possible, to control liquidity developments and to avoid unnecessary liquidity losses.

maconda quickly and competently helps you to plan your liquidity and shape payment flows. And based on this help you to take effective measures to improve liquidity and working capital as well as to install longer-term liquidity management.

Liquidity planning

Overview, control, release potential.

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While a transparent overview of all short- and medium-term cash flows is already advisable for companies in good years, it plays a vital role in times of crisis. The existing liquidity reserves melt away quickly and forecast cash flows are subject to a high degree of uncertainty especially in crises that affect the entire economy. Parameters such as the historical distribution of payment flows no longer help to adequately map the future. Agreed payment terms and the actual payment behaviour of customers increasingly diverge. The primary goal in times of crisis i.e., securing short- and medium-term liquidity, comes under threat.

It is therefore even more important to create a sound basis for targeted measures to increase liquidity. Not just for quick measures to secure the company’s survival, but also for a longer-term restructuring of the company. This might include releasing internal liquid funds in a targeted manner or obtaining the necessary debt capital from financing partners, e.g. additional credit support from the federal and state governments in the covid crisis, or equity or mezzanine financing from financial investors. Indispensable for this is the preparation of transparent liquidity planning appropriate to the level of detail of the crisis. In the event of imminent liquidity bottlenecks, a weekly or, in particularly critical cases, even daily comparison of incoming and outgoing payments is recommended. Planned and actual figures must be adjusted on a rolling basis.

We support you with rolling liquidity planning, which ensures that impending liquidity gaps are identified at an early stage. This is the basic prerequisite for taking targeted measures. The increasing uncertainty of payment flows over time requires a forecast using various scenarios. maconda has proven itself during many due diligence mandates to be able to create well-founded plans and scenarios even when there is a great deal of uncertainty. The clients’ historical payment behaviour serves as the basis for calculating future expected payment flows. The maconda experience from many crisis situations as well as the neutral view from the outside help to assess risks correctly and to map them in the liquidity forecast by means of probabilities.

Last but not least, well-founded liquidity planning is a mandatory basis for negotiations with banks to expand credit exposure. It is also an important component of restructuring reports according to IDW S6 as well as short reports for banks, so-called Independent Business Reviews.

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Securing liquidity

Creating transparency and immediate action.

The covid crisis, which broke out unexpectedly and on a massive scale, requires that the primary goal be to quickly secure short-term liquidity. In addition to creating transparency of the financial situation, this requires fast and accurate planning and implementation of immediate measures. Banks need well-founded bases for decision-making not only to stand still, but to expand credit commitments. To this end, the special financing aids of the federal and state governments must be tapped. Especially in the case of retailers, landlords must be persuaded to grant temporary rent exemptions, or at least rent deferrals. Negotiations must also be held with suppliers and other partners.
Time-critical precautions must be taken to ensure that the suspension of the insolvency petition obligation is used and to protect staff, but also to keep them on the job as much as necessary. These are only selected examples of measures to be taken from maconda’s many years of experience, based on a large number of successfully managed corporate crises – this time, however, necessarily in a concentrated form.

maconda quickly helps to identify and exploit all options for securing liquidity:

  • Checking the current cash flow status, rapid analysis and detection of liquidity reserves
  • Detailed cost analysis and identification of the most important cost drivers
  • Determining the profitability of projects, customers and products
  • Initiation of various operational measures: Adjustment of personnel requirements, application for short-time work, negotiations with suppliers and customers
  • Examination of other contractual obligations, tax and interest deferrals, utilisation of existing credit lines, tapping of additional loans from the federal and state governments, etc.
  • Determination of the financial requirements until the presumed end of the crisis or for restructuring
  • Documentation of the liquidity trend and all measures taken to avoid the obligation of filing for insolvency

We help you quickly and comprehensively establish the necessary prioritisation. In parallel to creating the indispensable transparency, we develop the needs-based planning and implementation of the measures to be taken together with you. This applies to urgent financial issues, e.g. by setting up a rolling liquidity forecast and corresponding documentation of the liquidity trend. It applies equally for strategic issues, e.g. the preparation of an independent short appraisal to obtain the state aid needed in the short term or negotiations with relevant stakeholders (suppliers, customers, landlords, etc.). In addition to securing liquidity in the short term, we also keep an eye on the long-term repayment of the loans granted in line with the holistic maconda approach.

Working capital management

Lower capital commitment, more efficient processes.

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Ongoing, active management of working capital helps to stabilise and increase cash flow and quickly repay additional covid loans taken out. Capital tied up in current operations can be reduced both by reducing inventories and stock levels and by increasing current liabilities and customer prepayments.

The primary goal of such an improvement is to reduce the period of capital commitment and thus to sustainably ensure sufficient liquidity at all times. Further advantages of working capital management are falling capital and storage costs, strong internal financing and an optimised balance sheet structure.

In close cooperation, we develop operational and strategic measures along the value chain. For example, suppliers are evaluated according to conditions, required goods and alternative sourcing origins are checked, the processing of orders is prioritised, lead times are shortened, inventories are reduced, transport and storage processes are optimised, invoicing is accelerated, and much more.

Improving processes along the value chain:  

  • Product management: product development, streamlining of the product programme
  • Procurement: procurement strategy, purchasing planning, order processing, incoming goods logistics, credit management, complaints handling
  • Production: sales planning, inventory management, planning of production, planning of warehousing and outbound logistics
  • Sales: sales strategy, customer management, order management, payment terms, receivables management

Improving the relevant processes can drastically reduce the need for working capital. The capital thus freed up should first be used in covid times to reduce the increased loans and lower the cost of capital. In addition to optimising the capital structure on the liabilities side, the assets side can also be improved – capacity is optimised and efficiency increased. Last but not least: the freed-up capital also enables expenditure in measures that increase earnings be it a market offensive, investments in development or reorganisation measures. We would like to support you in this – quickly, competently, pragmatically.

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Are you facing liquidity gaps or do you want to have a better overview of future payment flows? If action needs to be taken immediately, we can get to work. Even if you want to take precautions for the future, we can develop measures that work.

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