How can liquidity be managed in a complex and ever-changing scenario?

Markets are moving at an increasingly rapid pace, yet in complex and highly dynamic environments, sound liquidity management and long-term investment planning remain among the most valuable allies for small and medium-sized enterprises. How? Veronica Chiacchiera, Head of the Florence Branch, explains.

Why is liquidity management crucial for companies?

In a complex and constantly evolving environment characterised by fluctuating interest rates, a company’s ability to plan its cash flows becomes a competitive advantage. Efficient liquidity management enables companies to achieve several benefits:

Operational agility: It allows businesses to seize sudden market opportunities, such as purchasing stock at favourable prices.
Balance sheet strength: a solid cash position improves the company’s rating, facilitating access to credit.
Balanced cash inflows and outflows: helps avoid liquidity crises.

Which financial instruments can support SMEs in improving their planning?

To strengthen a company’s financial position and develop proper planning, it is essential to match each financial need with the appropriate instrument.

For working capital management, factoring is an instrument capable of meeting a company’s financial and liquidity needs in a flexible and highly customised way. Factoring offers multiple benefits in a single solution. In addition to meeting liquidity needs by enabling companies to advance future cash flows arising from receivables due from both domestic and international customers, it provides a credit management service delivered by a specialised operator, as well as the option to protect against the risk of debtor insolvency.

Other instruments supporting short-term needs, particularly for companies operating internationally, include export receivables advances and import financing.

As for supporting development projects or investments that will generate value over time, medium- to long-term financing is the ideal solution. Using an instrument with multi-year amortisation allows the cost of the investment to be spread over a timeframe consistent with the project’s expected economic return.

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What mistakes should be avoided in cash flow management?

At Banca Ifis, we promote financial planning that maintains a proper balance between the purpose for which liquidity is deployed and the duration of the source of financing. This distinction brings immediate benefits:

Cash flow protection: It prevents a major investment from absorbing the liquidity necessary for day-to-day management;
Cost optimisation: Using short-term funding to finance long-term investments is inefficient and more expensive over time.
Improved credit rating: A balance sheet demonstrating the appropriate use of financial instruments improves the company’s credit rating within the banking system, facilitating access to credit.

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