Uncertain times make it complex to predict the financial situation of your business. A fundamental element to consider is business liquidity. Thanks to our business liquidity calculator, you can quickly get a simulation of how your financial situation could evolve: what is the trend, will it lead to the crunch, how could some external factors influence your business liquidity?

The liquidity of a company refers to how easily its assets can be converted into cash. Some assets such as current accounts or bonds are very liquid as they can be converted to cash in a matter of hours or days while others are less easily convertible, such as property or equipment that would need weeks or months to sell.

Business liquidity management is fundamental for companies as generating cash quickly allows them to face sudden cash deficits or pay unexpected bills or debts, but also run their operations and potentially expand their business.

Many factors can influence the liquidity of a company. For example, overtrading – when you sell more than you can make or can afford to produce –  could alter your liquidity if you don’t have sufficient resources. Losing one of your biggest customers could also have a massive impact as it would reduce your revenue. If you can’t convert your assets into cash quickly, you may struggle to pay your bills and you may become insolvent.

To better understand how the business liquidity simulator works and how to simulate the impact of external factors on the liquidity of a company, complete the fields below and click on “Calculate”. You can also check out our advice below the liquidity simulator.
Your data

This tool is proprietary to Euler Hermes Group SAS, registered in Nanterre (552 040 594), a Company of Allianz, and is protected by copyright. Euler Hermes and Euler Hermes’ logo are trademarks or registered trademarks belonging to Euler Hermes Group, worldwide. The use of this tool made available by Euler Hermes Group SAS is granted for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken solely relying on it. This tool should not be reproduced or disclosed without our consent. Given that this tool, that uses assumptions which are simplified versions of business reality, is only intended as an illustrated example showing the potential impact of a range of predefined factors, Euler Hermes makes no representation or warranty (express or implied) of any kind, as regards to the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on this information. This tool is subject to change without notice. © Copyright 2021 Euler Hermes. All rights reserved.

First, complete the fields to reflect your current situation without taking into account the impact of any external negative factors:

  • Available liquid assets: your inventory, accounts receivable, stocks and unused lines of credit are examples of liquid assets – things you can quickly convert to hard cash.
  • Monthly fixed costs: lease and rental payments, insurance, interest payments
  • Monthly variable costs: labor, commissions, and raw materials
  • Monthly turnover
  • Number of sent invoices per month
  • One-off losses: the value of spoiled goods for example

Now, click on “Calculate” and look at the graph to observe the simulation of your liquidity for the next 90 days that doesn’t include the impact of external factors.

To go further and see how external factors could impact your business liquidity, you can now test out various scenarios.

All you need to do is to complete or modify some of the fields to simulate the potential impacts of reduced turnover, losses, drops in sales, unpaid invoices or payment delays on your liquidity.

For example, ask yourself these questions:

  • What percentage of my monthly turnover could be lost if my clients go insolvent?
  • Can I reduce any of my variable costs?
  • Are there any one-off losses I can foresee, for instance because clients will find alternatives or because I will destroy perishable goods?
  • To what extent could I expect sales to drop on average over the next three months?
  • What is the proportion of unpaid invoices or bad debts I could expect over the next three months?
  • What is the delay I can expect for payments from clients?

Monitoring where and how money is spent is important when managing the liquidity of a company. Making cash flow forecasts can help your liquidity management and avoid having to look for emergency solutions to prevent financial distress.

If you are concerned and wish to secure your cash flowtrade credit insurance  remains the most complete and reassuring solution to support your  credit risk management and commercial development.