The sale of receivables as part of liquidity management.

A well-functioning liquidity management system is essential to keep your company on track. If your balance sheets are well balanced, you will remain solvent and can plan your future with certainty. An efficient method for securing your liquidity in the medium and long term is the sale of receivables.

Liquidity management via the sale of receivables: People looking at a company’s figures.

Get your finances under control with liquidity management.

Liquidity management is about keeping an eye on pending incoming and outgoing payments, uncovering savings potential, and making sure that you have sufficient liquid funds to allow your business to constantly run smoothly.

Liquidity management via the sale of receivables: Businesswoman looks at her laptop.

Liquidity management means identifying liquidity shortfalls at an early stage.

To ensure a healthy ratio between cash flows, assets and the necessary financing, it is worthwhile taking a regular look at your balance sheets. Particular attention should be paid to the following liquidity ratios with a view to securing liquidity in the medium to long term:

  • Contribution margin 1
    Contribution margin 1 compares the ratio of equity to assets. An equity-to-assets ratio of 50 percent is considered healthy.
  • Contribution margin 2
    Contribution margin 2 compares the equity plus long-term borrowed capital to assets. The former should, if possible, fully cover or exceed the assets.
  • First degree liquidity
    Also known as cash liquidity or cash ratio, first degree liquidity is the ratio of liquid funds to short-term liabilities. A coverage of around 20 percent is an approximate reference value.
  • Second degree liquidity
    Second degree liquidity, also known as collection liquidity or quick ratio, considers the liquid funds together with the short-term receivables and securities portfolio and compares them with the short-term liabilities. Ideally all short-term liabilities are covered 100 percent.
  • Third degree liquidity
    Third degree liquidity, also called the working capital ratio or current ratio, measures the working capital against the short-term liabilities. To prevent a liquidity shortfall, the working capital needs to be around twice as high as the company’s short-term liabilities.
  • Receivables management as important tool.

    If your company’s figures deviate significantly from the above-mentioned reference values, this is a clear alarm signal that you need to make changes to your liquidity management. There are plenty of measures you can take. If you look at various guidelines on this topic, engaging a professional receivables management provider will often be the first piece of advice.

    So that you do not have to wait too long on your customers’ payments or even sit on outstanding invoices, stringent processes from invoicing to dunning procedures are absolutely imperative. In this context, EOS subsidiary FinTecrity offers software solutions especially for SMEs, which will largely digitize and automate your invoicing and receivables management.

    To services of FinTecrity.
Liquidity management via the sale of receivables: Colleagues having a discussion.

Inadequate receivables management often the cause of liquidity shortfalls.

As well as insufficient financial controlling, the cause of liquidity shortfalls is all too often found in a company’s receivables management and/or the payment practices of its own customers. Too many outstanding receivables can quickly become a problem.

But what are the reasons for the payment defaults? And what can companies do to counter them? EOS conducted a survey on this issue among 3,400 companies in 17 European countries.

To survey “European Payment Practices”

Find out more about the sale of receivables:

  • What does the sale of receivables involve: Businessman sits in lobby drinking coffee.

    What does the sale of receivables involve?

    Learn here how the sale of receivables works and what different kinds of receivables there are.

    Learn more
  • Forward flow: Businessman on the phone at his desk

    Sell receivables on an ongoing basis with forward flow.

    Is your company plagued by a lot of payment defaults? Forward flow agreements allow you to permanently minimize your outstanding receivables.

    Learn more
  • Receivables sale and costs: A couple of staff members look at a calculation for a receivables purchase.

    Sell your receivables completely free of charge.

    It costs nothing to sell your receivables to EOS. All that matters is the purchase price. Read here how it is calculated.

    Learn more

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