The liquidity of your company is the degree of possibility of early or simply accelerated repayment of its debts. Simply put, if a company for its development took a loan for the N-th amount (and this amount, as a rule, is never small), then its liquidity is higher, the sooner it can repay this loan if necessary. This is a kind of indicator of the financial stability of the enterprise.
Generally speaking, this degree is measured by dividing the funds at the disposal of the company by the total amount of debts. If it is less than 0.2, this indicator is extremely low. High rates will help the company "survive" in times of crisis or simply during financial instability. Low guarantees bankruptcy in almost any force majeure. Then the company will not last several months.
Why is it so important to increase the liquidity of the enterprise? The question here is not only how long the organization can withstand in unforeseen crisis conditions. The level of its liquidity is one of the indicators important for potential partners. A profitable partnership is important for any company, but if in the future it can be declared bankrupt, people who can offer long-term and fruitful cooperation will in most cases pass by. The same applies to investors - few people will be interested in an enterprise with low liquidity, unless some other indicators will inspire serious confidence. But many organizations can successfully exist only with the help of investments.
Therefore, increasing the liquidity of the enterprise is extremely important for the owner. This can be done by means of integrated solutions aimed at improving the financial condition of the company and reducing debts. The main measures by which to increase liquidity are as follows:
- the maximum possible reduction in the value of receivables;
- increase in profit;
- optimization of the capital structure of the enterprise;
- decrease in the value of tangible assets.
A separate question is how to achieve this. To optimize production , a competent management scheme is needed, and if it is not possible for the owner to compile it, which is quite probable, it is reasonable to spend the N-th amount and hire another employee - a talented specialist who will create a working and profitable scheme.
Other ways to increase the liquidity of the enterprise - financial stabilization and lower accounts receivable. This can be achieved by analyzing the assets for their more rational distribution, planning all the financial activities of the enterprise and, in addition to planning, also meeting the deadlines of these plans. As for financial stabilization, we need a very competent approach aimed at reducing monthly expenses. It is undesirable to do this at the expense of the wages of workers. You can find a lot of other points on which the organization has the opportunity to save.
Increasing the liquidity of the enterprise can also be provided by refinancing receivables and accelerating its turnover. Thus, you can increase the amount of financial assets. With the help of establishing standards governing the stocks of the enterprise, optimization of material or commodity values is carried out. Carrying out feasibility studies will also help in optimization.
By increasing the volume of products sold, you can count on an early increase in the liquidity of the enterprise. By actively using the available funds, the company can achieve growth in the level of profitability and the amount of profit received. Expanding the boundaries of the market will also help in increasing the liquidity and solvency of the company. Another important aspect is the increase in labor productivity of workers due to a stricter framework, higher requirements and penalties for violation.
With experience and economic education, the owner can easily cope with the tasks himself. But the majority in such cases uses the services of economists and analysts. As a rule, this contributes to the prosperity of the company.