For companies from industry, trade and financial services, financial decisions are becoming increasingly complex. Fluctuating markets, broken supply chains, volatile energy prices and geopolitical uncertainty demand more than ever precise and forward-looking financial control.
In this context, closely connecting credit risks with liquidity planning has increased significantly in importance. Payment defaults and deteriorations in creditworthiness have a direct effect on the liquidity status of companies – and conversely, poor liquidity control can amplify existing risks.
This article shows why connecting these two areas is strategically important, what advantages this offers – and how companies can realize this in practical terms.
Credit risks become problematic whenever a business partner fails to make agreed payments or makes them too late. For companies this not only means financial losses but also has specific effects on financial planning. Incoming payments that are not received postpone the planned deposits and disrupt the timing of planned payments to others.
A typical scenario: An industrial company is waiting for a six-figure payment from a large customer that fails to meet its obligations because of a deterioration in creditworthiness. The result is an unplanned outflow of liquidity – because the current liabilities such as salaries, rent and supplier invoices still have to be paid. Such liquidity bottlenecks can quickly become threatening to the existence of the company, especially if no precautions have been taken through forward-looking liquidity planning.
The conclusion: Credit risks are not only a theme for risk management but are a central influencing factor for the liquidity control of a company.
Structured liquidity planning is the backbone of company financial management. It makes sure that incoming and outgoing payments remain in balance at all times and solvency is guaranteed – even in crisis situations or when unpredicted events occur.
Modern companies do not only rely on static cash flow prognoses, they integrate future business developments, seasonal fluctuations, planned investments as well as potential risks into their financial planning. A holistic picture of the expected payment streams is thus created.
The value of this planning becomes especially apparent in times of uncertainty: if you know how liquidity will develop in the coming weeks and months, you can introduce countermeasures in time – for example by adjusting investment plans or using alternative financing options.
In many organizations credit risks and liquidity planning are still considered separately – a mistake with potentially serious consequences. Whilst risk managers evaluate payment defaults, management accountants calculate liquidity requirements independently of this. This means that relevant information often remains unused.
Integrated liquidity control that systematically considers credit risks creates significantly more transparency and control capabilities. The advantages are clear:
A successful practical example: A trading company divides its customers into segments according to their ability to pay and adapts payment terms and credit limits dynamically. These measures are automatically integrated into the liquidity planning, whereby potential liquidity bottlenecks can be identified in good time and compensated for.
Without technological support, a consistent linking of credit risks with liquidity planning can hardly be realized. The good news: There are high-performance software solutions that can connect the two areas using modern interface tools such as an enterprise integration layer. Modern tools – for example from SCHUMANN – also offer automated risk evaluation, integrated early-warning systems as well as real-time data for liquidity control. They analyse payment streams, detect anomalies and calculate scenarios taking into account possible payment defaults.
The use of artificial intelligence (AI) makes it possible to create precise prognoses for future incoming payments using historical data. This increases planning certainty, reduces incorrect decisions and relieves employees from manual routines.
Despite all the technical possibilities, many companies face specific challenges in their realization:
The solution begins with the creation of joint standards and the establishment of internal processes that treat credit risks and liquidity planning as tasks that are integrated with each other. Building on this, modern tools should be introduced and the employees trained in their use.
Especially important: clear communication between departments that is as automated and digital as possible. Only when the relevant information is shared promptly and completely can reliable liquidity planning take place – and only in this way can critical liquidity bottlenecks be avoided.
The integration of credit risks into the liquidity planning is not a "nice-to-have" but is strategically necessary for modern companies. With networked liquidity control you can minimize risks, secure your solvency and establish a real competitive advantage.
Industrial and trading companies that realize this integration consequently will profit from more control over their payment streams, better planning of their investments and higher resilience in times of crisis.
Now is the right time: Question your existing processes, evaluate the tools you are using and create structures that integrate credit risks with liquidity planning. In this way you will not only secure your financial stability – but shape the future of your company actively.
We are happy to advise you!