Will your business have the necessary liquidity? You can answer this question when making a treasury plan. Such a focused planning allows the entrepreneur to improve his ability to deal with obligations and unforeseen events. With this, financial and accounting management are optimized, while preventing legal or bad image problems, such as those that could result from non-payment of payrolls or outstanding debts.
What information should a treasury plan contain?
The treasury plan is a forecast that the company makes periodically.
Before starting a new quarter, semester or year, those responsible for business accounting should make their forecast about:
- The income they calculate they will get in that period of time. To make this estimate, you can review the invoices sent with an expiration date in that period and also analyze the recurring sales that are expected to be repeated and collected.
- The expenses they will need to meet. You have to post fixed and variable expenses. The former will be much easier to calculate, while in order to estimate the latter it will be necessary to pay attention to the course of operations and also rely on information collected in the historical archives.
The difference between what is expected to be charged and what is believed to be necessary to pay is the starting point that should be taken into account for future planning purposes. The ability to offer this perspective is precisely where the usefulness of the treasury plan lies.
What is the treasury plan for?
When comparing income and expenses it will be easy to determine if the company will have liquidity or not. Having liquidity does not only require having good benefits, but ensuring that they will be sufficient to cover the costs that are estimated to arrive. Sometimes it will be like that. In that case, we must pay attention to another aspect: profitability.
Excessive liquidity could indicate that capital is not being invested in the most effective way possible. This excess of resources, compared to those that would be necessary to meet the most immediate obligations, shows a financial management that does not fully exploit its possibilities (something you could do by reviewing your investment strategy or distributing dividends among shareholders).
POn the contrary, when it is predicted that, in view of the treasury plan, the expenses will presumably exceed the income, it will be necessary to consider financing options.
The objective of making this decision is to gain control and anticipate when liquidity is needed, in order to evaluate all possible options, for example, negotiating with suppliers or requesting financing from a banking entity or individuals through a specific platform
Acting with time makes it possible to compare between more offers, opt for more favorable conditions and have clearer the type of financing that best suits the economic needs to cover.