The most important points at a glance
- Liquidity is short-term solvency and is central to the stability of any company.
- Lack of liquidity jeopardises creditworthiness and leads to crisis faster than insufficient profitability.
- Key figures such as liquidity ratios and cash flow make the financial situation measurable.
- Planning, reserves and concrete measures ensure solvency.
- Digital tools create transparency and make management easier.
What does liquidity mean for companies?
Liquidity describes a company’s ability to meet its short-term payment obligations on time. It is therefore a key indicator of stability and capacity to act. If liquidity is lacking, payment bottlenecks and, in the worst case, insolvency threaten – even if the company is actually operating profitably.
Liquidity as the basis of solvency
Liquidity is the foundation for the trust of banks, investors and business partners. While profitability shows whether a company is generating profit, liquidity describes whether it remains solvent at all times. Healthy liquidity ensures that invoices, wages and taxes can be paid on time.
“In practice, it is not profit but liquidity that is the most common reason why companies get into trouble.” - Urs Rindlisbacher, expert in accounting and controlling
Which key figures make liquidity measurable?
Liquidity can be assessed objectively using just a few key figures. The most common are liquidity ratios 1–3 and cash flow. They show whether a company remains solvent in the short term and how stable the financial situation is over time.
Overview of liquidity ratios
The liquidity ratios show to what extent short-term debts are covered by funds that are immediately or soon available. They provide a snapshot of financial stability and are frequently reviewed by banks and investors.
Cash flow as a management tool
Cash flow complements the liquidity ratios with a dynamic perspective. It shows whether more funds flow in than out over a given period. A positive cash flow strengthens liquidity, while a negative cash flow indicates a need for action.
For managing liquidity, it is helpful to distinguish between the different types of cash flow:
- Operating cash flow: shows whether the ongoing core business generates sufficient liquid funds.
- Investing cash flow: reflects purchases and sales of fixed assets and affects long-term liquidity.
- Financing cash flow: includes capital raising, repayments and dividends.
The sum of these three areas results in free cash flow. This is the amount that is actually freely available to the company and determines investments, distributions or reserves.
Urs Rindlisbacher: “Liquidity ratios show the status quo – cash flow tells the story of the development.”
Table: Key figures for assessing liquidity
| Key figure | Formula | Statement | Benchmark |
| Liquidity ratio 1 | Cash and cash equivalents ÷ current liabilities × 100 | Ability to settle debts immediately | 20–30 % |
| Liquidity ratio 2 | (Cash and cash equivalents + receivables) ÷ current liabilities × 100 | Ability to settle debts with current assets | 100 % |
| Liquidity ratio 3 | Current assets ÷ current liabilities × 100 | Total short-term coverage capacity | 150–200 % |
| Cash flow | Income – expenses (in period) | Inflows or outflows of funds over time | > 0 (positive) |
How does sustainable liquidity planning succeed?
Sustainable liquidity planning ensures that companies remain solvent at all times. It is based on the systematic recording of all inflows and outflows and helps to identify bottlenecks at an early stage. This creates certainty for operational and strategic decisions.
Planning as a continuous process
Liquidity planning is an ongoing process. It must be updated regularly and adapted to changes in the market or within the company. Especially in phases of growth or crisis, structured planning creates the necessary room for manoeuvre.
Urs Rindlisbacher: “Forward-looking liquidity planning is the early warning system for every company management.”
| Period | Typical income | Typical expenses | Planning objective |
| Next 4 weeks | Customer invoices, advances | Wages, suppliers, taxes | Ensure short-term solvency |
| 1–3 months | Project payments, loans | Rent, social security contributions, insurance | Identify bottlenecks at an early stage |
| 3–6 months | Investments, financing | Repayments, inventories | Plan strategic liquidity reserve |
Which measures secure liquidity in day-to-day business?
Companies can secure their liquidity with a mix of short-term and long-term measures. While short-term levers help bridge acute bottlenecks, strategic approaches create sustainable stability. The decisive factor is to consistently link the two levels.
Operational levers
Short-term measures have an immediate effect and are particularly important in critical situations. Consistent receivables management ensures that invoices are issued promptly and incoming payments are reliably monitored. Clear agreements on payment terms with customers or better conditions with suppliers also provide relief.
In addition, factoring or bridge financing can help to convert open receivables into liquid funds more quickly.
- Issue and monitor invoices promptly
- Actively negotiate payment terms with customers
- Optimise supplier conditions
- Use factoring to obtain liquidity quickly
Strategic approaches
Long-term measures strengthen the company’s resilience beyond day-to-day business. Building up reserves creates a safety buffer for fluctuating income or unexpected expenses.
Credit lines and alternative forms of financing provide additional flexibility when funds become scarce. Forward-looking investment planning also prevents too many resources from being tied up at the same time.
- Build up reserves in a targeted manner
- Provide credit lines or alternative financing
- Stagger and prioritise investments over time
- Regularly review and adjust liquidity reserves
How do liquidity, solvency and profitability differ?
Liquidity, solvency and profitability are three key financial terms that are often confused. Each of them, however, describes a different dimension of a company’s situation. For a sound analysis, it is important to clearly distinguish between them and consider how they interact.
Three dimensions of financial stability
Liquidity describes the ability to meet short-term payment obligations on time. Solvency, on the other hand, stands for a company’s ability to cover its debts in the long term. Profitability, in turn, measures earning power and shows whether a company is generating profit.
These key figures are complementary: a company can be profitable but illiquid in the short term. It is also possible to be liquid but not solvent in the long term. Only when all three dimensions are in balance does sustainable financial stability emerge.
| Term | Meaning | Practical example |
| Liquidity | Short-term solvency | Invoices and wages can be paid immediately. |
| Solvency | Long-term ability to cover debts | Loans and borrowings can also be reliably repaid in the future. |
| Profitability | Earning power / profit orientation | A company generates profit even if liquidity fluctuates in the short term. |
Why are digital tools crucial for liquidity management?
Digital solutions enable companies to monitor their liquidity in real time and react to changes in good time. Automated processes reduce errors, save time and make complex payment flows transparent. This gives companies security and creates the basis for well-founded decisions.
Digital solutions in practice
A key element is digital accounting. Bill Bucher ensures that income and expenses are recorded automatically and that up-to-date data is always available for liquidity management. This makes it possible to identify and avoid bottlenecks more quickly.
Building on this, reporting systems play an important role. Analise Franci presents financial data in an understandable way, prepares scenarios and provides forecasts on the future development of liquidity. This turns pure figures into a clear management tool for executive boards and investors. In this way, traditional fiduciary expertise is combined with modern digital solutions