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A positive account balance does not yet mean that the company will stay liquid in the coming weeks.
The account may hold funds earmarked for salaries, taxes, contributions, suppliers and subcontractors. At the same time, some of the planned inflows may arrive later than the due dates written on the invoices suggest.
That is why liquidity has to be assessed on the basis of future flows, not only the current balance.
What affects a company’s liquidity?
To predict the cash position, you need to put together:
- current funds in the accounts
- invoices issued and unpaid
- likely inflow dates
- cost invoices awaiting payment
- salaries, taxes and contributions
- recurring costs
- planned project expenses
- liabilities for which the company has not yet received documents
The biggest mistake is to assume that every client will pay exactly on time.
Why the due date on an invoice can be misleading
If a client regularly pays 14 days late, planning the next payment according to the date on the invoice can produce an overly optimistic forecast.
The situation is similar on the cost side. The company may not yet have an invoice from a subcontractor, but it knows that after the project ends it will have to pay 15,000 PLN. Such an expense should be included earlier.
A reliable forecast should therefore rest not only on documents, but also on counterparties’ real behaviour and planned liabilities.
How to check liquidity for the coming weeks
The simplest model is to prepare a weekly forecast of inflows and expenses.
For each week you should calculate:
opening balance + expected inflows – planned expenses = forecast closing balance
If the result in a given week falls below the level needed to operate safely, there is a risk of a cash gap.
It is also worth preparing several scenarios:
- optimistic — clients pay as planned
- realistic — takes their typical delays into account
- cautious — some inflows slip into the next period
How to react to a predicted cash shortage
The sooner a company sees the threat, the more options it has.
Among other things, it can:
- issue invoices sooner
- ask the client for an advance payment
- split the payment into stages
- start recovering overdue receivables
- postpone a less urgent expense
- renegotiate the term with a supplier
- limit trade credit for a risky client
- secure additional financing
A cash flow forecast should therefore not only show the problem, but give time to take a decision.
How Administy helps predict liquidity
Administy combines data on invoices, payments, costs, bank accounts and projects under way.
The system helps to:
- monitor the actual balance of funds
- analyse unpaid receivables
- predict inflow dates based on client history
- include recurring and planned expenses
- control liabilities awaiting payment
- detect future periods with a cash shortfall
- compare the financial result with the actual cash flow
This way the company does not have to combine data from the bank, the invoicing software and spreadsheets by hand. The forecast updates as new payments and documents arrive.
Summary
To predict a company’s liquidity, you need to know not only how much money is in the account today, but also when receivables will come in and when liabilities will have to be covered.
The most reliable forecast takes into account clients’ real payment behaviour, planned costs and several possible scenarios.
Administy organises this data and shows in advance when a cash gap may appear. This way the company can react before it runs out of funds for the most important payments.
