When finance leaders hear “liquid assets,” they often feel reassured. These are assets meant to be readily converted to cash. In theory, yes; but in reality, most companies discover that “readily” is often a stretch.
The Reality Check
Contractual terms, supply chain friction, and customer unpredictability create barriers. Receivables do not always turn into cash: Customers may pay late or not at all; Inventory, meanwhile, is often essential for fulfilment and ties up capital – it cannot simply be converted without cost.
Panic Liquidation Hurts
When cash is tight, desperate moves, such as delaying supplier payments, discounting receivables or offloading inventory at a loss, frequently set off a downward spiral. Suppliers and insurers lose confidence, credit dries up, and customer trust erodes. All of this can lead towards potential insolvency. These decisions rarely end well.
There Is a Better Way
You do not need to trigger a crisis to release cash. In my experience most businesses are carrying excess working capital – often up to 25% more. But this is rarely a reflection on the quality of its people. In my experience, even the most capable managers can miss the gradual build-up of small issues, while daily demands often leave little room to identify or address their impact.
Unlocking Liquidity, Sustainably: Top 5 Levers
Here are five practical areas where focused attention can quickly release cash and bolster financial resilience:
- Receivables: Tighten credit policies. Automate collections. Settle disputes quickly. Aim to keep overdue accounts below 10%.
- Inventory: Use real-time analytics to right-size stock. Align sales and operational planning. Curb unnecessary SKU growth.
- Payables: Don’t neglect the opportunities here. Systemic gaps often lead to early payments and missed opportunities.
- Expense and Cost Control: Exercise discipline on discretionary spending and non-essential costs, maintaining lean operations so more cash remains in the business.
- Making cash a company-wide culture It’s not just Finance. Sales, Operations, everyone plays a part in safeguarding liquidity. Cash should be central to decision-making across the business
By shining a spotlight on these five key drivers of Liquidity, businesses frequently uncover immediate opportunities for improvement. Modest interventions, whether in day-to-day management, cultural mindset, or the adoption of smarter technology, can unlock trapped cash, boost operational agility, and help your organisation stay ready for whatever comes next.
Addressing all these levers together is a game changer and can deliver a step change in cash flow, strengthen liquidity, earn stakeholder confidence, and lay a solid foundation for sustainable and resilient growth.
Ready to transform your liquidity? If you’re looking to release trapped cash and build lasting resilience through best-in-class Receivables, Inventory, and Payables management, let’s talk. My expertise is in helping businesses drive real results by focusing on these high-impact levers within their working capital cycle.