Active liquidity management in uncertain economic environment or financial distress caused by COVID 19

Our approach is to implement the “13 or 26 weeks cash flow forecasting”. This methodology has been specifically designed for companies operating in uncertain economic environment or financial distress. It forecasts the company’s necessary cash flow and the end of the week cash flow balance. The methodology is focused on one or two consecutive quarters.

The advantages of the methodology “13/26 week cash flow forecast” are:

• It helps the management to define which costs to optimize in order to achieve neutral cash flow position at the end of each week
• It provides the management and the creditors with the status of the end of the week cash flow balance in next one or two quarters
• Provides the management with the necessary information for proper planning and taking informed decisions
• Is what banks or leasing companies want to see from the management in order to restructure the extended credit facilities or grand new once

The methodology “13/26 weeks cash flow forecast” is prepared on weekly bases calculating the expected:

• Cash proceeds (cash in)
• Cash expenses (cash out)
• Calculation the Net cash flow: cash in minus cash out
• Calculation the End of the period cash balance: the sum of the Net cash flow of the current period plus the End of the period cash balance from the previous week; if the result is negative the company has to utilize proceeds from its working capital bank facility in order to cover the negative balance;
• Calculating the total liquidity: the sum of End of the period cash flow balance from the current week and the available for utilization amount from the working capital bank facilities