Daily liquidity is the total cash you have in your multiple bank accounts. You need daily liquidity to pay salaries, taxes, purchase invoices, and loan repayments. A daily liquidity forecast is needed to get confidence that you'll have money in the bank accounts when paying invoices to keep your business running. Cash is like oxygen for a company; never take it for granted, as it keeps your business alive. Even if you have a great product, growing revenue, and a steady talent pipeline, your company is dead if you run out of cash. Your cash can be kept in multiple bank accounts. As a CEO, you should ideally have a daily view of liquid cash: This is your cash in the bank accounts, not including restricted cash, investments, or anything that is tied up. Timing matters on daily liquidity. Forecasting daily cash or liquidity, timing matters. Cash that you have not received is not cash. In the real world, customers are going to pay you late, and some are not going to pay you at all. You need to consider this when considering how much cash you need to cover outgoing payments. If you have multiple bank accounts and need to do bank transfers, keep in mind that it can take a couple of bank days to clear. Leave a buffer in timing and excess liquid cash to allow for these delays. What are Cash-in and Cash-out?
Your daily liquidity is your bank account balances increased by Cash in and decreased by Cash out. Cash-in is your sales invoices, and Cash-out is purchase invoices, credit card payments, salaries, taxes, and loan repayments. The most important thing to remember is that you always have money in a bank account when salaries, taxes, and loan repayments are due. Until you receive the cash payment, it's not cash. Open sales invoices (i.e., the money that your customers owe you) is not cash because you haven’t received anything you could use to pay your employees or make your repayments. Until you receive the cash payment, it is not cash. Outgoing payments, like salaries, taxes, and purchase invoices, are easy to forecast. Predicting customer payments is the most critical part of the daily liquidity forecast because paid sales invoices only fund salaries, taxes, and purchase invoices. And this is the hardest part of predicting daily liquidity because customer payment behavior is sporadic. Customers pay sales invoices on the due date only in a perfect world. Sales invoices are paid after the due date due to bank value dates, bank holidays, slowness in the invoice approval process, or due to liquidity needs which means customers need to prioritize payments. Confidence about next month's daily liquidity means less cash buffer in a bank account. Forecasting daily liquidity is business-critical but, at the same time, very time-consuming. riskrate can automate your daily liquidity forecasting. riskrate can predict how your new and current customers will pay their sales invoices. riskrate connects your invoices and banks with machine learning models and a massive database of payment risk ratings.
As a result, you can get confidence in the daily liquidity forecast. It means savings on financial costs, growing faster with fewer cash buffers on a bank account, and reducing up to 90% of your time wasted on manual work with a cash forecast that is always up to date. Tips on forecasting daily liquidity
Cash is like oxygen for your company. Get confidence about your Cash flow today, next weeks, and months by consolidating data from banks and finance tools into a live cash forecast. No manual work is needed.
If you have multiple bank accounts and need to do bank transfers, keep in mind that it can take a couple of bank days to clear. Leave a buffer in timing and excess liquid cash to allow for these delays.
Forecasting daily liquidity is critical but, at the same time, very time-consuming. riskrate can automate your daily liquidity forecasting. It means savings on financial costs, growing faster with fewer cash buffers on a bank account, and reducing up to 90% of your time wasted on manual work with a cash forecast that is always up to date.
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