Short-term Liquidity Planning

Reorganisation situations frequently are confusing. Due to the operational hustle and bustle, the mind is not clear to see the things that are important in the acute crisis. At this stage, control of short-term liquidity is of vital significance. Only clear planning can ensure that negative surprises will not occur and then the management will completely lose control of the company. Stable liquidity planning hence is the basis of any company reorganisation.

We have many years of experience which enables us to draw up a reliable liquidity plan when the company is in a difficult situation, and in the face of often unreliable data.

The plan reveals the extent to which options for action still remain and under which preconditions the company can meet its current payment obligations. The liquidity plan is the basis for continuous control, the target-actual comparison and subsequent root cause analysis in case of any deviation.

The drawing up of a valid liquidity plan is necessary in many respects in the reorganisation process. Firstly, it provides information about the company's ability to pay. If the company is no longer able to pay, the executive bodies are under an obligation, enforced by penalty, to file for insolvency. A valid liquidity plan is a tool providing information continuously about the ability to pay. In addition to the criminal aspect, liquidity planning also has various other aspects relevant to the executive bodies' liability because civil law also ties numerous claims regarding personal liability of the executive bodies to the time of occurrence of factual insolvency – that is the time of occurrence of the inability to pay. A clear and valid documentation of the liquidity can insofar clear the executive bodies of charges.

However, also beyond this, liquidity planning is of substantial importance to the reorganisation process as a whole. The planning reflects the room for manoeuvre which the company has in the course of the reorganisation. This makes it an essential control tool that needs to be created with precise workmanship and substantial reliability. It creates the necessary transparency in the process without which any reorganisation is doomed to fail.