Liquidity planning – an important tool for management and shareholders

Uncertainty about the development of liquidity in many companies is still high – also due to the effects of the Corona pandemic. On March 25, 2021, the German government therefore extended the KfW special program, including the KfW fast loan, until December 31, 2021 (previously limited until June 30, 2021). At the same time, the credit ceilings were increased.

The StaRUG already came into force on January 1, 2021. Its §1 (Early Crisis Detection and Crisis Management for Limited Liability Entities) stipulates that the members of the body appointed to manage a legal entity (managing directors) must continuously monitor developments that could jeopardize the continued existence of the legal entity. The duties of tax advisors, tax agents, auditors, certified public accountants and lawyers to provide information are also new (Section 102 StaRUG). They must inform the bodies of the legal entities they advise of the existence of insolvency filing obligations. In practice, this means that the managers have to prove to their tax advisors and auditors with a liquidity plan for usually 24 months that there is no insolvency maturity in the sense of §§ 17 -19 InsO. In the worst case of a possible future insolvency, the proof that there was no (imminent) insolvency or over-indebtedness under insolvency law without a positive continuation forecast becomes retroactively even more important. If you would like to know more about StaRUG, please read the article by our colleague Dr. Thomas Zubke-von Thünen here.

Liquidity planning has thus become even more important in order to identify potential need for action and to make the right financial decisions for your company. In this context, liquidity planning must differentiate in terms of time in such a way that peak demands can be identified. Depending on the business model, this means planning on a day-to-day basis. And it must cover a period that gives the company room for maneuver to take action when bottlenecks become apparent. This is where HANSE Consulting can help.

Liquidity planning – more difficult than expected

The task that seems so simple at first glance often turns out to be more difficult than expected in practice. The first problems can arise as early as the planning of incoming and outgoing payments from the receivables and liabilities on the balance sheet. Often, actual payment behavior is quite different from the contractual payment terms recorded. Their correctness must also be critically questioned on a regular basis. The reasons for deviating payment behavior on the part of customers are complex. From cash discounts to unjustified objections, the reasons for faster and later payments can lead to considerable deviations compared to the simple “planning out” of the underlying data. Deviations that cannot simply be “averaged out” either.

In addition, for many on-balance sheet assets (other liabilities, accruals, loans, …), the information relevant for liquidity planning is known in principle, but must be laboriously prepared for planning.

These and a multitude of other challenges multiply when liquidity has to be planned for a group of companies and its investments. Contractual and liability framework conditions between the companies in the group are added and must be taken into account.

As a result, many companies experience that their liquidity plans do not work out and that the actual development is completely different from the planned one. Often, liquidity planning is then only prepared for external reporting recipients, e.g. financiers, if they demand liquidity planning. Due to its unreliability, it is often no longer used to manage the company and its liquidity.

This is a procedure that harbors risks and can also seriously undermine the confidence of the recipients of the report. Particularly in the case of current “full utilization” of overdraft facilities or announced reductions, reliable liquidity planning is often a prerequisite for the targeted development of liquidity measures and discussion with financiers.

The following applies: the tighter the liquidity, the shorter the intervals for updating liquidity planning.

Liquidity planning – a matter of experience and tools

From the practice of hundreds of mandates, HANSE Consulting has permanently optimized procedures and tools for liquidity planning. As a rule, we are able to show the company and third parties the current status of liquidity and how it will develop in the short term within just a few days. We put our clients in a position to independently create and analyze an up-to-date short-term liquidity plan with reasonable effort after only a short period of time and, if necessary, to initiate appropriate measures in time.

In addition, as a “neutral” third party, HANSE Consulting enjoys the trust of many financiers. This can be a great advantage when implementing and negotiating measures to improve and secure liquidity.

In order to plan liquidity correctly, it is necessary to take into account all payment-relevant business transactions completely and correctly. In business models characterized by projects and individual orders, such as the construction industry and mechanical and plant engineering, all orders must be planned with their individual parameters. Utilization of guarantee and mixed lines, correct consideration of sales tax on down payments and all types of guarantees want to be taken into account correctly.

Based on the detailed analysis of all payment flows, a liquidity forecast is created that is coordinated with the actual and planned figures for the P&L and balance sheet. The premises are continuously optimized and updated through ongoing plan/actual comparisons down to the level of individual payments. By setting up a continuous workflow (and optimizing it), the workload for regular updating is reduced to a minimum.

Our project example –
Optimal utilization of supplier credit limits

A company in the plumbing industry purchases steel from multiple suppliers. These had secured their sales with three different trade credit insurers. When the trade credit insurers reduced their credit limits, advance payments had to be taken into account in the liquidity planning at short notice, even though the lines were already fully utilized, resulting in a shortfall in cover. The company did not want to lose its customers through business cancellations. However, without liquidity-improving measures, insolvency was imminent. By carefully analyzing the utilization of the limits, liquidity was secured by shifting purchases between suppliers. Although this had a temporary negative impact on profitability, insolvency was avoided.

Together with HANSE Consulting, the client was able to successfully renegotiate limits at the old level with the trade credit insurers after a few weeks.


Only a proper liquidity planning can protect the management and/or the shareholder.

Proper liquidity planning creates transparency, shows the need for action and creates room for maneuver by identifying bottlenecks at an early stage.

HANSE Consulting supports companies in preparing this planning correctly, promptly and completely.
Your contact persons: Dr. Armin Bratz and Christian Austermann