How do you mitigate low liquidity?

Liquidity management is crucial for businesses to maintain smooth operations. To achieve this, regular review of financial statements is essential. By doing so, companies can gain insights into their cash flow, assets, and liabilities, enabling them to make informed decisions about their financial health.

Inventory management plays a vital role in liquidity management. Effective inventory management ensures that businesses have the right amount of stock to meet customer demand without overstocking or understocking. This helps in reducing waste and improving profitability.

Supply chain management is another key aspect of liquidity management. By optimizing the supply chain, businesses can reduce lead times, minimize inventory costs, and improve overall efficiency. This, in turn, enhances the company's liquidity position.

Accounts receivable (AR) and Accounts Payable (AP) management are also critical for liquidity management. Effective management of AR ensures timely collection of payments, while proper management of AP helps in maintaining good relationships with suppliers and avoiding late payment penalties.

Minimizing expenses is another strategy for improving liquidity. By cutting unnecessary costs and focusing on cost-effective solutions, businesses can free up cash that can be used for other purposes, such as investments or debt repayment.