How familiar are you with business liquidity? Do you know that a good understanding of it can equip you to maintain a solid cash flow to settle your expenses as a business owner and unplanned expenses that creep up occasionally?

What is Business Liquidity?

Business liquidity is a firm’s capability to satisfy its short-term liabilities by using easily and quickly turned assets into cash. Liquid assets include cash and marketable securities, which are a firm’s cornerstone and surety that it can pay both its long-term and short-term debts, such as rent and salaries.

Nigeria’s modern and dynamic business space requires businesses to maintain liquidity. The lifeblood of every business is the ability to secure cash quickly to take care of matters when they arise without disrupting its operation. Unfortunately, it is quite a daunting challenge for small and medium-scale businesses, which need more resources like the big companies to ensure and maintain adequate liquidity.

Fortunately, the rise and continuous success of fintech solutions such as PayCliq have revolutionised how businesses manage their finances through innovative solutions to improve liquidity management. Fintech solutions empower businesses to maximise their cash flow and secure their financial stability through streamlined payment processes and alternate lending platforms, among other solutions that transform business liquidity.

Why Business Liquidity is Important

Robust liquidity helps a business remain steady and viable. This liquidity capability helped it weather the business space’s complex, unpredictable situations. Moreover, good liquidity affords the company a strategic advantage over competitors. It raises their creditworthiness and retains shareholders’ trust. Additionally, it allows the company to increase its prospects for growth by investing in other ventures or buying assets. So, good liquidity not only safeguards a business from future crises but also strategically positions the business to do well in better conditions.

How are fintech solutions helping businesses stay liquid?

• Real-Time Cash Flow Management

Businesses can use Fintech platforms such as PayCliq to monitor real-time cash flow. With its features, such as automated invoicing and predictive analytics, businesses can continuously track their financial status, offer insights on incoming and departing funds, and plan and allocate resources more effectively. 

• Access to Alternative Financing

Traditional financing options can be slow and rigid; hence, fintech provides alternative financing solutions that are faster and more flexible. Fintech firms have gone ahead and offered online lending platforms for merchants. For instance, PayCliq recently partnered with Yabx to launch a merchant cash advance solution in Nigeria. This innovative platform offers quick access to loans and credit lines with simpler application processes and faster approval times than traditional banks.

• Expense Management Tools

Managing a company’s expenses is vital for maintaining liquidity. Fintech solutions provide the right tools for tracking and controlling expenses through corporate expense cards and expense management software. While the former helps to track and manage employee spending, set limits, and prevent waste, the latter automates expense reporting and reimbursement.

• Enhanced Financial Planning and Analysis

Fintech solutions’ advanced financial planning and analytics capabilities enable better business decision-making and liquidity management. Through budgeting, forecasting, and scenario analysis tools, businesses curate comprehensive budgets and forecasts that clearly show future financial needs and potential liquidity issues.

• Improved Access to Financial Services

Access to fintech solutions such as digital and open banking facilitates the democratisation of financial services accessibility, hence streamlining liquidity management for businesses, particularly small and medium-sized organisations (SMEs). 

Additionally, businesses can access features tailored to their needs, such as integrated accounting software, easy reconciliation, and multi-currency accounts.

What are some of the important aspects of staying liquid for businesses?

• Operational Stability: This ensures a business can meet its short-term obligations, like paying salaries, rent, and utility bills.

• Flexibility to Seize Opportunities: A liquid business can quickly take advantage of new opportunities, such as purchasing inventory at a discount, investing in new projects, or expanding operations. Liquidity provides the flexibility to act swiftly in a dynamic market environment.

• Risk Management: Adequate liquidity buffers against unforeseen financial challenges, such as economic downturns, sudden sales drops, or unexpected expenses. It helps businesses manage risks without resorting to expensive emergency funding.

• Creditworthiness and Investor Confidence: Businesses with healthy liquidity attract lenders and investors, enhancing their creditworthiness and making it easier to secure loans and investment investments. Investors and creditors prefer businesses that can manage their finances prudently.

• Maintaining Business Reputation: Meeting financial commitments on time helps maintain a positive reputation. Delayed payments to suppliers, employees, or creditors can damage relationships and harm the business’s reputation, leading to distrust and loss of potential business opportunities.

Our Take 

Fintech solutions are essential for organisations to protect and sustain liquidity. Fintech tools facilitate businesses’ ability to navigate financial challenges and maintain operations and growth by offering real-time cash flow management, alternative financing options, efficient expense management, dynamic cash reserve management, enhanced financial planning, and improved access to financial services. As a business owner, you should leverage fintech solutions to help your business stay liquid and succeed.