A Comprehensive Guide to Effective Liquidity Management for Businesses In Indonesia (2024)

Here are essential guidelines for business practitioners in Indonesia to help ensure effective liquidity management:

1. Have A Cash Flow Forecast

   To manage liquidity effectively, you need to know your business’s cash flow forecast. Study the historical data of your business’s cash flow, gather information on asset or fund structures, transaction and liabilities data, and then create forward-looking projections of cash flow from there. By taking these steps, financial decisions can be made more accurately because you have a clear understanding of the business’s cash flow condition over time.

2. Expenditure Evaluation

   Healthy liquidity management involves implementing planned and accurate expenditure policies. Review expenditure items that you can trim without causing any impact on business growth.

3. Diversify Your Capital Financing

   Liquidity risks often arise due to a mismatch between assets and maturing liabilities. It is necessary to diversify access to various self-financing techniques, current accounts, deposits, and investments that are tailored to the business’s liability profile. By doing so, the gap can be reduced and liquidity risks can be mitigated.

4. Optimization of Working Capital

   Sufficient liquidity conditions can be achieved by optimizing working capital. This can be done by reducing inventory levels, increasing debt collection, and also by extending the tenor of debt payments. These steps can help your business generate more money, reduce costs, and create sufficient liquidity.

5. Build Communication with Creditors

   Liquidity risk arises when obligations mature but are not followed by sufficient funds to make payments. It is important for you to build good communication with creditors so that they are aware of the financial condition of your business. Therefore, when faced with severe challenges that burden businesses such as the outbreak of the Covid-19 pandemic, creditors can understand and offer appropriate solutions.

6. Balancing Structure

   Liquidity management can be effectively carried out by maintaining a balanced structure and maturity between assets and liabilities. Extending the maturity of liabilities to align with the asset profile can be tried. You can also consider other liquidity solutions as a precautionary measure, such as bank loans, investments in equity assets, or refinancing options.

With effective liquidity management, business practitioners can reduce exposure to risks that impact business sustainability, especially during challenging economic periods such as the outbreak of the Covid-19 pandemic.

You can avoid liquidity risks by following the six steps mentioned above. You can also consider liquidity solutions from HSBC that can help businesses manage liquidity effectively and avoid liquidity risks in the future.

HSBC’S Cash Flow Forecasting Tool enables your business to forecast cash flows more accurately, both when the market is stable and when the market faces unexpected situations.

Cash preparation needs, working capital, and liquidity in the future can be done more easily. Here are some of the benefits of using HSBC’s Cash Flow Forecasting Tool that your company can enjoy.

1. Increasing efficiency

   HSBC’s Cash Flow Forecasting feature will help you benefit from receivable and payables practices. Where it helps process efficiencies as well as lower cost. More than that, the company’s balance sheet can also stronger.

2. More accurate decision making process

   HSBC’s Cash Flows Forecasting feature allows you to have more accurate liquidity forecasts. Thus, you can more easily make the right decision based on accurate data.

3. Gain insight

   As a HSBC’s Cash Flow Forecasting Tool user, you can access a suite of informative reports where information can be consolidated, compared for accuracy, and interrogated at the bank account. Also, intercompany level and save into user-defined format.

   You can also review the largest forecast movement by business line alongside the largest instances of variance.

4. Anticipate various scenarios

   This comprehensive tool enables you to test various scenarios to understand the impact on future cash flows.

   Not only that, but you can also be helped to conduct variance analysis, and actual versus forecast, at multiple forecast levels.

5. Improve visibility

   Users of HSBC’s Cash Flow Forecasting tool gains visibility of the biggest forecasting movement for the business sector. Apart from that, you can also use the tools also to predict an area of operations and expand to business units or other currencies.

Based on information captured from cash pool structures, bank accounts, and transaction-level data, you can have more accurate cash flow forecasts that can help in making more informed business decisions. Your business can also anticipate future cash needs, working capital, and liquidity, facilitating effective budgeting, and supporting efficient reporting to both internal and external stakeholders.

Sign up for a business bank account with HSBC to access our liquidity management solutions today.