Discover everything you need to know as an entrepreneur about liquid assets here. Gain insight into what liquid assets are, what liquidity is, where liquid assets appear on the balance sheet, and what you use them for.
What are liquid assets?
Liquid assets are the money that your business can use immediately to meet its obligations. Consider the following:
- Cash: banknotes and coins in the cash register.
- Business bank account: the balance on your current account.
- Business credit card account: the available balance on your credit card.
- Balances from payment providers: the money in your PayPal or Mollie account.
Liquid assets provide a picture of your company’s financial health. Do you have enough money to pay your bills and cover unexpected expenses?
Why are liquid assets important?
A healthy cash flow is the lifeblood of any business. With sufficient liquid assets, you can pay your bills on time, handle unexpected expenses, and seize opportunities to grow.
Liquid assets, therefore, indicate something about the liquidity (payment capacity) of a company. Improving liquidity is an investment in the financial health of the company.
Where are liquid assets on the balance sheet?
On your company’s balance sheet, you can see the status of your liquid assets. The balance sheet is an overview of your assets (assets) and liabilities (liabilities). Liquid assets on the balance sheet are found on the left side, under current assets.
Current assets are possessions that you can convert into cash within a year. In addition to liquid assets, current assets also include:
- Inventory: the products you have ready to sell.
- Accounts receivable: the money customers still owe you.
- Other current assets: for example, balances on short-term investments.
Within the category of liquid assets on the balance sheet, you may encounter different subcategories. For example, cash, bank account balances, and credit card balances are listed separately.
How can you improve your liquidity?
By applying these strategies, you can strengthen your liquidity and ensure that your company always has sufficient liquid assets.
Quick invoicing
Make sure to send the invoice quickly after you finish your work. By doing this, you receive payment faster. You can also encourage your customers to pay earlier by offering a discount for late payment.
Cost control
Keep an eye on your expenses. Create a budget for the money coming in and going out. Try to avoid unnecessary expenses by critically examining your spending patterns. Try negotiating with your suppliers for better prices, which will reduce unnecessary expenses.
Other financing options
Choose to sell your invoices to another company through factoring. This way, you can quickly access the money you expect. This is useful if you need to make a payment immediately. Additionally, you can raise money from many people through crowdfunding. This is a good option to finance a one-time project or investment.
Manage your liquid assets with Payt
As an entrepreneur, you know better than anyone how important it is to have control over your finances. An important part of managing liquid assets and maintaining healthy liquidity is collecting outstanding invoices on time. At Payt, we make this easier for you with our accounts receivable management software.
Faster payments
Payt helps manage liquid assets through an automated accounts receivable management system. This ensures that your invoices are paid faster, making more money available to meet your obligations.
Time savings
With Payt, you also save a lot of time by automating repetitive administrative tasks, such as automated follow-up of outstanding invoices. This allows you to focus on more important tasks within the company.
Integration with software packages
Thanks to integration with various software packages, Payt can also simplify the management of liquid assets. This is done by automatically recognizing customers and optimizing the reminder process for outstanding payments.
With efficient management of liquid assets, you ensure improved liquidity and strengthen your financial position.
Curious? Schedule an online demonstration or download our brochure. Join more than 10,000 satisfied users of Payt and give your organization the financial boost it deserves.
