Managing Liquidity With A Liquidity Management System

by John Eshan

Managing a company’s liquidity is crucial to its success. Without good visibility into cash flow, businesses risk running out of money and having to borrow or sell assets at unfavorable terms. A treasury management system centralizes data that is typically scattered across multiple technical ecosystems. This makes it possible for users to create liquidity structures as per available documentation, set up processing rules and obtain account balances from general ledger systems.


Liquidity management system means keeping track of incoming payments and outgoing cash commitments. In order to keep track of these transactions, businesses must issue invoices. These documents serve to notify customers of the products or services they have purchased, how much is owed, and when payment is due. Depending on the business, these documents can be sent via email or printed and mailed. Liquidity management involves streamlining invoicing and collections processes. It also involves optimizing accounts payable and inventory levels to minimize carrying costs and take advantage of early payment discounts. These strategies help companies meet short-term debt obligations while maintaining a strong credit rating.

For midsize companies, it is crucial that they have a system that can efficiently collect and aggregate liquidity information. This enables finance and treasury departments to consolidate cash position data and perform real-time forecasting. It also enables financial professionals to meet regulatory reporting requirements in various geographic regions. Additionally, the system should have audit logging capabilities for critical processes to reduce downtime in case of failure scenarios.


When a company is ready to make payments to suppliers and other creditors, it’s necessary for them to have full visibility into their current cash position. If not, they may face unwanted financial surprises. One way to manage liquidity is through a process called sweeping, where funds are physically moved in and out of accounts. Another option is ‘pooling’, where account balances are not physically moved, but are notionally consolidated and interest computed on these notional balances.

Liquidity management solutions pool data spread across multiple systems inside a bank’s IT infrastructure to provide accurate liquidity analyses and reporting. Most of them can also collect cash flow forecasts and actuals from different sources to improve liquidity visibility and deliver automated and flexible reports for internal and external stakeholders. They can also help forecast the liquidity needs of global corporations and deploy their cash in an optimal manner to reduce external debt and maximize returns on excess cash.


Liquidity management is the proactive process of ensuring that a company has sufficient cash or liquid assets to pay its short-term financial obligations as they come due. It is a critical component of financial health and is necessary to avoid insolvency or bankruptcy. It involves monitoring a company’s current and historical cash flow to analyze its liquidity and ensure that it has enough funds to meet upcoming financial commitments. It also includes managing a company’s debt and investing its excess cash. It is particularly important for companies in cyclical industries, which often have seasonal fluctuations in demand.

A good retail banking solution can collect data from a variety of internal and external systems to enable a holistic view of a company’s liquidity. It should provide a user interface for creating and modifying liquidity structures and assigning rules as well as providing users with customized reports. It should also support a flexible workflow and audit logging for critical processes in order to facilitate recovery in failure scenarios.


Whether you are a startup or a growing company, effective liquidity management is essential to ensure financial agility. It enables you to quickly react to sudden business risks and capitalize on opportunities faster. In the worst-case scenario, a lack of visibility into your financial health can lead to insolvency. Managing your liquidity requires centralized data and access to real-time information. However, this can be difficult for companies with complex technical ecosystems with many banks, accounts, suppliers, customers, and ERP systems in multiple countries.

Sancode technologies use automation to help you break down these silos and centralize all your data in a single system. This helps you forecast accurately, improve banking relationships, and gain visibility into the financial health of your company.


It also enables you to implement cash concentration techniques like Zero, Target, Threshold, Collar balancing and percentage sweeps and pools for better liquidity management and minimizes currency exposure. Moreover, it facilitates intercompany loans to fund business units with short-term liabilities and invest excess funds.

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