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Liquidity budget

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What is a liquidity budget?

A liquidity budget is often confused with an operational budget, but a liquidity budget is for strengthening your future actions from an economic perspective. A liquidity budget is characterized by the fact that expenses and revenue appear in the month that they are paid. If an invoice has to be paid within the period of the first of May plus 30 days, this invoice will appear in the month of June in the liquidity budget.

It is about knowing your current and future cash position. This way you will know every month if you have enough revenue to cover your expenses. The liquidity budget will give you an insight into whether your business has good or bad liquidity – if the business is good at paying its short-term expenses or bad at paying them.

If you experience that there has been bad liquidity for several months, you can try to correct this in a couple ways. You can, among other things, cut down on your expenses, if this is not possible you can apply to increase your overdraft, or try to increase profits.

We recommend that you contact one of our coaches, as it is not always easy to figure out which figures need to be in this budget. Here are a couple of our coaches with expertise in this field: Camilla Nyvang, Frederik Sandgrav, Diana Ahmad, Martin W. B. Kristensen.