Why Liquidity Is Becoming a Central Leadership Responsibility for Companies

Economic indicators such as the Swiss PMI have been signalling a slowdown in economic momentum for some time.
For companies, however, the exact number is less important than its practical implications: planning uncertainty is increasing.

This uncertainty does not primarily manifest itself in declining revenues, but in the financing logic of day-to-day operations. Payments are delayed, capital is tied up for longer periods, and external financing becomes more restrictive. As a result, a topic that is often underestimated in stable phases moves into focus: working capital.

From Stable Processes to Unstable Cash Flows

In a changing market environment, established processes come under pressure. Across industries, similar patterns can be observed:

• The gap between service delivery and payment receipt widens
• Customers make more consistent use of extended payment terms
• Pre-financing and inventories tie up capital for longer
• Credit facilities lose flexibility or are reassessed

Individually, these effects may appear manageable. Cumulatively, however, they are significant. Companies do not necessarily face an acute crisis, but rather a state of persistent liquidity tension.

Working Capital as an Operational Control Lever

Working capital is not merely a balance sheet concept. It reflects the functional resilience of day-to-day operations and addresses key management questions:

• How much capital is tied up in ongoing operations?
• How stable are cash inflows and outflows?
• To what extent does the company depend on external financing sources?

In the current environment, three areas prove particularly sensitive:

• Receivables: Longer payment periods increase financing needs without driving revenue growth.
• Inventories and pre-financing: Capital commitment rises while turnover rates decline.
• Financing headroom: Traditional credit instruments offer less flexibility than in the past.

This combination turns working capital into an active management responsibility, rather than a purely accounting issue.

Why Conventional Responses Reach Their Limits

In uncertain times, companies often resort to familiar measures: cost discipline, postponement of investments, or intensified receivables management. While sensible, these actions have clear limitations:

• Costs cannot be reduced indefinitely without impairing operational performance
• Collection efforts only marginally accelerate payments
• Additional borrowing increases leverage and dependency

This creates the need to generate liquidity from existing structures, rather than relying on additional debt.

Structured Working Capital Solutions

At this point, instruments that directly address cash flows become relevant. In particular, factoring and supply chain finance play a key role.

While their approaches differ, they share a common objective:
making liquidity available without disrupting operational processes.

Factoring: Using Receivables as a Source of Financing

Factoring is based on a simple principle: outstanding receivables are sold and converted into liquidity at short notice.
The economic effect lies not in increasing revenue, but in gaining time.

For companies, this results in several advantages:

• Liquidity becomes available promptly
• Cash flows become more predictable
• Dependence on individual customers’ payment behaviour is reduced
• With appropriate structures, debtor default risk can be partially transferred

The decisive factor is not volume, but the quality of the receivables.

Supply Chain Finance: Coordinating Payment Flows

Supply chain finance addresses a different point in the value chain: the interaction between buyers and suppliers.
By confirming invoices at an early stage, suppliers can accelerate liquidity, while buyers optimise their payment terms.

The benefits arise systemically rather than in isolation:

• More stable supplier relationships
• Improved predictability of cash flows
• Reduced liquidity bottlenecks across the value chain

Especially in challenging market phases, SCF has a stabilising effect without placing additional pressure on individual participants.

Comparison with Traditional Financing Approaches

Bank Financing

• Characteristic: Traditional debt financing
• Long-term effect: Higher leverage, covenants

Extended Payment Terms

• Characteristic: Operational measure
• Long-term effect: Strain on supplier relationships

Factoring / Supply Chain Finance

• Characteristic: Revenue- and process-based
• Long-term effect: Liquidity without additional indebtedness

The key difference is that structured working capital solutions do not rely on increased borrowing.

Success Factors for the Use of Factoring

To ensure that factoring creates sustainable value, three elements are critical:

• Selective use rather than blanket assignment of all receivables
• Clear objective definition, whether the focus is liquidity, risk reduction or balance sheet impact
• Integration into the overall financing strategy, not as a standalone measure

Factoring is not a substitute for sound financial management – it is a complement to it.

Conclusion: Working Capital Determines Strategic Flexibility

Periods of economic uncertainty reveal how resilient financing models truly are.
Working capital becomes a benchmark for a company’s ability to manage and steer its operations.

Companies that actively shape their cash flows gain:

• Stability in day-to-day operations
• Flexibility in financing
• Decision-making freedom in volatile markets

At Aequitex, we view working capital solutions as strategic instruments for safeguarding entrepreneurial agility – not as short-term stopgaps.

Are you ready to take control of your cash flows?

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