To be sure, the current FTX crisis in the cryptocurrency sector has put the word “liquidity” on everyone’s lips as traders withdraw their bitcoin from exchanges, trading platforms declare bankruptcy, and worries mount that other crypto-focused businesses may follow suit.
However, liquidity is a global issue. Liquidity may be viewed as the “oil” that powers business motors. Cash, short-term assets (and the capacity to convert them to cash), and loans are essential for firms to satisfy their short-term obligations.
There are several reasons why CEOs, particularly treasurers, are more concerned than ever with maintaining healthy balance sheets and cash flows. Inflation has reached levels not seen in decades.
According to a recent New York Federal Reserve research study, “banks operate as if their intraday reserve holdings are a precious resource, despite the fact that overall reserve balances in the US banking system are considerably over $1 trillion.” Although the reserves exist, prudence is a big side effect of today’s macroeconomic uncertainties.
At a high level, enlisting suppliers — including large banks and independent providers — may automate the back-end operations that traditionally fill the workday while improving cash flow visibility. Data and analytics, which provide a comprehensive picture of a company’s real-time financial health, contribute to the gains.
