On certain occasions, the profits of a company are often confused with the money it generates. Economic concepts are used, which through indicators, attempt to explain how the cash has been generated.
To understand this better, we can say that there is nothing more important than liquidity, which represents the "oxygen" a company has; without it, its "heart" stops functioning. This highlights the vital importance of maintaining an adequate level of "breathing" at all times, depending on the life stage of the organisation..
The problem is that, just as we humans struggle to accept an ailment, companies often tend to deny any discomfort for as long as possible, and therefore do not address the causes that may be provoking it.
This often leads to less than positive situations, which eventually have a direct impact on the cash flow, tending to multiply problems and generate certain "tensions" that can complicate the payment of payroll at the end of each period, commercial debt with suppliers, or the repayment of loans.
In this way, the company's activity decreases because it lacks the necessary oxygen, forcing it, much like the human body, to stay alive by minimising its activity.
The problem is that the passage of time, without applying the proper "medicine" for the illness the company is experiencing, can lead to a state of "induced coma" (creditor proceedings) or, even death (dissolution) when the “patient´s” state is severe.
It is in the generation of liquidity that the real causes of a crisis situation in a company materialise, and which are expressed by running out of ‘oxygen’ at a given moment, no matter how strong the business idea or market position behind it is
The same can happen during a growth phase; if it lacks the necessary financing, this inability to "breathe" properly can prevent achieving the intended objectives and lead the company into an unexpected crisis, which is often very difficult to overcome.
Having an integrated treasury management platform like Embat is essential to optimise the company's liquidity.
Embat allows for precise control of cash flows and treasury positions in real-time, providing financial teams with a comprehensive view of the company’s liquidity. With this information readily available, they can make informed and strategic decisions to maintain a healthy cash flow and ensure the sustainable growth of the organization.
Therefore, cash is king. There is no discussion, although this doesn’t mean that in certain circumstances certain "shortcuts" are taken and the true meaning of treasury is not properly considered.
This is where we must mention EBITDA, an indicator that has become established as a way to simulate, with certain limitations, the cash flow generation of a country over a specific period.
While it is a good approximation that gives us a reasonably simple idea of the "cash" generated, nothing is more important than performing a "fine" calculation to truly understand the actual inflows and outflows of money, because...
Cash is always king!
