How to increase the solvency of the enterprise

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Currently, the assessment of financial stability and solvency is one of the first places in the field of financial management of domestic enterprises. This is due to the exacerbation of the non-payment crisis, widespread everywhere.

Instruction manual

In order to increase the solvency of the enterprise, it is necessary to remember that it is determined primarily by the structure and qualitative composition of current assets. After all, solvency is the ability of an enterprise to pay off its debts on time. And this can be done through the quick sale of assets. Therefore, they should be easy to implement. Therefore, the management of current assets should imply a balance between the costs of maintaining the assets in the amount and structure that guarantees an uninterrupted technological process, between losses associated with the risk of loss of liquidity and income from the involvement of new funds in the turnover.

Note that solvency depends on the speed of turnover of assets, as well as on its correspondence to the speed of turnover of short-term liabilities. The current activity of the enterprise can be financed at its own expense, i.e. directing the share of net profit to the acquisition of current assets, as well as from long-term and short-term borrowed sources. If the current activity of the organization is ensured by short-term revenues, then the sources of additional funds can be loans and borrowings, payables to suppliers and employees of the enterprise. If the organization has reduced asset turnover and management does not take measures to attract additional sources, this can lead to a decrease in solvency, even if it is currently profitable.

If your company has a tendency to increase the operating cycle, then take measures to stabilize the financial condition. For example, reduce the shelf life of stocks, goods, materials, pay attention to improving the system of settlements with customers, work with debtors who violate payment terms, etc. At the same time, do not lose sight of the fact that additional sources of financing are always associated with the costs of attracting them. In general, the solvency of the enterprise can be increased by improving the quality of products, as well as by mobilizing sources that will ease financial tensions at the enterprise.