A liquidity crisis is the moment of truth for any management team. Yet there are always ways to turn the ship around— before the bankruptcy judge takes over.
1. In a Nutshell
It is about the survival of your company in a liquidity crisis – in other words, when there is not enough cash to pay ongoing invoices, salaries, or suppliers on time. If this situation remains unresolved, it can escalate into a restructuring or insolvency scenario. The real challenge is to identify such bottlenecks early and counteract them in time, before the crisis spirals out of control and the law forces you to file the balance sheet.
2. Key Takeaways
A liquidity crisis rarely comes out of nowhere. It is usually preceded by clear warning signals such as declining revenues, cost freezes, or high levels of liabilities. Management—and in particular the board of directors—carry a central duty of oversight and response. This has become even more important since the revision of Swiss corporate law, which explicitly requires ongoing monitoring of solvency.
In Switzerland, as a board member or executive, you are legally obliged to prepare an interim balance sheet if there is justified concern about over-indebtedness.
In a crisis, two paths are possible:
- Restructuring: Financial and operational measures are taken to restore the company’s health—for example cost reductions, debt restructuring, or securing new sources of financing.
- Bankruptcy: If restructuring prospects are not evident or action is taken too late, a liquidity crisis often marks the entry into formal insolvency proceedings.
3. Planning and Timing Essentials
- Early warning is everything: Short-term liquidity planning (e.g. a 3–12 month cash forecast) should be a core element of financial management. This allows bottlenecks to be identified before they become acute.
- Review regularly: Financial ratios, cash-flow forecasts, and liquidity indicators should be reviewed at least monthly—not only when the situation becomes tight.
- Speed matters: In a crisis, every hour counts. The earlier measures are initiated—such as working capital optimization or discussions with lenders—the greater the chances of a successful restructuring and the lower the risk that a temporary crisis turns into bankruptcy.
4. Why This Matters to me
- Better protection against insolvency: Those who identify liquidity bottlenecks early can act decisively and often avoid bankruptcy altogether.
- Legal certainty for decision-makers: Systematic planning and proactive management reduce liability risks for board members and executives, protecting personal assets from claims related to delayed insolvency filings.
- Stronger business resilience: Robust liquidity planning not only improves survival chances in times of crisis, but also strengthens the company’s negotiating position with banks, suppliers, and investors. And not infrequently, a crisis becomes the catalyst needed to finally put the business on a more cost-efficient footing.
