Why is gold known as a liquid asset

Liquid funds - what are liquid funds?

Liquid funds are a current asset item on the assets side of your balance sheet. Like the word liquid already reveals, these are your company's cash and cash equivalents. By definition, receivables, checks, bills of exchange and securities, your cash on hand and your bank balance are among the liquid funds. So everything that is actually available as money or can be liquidated quickly. Production resources and raw materials are also liquid funds.

Different orders of liquid funds

Liquid funds are divided into three categories, which are differentiated according to how quickly they can be liquidated.

First-order liquid funds

The first-rate liquid assets include bank balances and cash. In other words, money that is immediately available.

Second-order liquid funds

Second-order liquid funds are checks, bills of exchange, securities and trade accounts receivable. These values ​​are not yet immediately available as money for your company, but neither are they a product or service.

Third-order liquid funds

Goods, raw materials, etc. are third-order liquid assets. They have real value but have yet to be sold.

Keep an overview of your liquid funds

In order to keep the accounting of your company in order, a precise overview of your cash and cash equivalents is very important. We would like to briefly introduce you to how this is possible in detail:

Cash on hand

Keeping track of the cash balance is comparatively laborious nowadays, as withdrawals are not recorded automatically, as is the case with a bank account, but are recorded in writing every time. The easiest way to do this is with a cash book.

In the linked post you will find out everything you need to know about the structure of the cash book, the recording of data and deadlines. We have also linked a sample there.

Checks, bills of exchange, securities

Regardless of the form in which you have these documents, you must definitely adhere to the statutory retention periods. You should keep paper documents in folders for as long as required.

For example, if you have a securities account, you can best manage it directly in FastBill. You can find out how this works in the next point "Bank balance".

Bank balance

Online banking is standard. But in everyday business in particular, it usually quickly becomes confusing with multiple accounts and securities accounts, especially if you may offer other means of payment such as PayPal. The banking in FastBill was created to give you this important overview again. In the following video you can see how banking works in FastBill.

With the banking in FastBill you can manage all your accounts and securities accounts. Soon you will also be able to make transfers directly in FastBill and your receipts will automatically be assigned to the appropriate payments.

How much cash does my company need?

There is no general answer to this question, as the need for cash always depends on the activities of your company. There may be phases in which you need more liquid funds than in others.

Overall, however, you should keep your liquid funds as low as possible. Because money that is only in the bank hardly generates any interest. So as much as necessary, but as little as possible.

Moritz Lampkemeyer
Moritz is responsible for product marketing at FastBill. He regularly writes on the blog about the latest developments, new features, and tips and tricks for using the software.

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