Secure cash flow, avoid insolvency: 5 effective strategies for securing liquidity for companies in Austria

In economically challenging times, the issue of securing liquidity is becoming increasingly important for companies. Sound financial planning, a continuous overview of cash flows and securing cash flow at an early stage are crucial in order to avoid financial bottlenecks and prevent insolvency. This comprehensive guide is designed to help companies in Austria optimize their cash flows and secure cash flow in the long term. We shed light on legal aspects and provide practical tips on how to proceed effectively at all levels of securing liquidity. Here are our 5 strategies

1 The importance of cash flow for companies

Cash flow refers to the cash flow, i.e. the difference between incoming and outgoing payments in a specific period. Cash flow shows how much money is actually available to a company to pay running costs such as rent, salaries, taxes and supplier invoices. A healthy cash flow means stability and is the basis for investment, growth and financial security. Maintaining a positive cash flow is particularly important for small and medium-sized enterprises (SMEs). A stable cash flow protects against financial bottlenecks and minimizes the risk of insolvency. Even economically healthy companies can get into payment difficulties if they do not collect their receivables on time and their capital therefore remains tied up on the debtor side.

2. preventive measures to secure the cash flow

To avoid cash flow bottlenecks, it is important to take a preventative approach and establish processes to secure cash flows. Below we present measures that companies can take to secure cash flow and minimize liquidity risks.

A) Early and timely invoicing

Timely invoicing is the first and one of the most important steps to ensure prompt payment. Frequent errors, such as sending invoices late or providing inaccurate information, result in payments arriving late or not being received at all.

  • Our tip:
    Establish clear internal processes to issue invoices as soon as possible, either before or immediately after the service is provided. Automated invoicing systems or accounting software can help to simplify and speed up the invoicing process.

  • Beware of errors:
    Make sure that payment deadlines, invoice amount and VAT are stated correctly, as incomplete or incorrect invoices delay the payment process.

B) Clear and transparent terms of payment

Clear and precise payment terms create transparency and help to avoid misunderstandings. These terms should be detailed in every contract and on every invoice.

  • Standardized payment terms:
    In Austria, a maximum payment term of 30 days is customary by law, unless otherwise agreed. However, companies can also agree shorter terms with their customers. It is important that these are clearly communicated in advance.

  • Early payment discounts: Early payment incentives (e.g. cash discounts) can be an effective way of motivating customers to pay their invoices more quickly. However, customers do not have a general right to deduct a discount.

C) Dunning and deadline monitoring

The dunning process is a critical area in the company to ensure cash flow. Qualified and reliable employees should be entrusted with this task. Effective dunning processes ensure that late payments are tracked and collected in a timely manner.

  • Create a dunning plan:
    A structured dunning process with clearly defined dunning levels (e.g. payment reminder, first reminder, second reminder) is crucial. Each dunning level should include a fixed interval and a clearly defined procedure.

  • Automated dunning process:
     Numerous accounting programs offer the option of creating and sending reminders automatically as soon as the payment deadline has passed. This saves time and minimizes the risk of losing track of payments.

D) Handover to the lawyer

If a debt remains unpaid despite repeated reminders, it may make sense to hand the matter over to a lawyer. A professional debt collection procedure shows the debtor that the claim is being pursued seriously and can increase the pressure.

  • Time of the reminder:
    It is often advisable to consult a lawyer after the first reminder, as the enforcement of the claim by a lawyer can exert significantly more pressure on the debtor and persuade them to pay.

  • Choosing the right procedure:
    Depending on the amount of the claim and the case, it may be necessary to file a lawsuit, initiate legal dunning proceedings or enforce the debt. A lawyer for commercial law can provide companies with the best advice on which procedure makes the most sense and is the most cost-effective in their case.

3. practical solutions to improve the payment flow

In addition to optimizing accounting and dunning, companies can take further measures to stabilize their payment flows.

  • A) Cash flow forecasts and liquidity planning
    A successful cash flow management approach requires regular liquidity planning and cash flow forecasts. This allows companies to keep track of expected income and expenditure and to react at an early stage if bottlenecks are imminent. Cash flow forecasts:
    Create monthly or quarterly cash flow forecasts to anticipate income and expenditure. Make sure you also take unforeseen expenses into account and allow for a buffer. Software tools:
    Various software solutions offer the possibility of planning cash flows and obtaining an overview of the company’s financial situation.

  • B) Optimize payment methods and create variety
    Offering different payment methods can simplify and speed up the payment process for customers. Alternative payment methods such as credit card payment or online payment systems can be particularly useful for international customers. Diversification of payment methods:
    Offer a variety of payment methods to simplify the payment process for your customers. Digital payment and e-invoicing:
    The use of e-invoices and digital payment platforms speeds up payment processing and reduces the risk of delays due to postal delivery times.

  • C) Credit insurance and factoring
    Companies that regularly work on account can protect themselves with credit insurance and factoring. Factoring represents an immediate cash injection, as receivables are sold to a financial institution. Factoring models:
    With factoring, companies sell their outstanding receivables to a bank or factoring service provider. This gives them immediate liquidity and they do not have to worry about the dunning process. Credit insurance:
    Credit insurance protects companies against payment defaults and assumes the risk if customers are unable to pay. This can be a good hedge, especially in economically uncertain times.

Legal framework in Austria for securing cash flow

In Austria, there are various legal frameworks that companies can use to secure their cash flow. Knowledge of these legal options is important in order to collect receivables effectively and take legal action correctly.

  • A) Statutory payment deadlines and default

    The Austrian Commercial Code (UGB) regulates payment deadlines and default interest for companies. Entrepreneurs are obliged to make payments within 30 days, unless otherwise agreed. In the event of late payment, creditors can claim interest on arrears. Ideally, a shorter due date should be agreed with the customer.

    Default interest:
    Companies can claim default interest of 9.2% above the prime rate. This default interest is intended to create incentives to make payments on time.

    Reminder fees:
    Companies have the right to charge reminder fees if a payment is late. However, the amount of the reminder fees should be reasonable and contractually agreed in advance.

  • B) Judicial dunning procedure
    The judicial dunning procedure offers companies a quick and cost-effective way of collecting outstanding debts. A dunning procedure is particularly suitable if the claim is undisputed. The dunning procedure:
    As part of a dunning procedure, the creditor applies to the competent court for an order for payment. If this is not contested, the creditor can immediately initiate execution to collect the debt. Advantages of the order for payment procedure:
    The order for payment procedure saves time and costs compared to conventional court proceedings and can persuade the debtor to pay without the need for costly litigation.

  • C) Execution and compulsory enforcement
    If a claim remains unpaid after a judicial dunning procedure, execution or compulsory enforcement can be applied for. The creditor can have the debtor’s assets seized in order to collect the outstanding debt. Types of attachment:
    Execution can be carried out in the form of wage attachment, account attachment or attachment of property. If the debtor is an entrepreneur, forced administration is also an option. Additional steps:
    If the debtor does not have sufficient assets, it is possible to apply for the debtor’s insolvency. This involves checking whether the debt can be (partially) satisfied by selling assets.

5. minimize insolvency risks through preventive measures

Avoiding insolvency risks requires a proactive strategy and close monitoring of cash flow. Preventive measures and effective receivables management allow financial bottlenecks to be identified and averted at an early stage.

  • A) Regular credit assessment of business partners

    Regular credit checks of new and existing customers make it possible to minimize payment defaults and identify risks at an early stage. In Austria, various credit agencies offer credit checks to obtain information about the financial situation of business partners.

  • B) Early communication and cooperation with the tax advisor

    A good tax advisor can provide valuable support with liquidity planning and help to minimize tax burdens. Regular analysis of the financial situation and the joint development of measures can help to avoid liquidity bottlenecks.

  • C) Financial reserves and emergency strategies

    Every company should set aside reserves for unforeseen expenses and economic fluctuations. These reserves make it possible to bridge short-term liquidity bottlenecks in times of crisis and continue business operations.

Conclusion: secure cash flow and avoid insolvency

Sound liquidity planning and effective receivables management are the cornerstones for preventing cash flow bottlenecks and minimizing insolvency risks. Companies in Austria can ensure their financial stability by establishing clear payment terms, adhering to a structured dunning process and handing over unpaid receivables to a lawyer at an early stage. Especially in uncertain economic times, it is important to implement these preventative measures consistently and review them regularly. Close cooperation with legal and financial advisors and continuous adjustment of the cash flow strategy are essential in order to remain successful and solvent on the market in the long term.