The link between a stronger credit rating and stronger liquidity is direct, if an entity’s liquidity is well managed and well viewed by its credit agencies.
Liquidity analysis and management of all cash are important components in showing credit agencies that your entity has a strong handle on its sources of revenue. How effectively that cash is managed requires a strong plan that covers operating and capital payments.
Outside of the basics of receiving and disbursing funds, the management of liquidity of operating and reserve funds is expected. But credit agencies take more favorable views based on how well the funds are managed while they’re under an entity’s control.
Think of it this way: liquidity is cash. If cash is viewed as an asset, it can be effectively managed, calculating in operating and capital payments, and lead to increased bottom-line income.
At three+one, we specialize in identifying and managing our clients’ operating and non-operating liquidity. Our pure and independent data allow entities to manage cash more effectively—and benefit from a significant increase in interest income. Frequently in the tens to hundreds of thousands of dollars each year.
A stronger liquidity initiative could lead to a stronger credit rating and lower rates on lending in the marketplace. The link between the two is a direct one.
With the proper management plan, the end result can be a “win-win” for your entity and to those you serve—in both lower costs and higher interest earnings
