Revenue is important - but it does not pay the bills. For the stability of your business, available cash flow is what really counts.

According to a recent study, 81% of companies in Germany now report payment delays, up from 59% in 2021 - a clear sign that professional cash flow and receivables management has become essential.

This guide gives you a practical, step-by-step approach to freeing up cash both quickly and sustainably - with a focus on:

  • structured receivables management
  • effective payment terms and incentives
  • using trade credit insurance
  • optimized bond and guarantee management
  • factoring and related financing solutions

Target audience: Finance leaders in mid-sized companies who want to strengthen liquidity, outsource risks, and make their financing less dependent on their principal bank.

What you will achieve with this guide

Once you implement these actions, you will be able to:

  • actively control and shorten days sales outstanding (DSO)
  • free up cash quickly without providing additional collateral
  • transfer credit default risks and make them more predictable
  • broaden your financing base (bank, trade credit insurance, factoring, guarantees)
  • relieve and professionalize your finance and receivables management

renz credit & consulting (rcc) supports companies in doing exactly this - with independent advice on trade credit insurance, guarantees, factoring, and financing.

Prerequisites: Prepare these documents

Before you start, you should have the following documents and key figures ready:

  • current management accounts / monthly financial statements (at least the last 12 months)
  • open items list (accounts receivable, due dates)
  • overview of payment terms (standard payment period, early payment discount, industry specifics)
  • analysis of your dunning and collections processes (e.g. dunning statistics)
  • overview of bank facilities (overdraft, guarantee credit lines, term loans), including utilization
  • existing trade credit insurance policies (limits, cover, waiting periods)
  • existing factoring or supply chain finance / purchase finance agreements
  • list of guarantees/bonds (type, amount, term, provider)

Tip: Start with what you have and add missing data as you go. Getting started is more important than perfection.

Step 1: Create transparency on receivables and liquidity

Impact on cash flow: high
Effort required: low to medium

Clarity about your receivables and cash position is the essential foundation. Begin with a compact status review.

1.1 Calculate days sales outstanding (DSO)

Days sales outstanding (DSO) measures how many days, on average, your customers take to pay.

Simplified formula:

DSO = (average accounts receivable balance ÷ annual revenue) × 365

The typical payment term in German B2B business is around 30 days. If your DSO is above that, your receivables are tying up too much cash.

Ask yourself the following questions:

  • What is our average receivables balance?
  • How many days typically pass between invoicing and payment?
  • Do we have major customers with significantly different payment times?

1.2 Identify your top 10 receivables risks

Create a list of your top 10 customers by receivables volume and review:

  • outstanding amounts
  • average payment duration
  • existing collateral (trade credit insurance limit, guarantee, retention of title, etc.)

Note: The highest risk rarely comes from all receivables, but usually from a few major customers.

Step 2: Streamline receivables management - from quote to collection

Impact on cash flow: high
Effort required: medium

Your goal is a consistent, efficient process from quotation through to cash receipt.

2.1 Define clear payment terms

Review your standard terms:

  • Do payment periods match industry practice?
  • Are early payment discount rules clearly defined?
  • Do special arrangements unnecessarily tie up cash?

Payments in Germany are now, on average, almost 32 days overdue beyond the due date. Unclear terms increase that risk.

2.2 Improve invoice quality

Avoid delays caused by formal errors. Your invoices should:

  • be complete and legally compliant
  • include clear descriptions of goods or services
  • show correct customer references (e.g. purchase order number)
  • be sent and archived digitally

Tip: Use standardized invoice templates and checklists to prevent queries and disputes.

2.3 Enforce your dunning process consistently

  • define clear reminder levels (e.g. friendly reminder, 1st and 2nd formal reminder, collection agency)
  • set fixed deadlines for each level
  • use phone follow-ups for larger amounts
  • define escalation thresholds (e.g. delivery stop, payment in advance)

Note: Postponed dunning runs weaken your liquidity and can become existentially threatening in a worst-case scenario. Clear processes protect both your cash flow and your customer relationship.

Step 3: Actively manage payment terms and use incentives

Impact on cash flow: medium to high
Effort required: low to medium

Many payment terms are the result of legacy arrangements. This is often an area where you can free up cash quickly.

3.1 Review and adjust payment terms

  • define standard payment terms by customer group (e.g. 14 days for new customers, 30 days for long-standing customers)
  • check where longer terms are genuinely necessary
  • tie longer terms to collateral (e.g. trade credit insurance limit, guarantee)

3.2 Use early payment discounts strategically

Calculate when early payment discounts are cheaper than external financing:

  • for example, 2% discount for payment within 10 days instead of 30 days
  • the effective "interest rate" is roughly 2% for 20 days - annualized, that is very high.

Even so, discounts can make sense when:

  • no cheaper financing is available
  • you have a high need for immediate liquidity
  • credit risk is reduced by getting paid faster

Step 4: Use trade credit insurance for protection

Impact on cash flow: medium (indirect), high
Effort required: medium

Trade credit insurance protects you against bad debts and gives you room to grow.

In the event of a claim, trade credit insurance typically covers up to 90% of the insured receivable amount. This makes losses more predictable.

4.1 Typical areas of application

  • fast-growing revenue concentrated in a few major customers
  • more international or export business
  • tight liquidity where payment defaults are critical
  • industries with high receivables exposure

4.2 Benefits for your cash and risk management

  • credit checks conducted by the insurer and credit information agencies
  • credit limits per customer that can be used as a management tool for sales
  • reduced equity capital pressure, as covered losses are mitigated

A tailor-made trade credit insurance policy is a key component for securing your business model. rcc provides independent advice and helps you compare the market.
Learn more here: You deliver on open account - rcc protects you.

Step 5: Factoring - turn receivables into cash immediately

Impact on cash flow: very high
Effort required: medium

With factoring, you sell your receivables to a factor and receive most of the amount immediately.

With non-recourse ("true") factoring, companies usually receive 80-90% of the invoice amount right away; the factor also assumes the default risk and often manages the dunning process.

In 2024, members of the German Factoring Association purchased receivables worth €398.8 billion. The factoring ratio is 9.3% of German GDP - a sign of how widespread the instrument has become.

5.1 Benefits for liquidity and risk

  • immediate cash regardless of long payment terms
  • flexible, volume-based financing that grows with your sales
  • outsourcing of default risk (in non-recourse factoring)
  • optional services such as receivables ledger management and dunning relieve your back office

Factoring often pays off from around €250,000-500,000 in annual revenue and is especially suitable for businesses with regular invoicing.

Tip: Factoring is particularly attractive when you are growing, granting long payment terms, or your overdraft facility is fully utilized.

Which type of factoring is right for you is explained by rcc here: Factoring, purchase finance, project finance

Step 6: Decouple guarantees and bonds from bank credit

Impact on cash flow: medium
Effort required: medium

Many companies obtain guarantees (e.g. performance bonds, advance payment bonds, warranty bonds) from their principal bank - which ties up credit lines that would be better used for real liquidity.

Guarantees and bonds are reported as contingent liabilities in the balance sheet, but they still consume bank credit lines because the bank is liable.

6.1 Surety insurance as an alternative

Guarantees can often be issued via surety insurers. The advantages:

  • preserves bank credit lines
  • often more flexible limits if credit quality is sufficient
  • broader financing base (bank + insurer)

Note: Regularly check whether all guarantees are still needed or whether limits can be reduced.

A structured guarantee and bond management approach is recommended to relieve your banking lines. rcc provides independent advice and shows alternatives, see Guarantee, bond, warranty? We optimize your guarantee management.

Step 7: Professionalize financial communication and reporting

Impact on cash flow: medium to high (medium- to long-term)
Effort required: medium to high

Banks, trade credit insurers, and factoring providers base their decisions on your financial information. Professional financial communication improves terms, limits, and your negotiating position.

7.1 Report key metrics regularly

Provide structured reporting on:

  • revenue, EBITDA, and cash flow
  • receivables structure (maturities, concentration risks, regions)
  • DSO, dunning statistics
  • existing collateral and utilization

7.2 Proactive communication instead of "firefighting mode"

  • Approach your financing partners early when risks or growth spikes emerge
  • Prepare scenario analyses (best/medium/worst case)
  • Provide rating-relevant information to strengthen your position

Structured reporting is a powerful lever for better terms on trade credit insurance, guarantees, factoring, and bank financing - thereby expanding your liquidity headroom.

Prioritization: Which action should come first?

If you cannot implement everything at once, the following order is recommended:

  1. Create transparency (Step 1)
  2. Optimize receivables management and payment terms (Steps 2-3)
  3. Evaluate trade credit insurance (Step 4)
  4. Assess factoring (Step 5)
  5. Optimize guarantee and bond management (Step 6)
  6. Professionalize financial communication (Step 7)

Next steps: How to put the process into practice

  • Create transparency: Determine your DSO and your largest receivables risks.
  • Launch a receivables management project: Improve invoicing cycles, dunning, and payment terms.
  • Use external levers: Work with independent specialists to assess how trade credit insurance, factoring, and guarantee management can sustainably improve your liquidity.
  • Define a liquidity target: for example, "reduce DSO by 10 days within 12 months" and track progress monthly.

renz credit & consulting is your navigator through the maze of offerings from trade credit insurers, banks, factoring companies, and credit information agencies - developing tailored solutions for your business model.

FAQ: Common questions about freeing up liquidity

1. How quickly will these actions have an effect?

  • Short term (weeks): Improvements from optimizing invoicing, dunning, and payment terms become visible quickly.
  • Medium term (months): Trade credit insurance and factoring stabilize liquidity and shift risks off your balance sheet.
  • Long term: Professional financial communication and optimized guarantee management improve your rating and conditions within 12-24 months.

2. From what size does factoring make sense?

Factoring usually becomes economical from around €250,000-500,000 in annual revenue - for companies with regular invoicing and long payment terms. More decisive than size are:

  • continuous invoice volume
  • a diversified customer base
  • a significant receivables balance that ties up liquidity

3. Do I still need trade credit insurance if I use factoring?

With non-recourse ("true") factoring, the factor assumes the default risk (del credere). However, in individual cases an additional trade credit insurance policy can make sense - for specific deals, exports, or when only part of your receivables are factored. An independent analysis will show the most economical setup.

4. Do guarantees and bonds affect my liquidity?

Not directly - guarantees are contingent liabilities. However, your bank provides the risk capacity, which limits your credit lines.

A guarantee is recorded as a contingent liability, but the bank reserves credit headroom for it. Many or large bank-issued guarantees can restrict your financing flexibility. Surety insurers often provide relief.

5. How do I recognize a receivables management system that is starting to fail?

Warning signs include:

  • rising DSO
  • an increasing share of overdue receivables (e.g. > 60 or > 90 days)
  • frequent limit reductions by trade credit insurers or banks
  • growing numbers of one-off decisions for individual customers

Around 10.5% of German companies are currently considered at risk of insolvency - mostly due to tight liquidity and poor payment behavior. Professional liquidity and receivables management is therefore indispensable.

If you would like an individual assessment or a neutral second opinion, renz credit & consulting supports you as an independent specialist broker for trade credit insurance, guarantees, factoring, and financing - personally and objectively.