Mid-Market Liquidity Check: Your Guide to Optimizing Cash Flow

When it comes to building a resilient and agile business, cash flow management is key. Adequate liquidity conveys a significant competitive advantage, enabling organizations to capitalize on growth opportunities, navigate industry and economic downturns, and financially buffer and protect their operations.

But many organizations, especially mid-market organizations, face a spate of pressures that impact liquidity, from interest rate pressure to trade volatility. Without careful planning, these conditions can create a cash crunch, just when companies could benefit from liquidity the most. 

But treasury leaders can mitigate the effects of these market shifts by taking steps to identify liquidity stress points and optimize their organization’s cash flow — without a complete financial overhaul. 

Here, we’ll explore how small shifts in collections, invoicing, inventory, and treasury tools can free up meaningful operating cash and help you build financial resilience within your organization.

Inside the Mid-Market Cash Crunch

While every business, from multinational enterprises to solopreneurs, feels the effect of economic challenges, private, middle-market companies often bear the brunt of these shifts. 

While large companies have significant internal resources and the capital to bring in external expertise when they need to, middle market businesses typically rely on leaner budgets and more limited resources to navigate significant challenges.

So it’s perhaps no surprise that middle-market companies have seen their operating profits dip by an average of 23 percent from 2020 to 2025, according to research conducted by Rapid Ratings. Meanwhile, their publicly traded counterparts improved operating profit by 16 percent over the same time period.

Many middle-market companies also face a debt problem, according to the same study. Private middle-market companies increased their leverage by 126 percent between 2020 and 2025. And as interest rates have risen, they’re paying more and more interest on their debts. 

Rising interest costs, combined with tariffs, inflation, and other cost pressures, have resulted in a cash crunch that not only threatens organizations’ viability — but also limits their ability to capitalize on growth opportunities that would improve their financial picture. 

Optimizing Cash Flow Starts with Identifying Liquidity Stress Points  

While middle-market treasury leaders may not be able to change the economic conditions that lead to a cash crunch, they can act strategically to improve cash flow within the business. Identifying liquidity issues early — before their simmer reaches the boiling point of a cash problem — can help leaders identify and mitigate serious problems before they start.

As you evaluate your organization’s own liquidity, pay attention to the following indicators of stress:   

• Declining interest rate coverage ratios: Rising interest rates or declining EBITDA can impact your organization’s interest coverage, increasing the risk of a liquidity problem. 
• Volatile operational cash flow: Unexpected spikes in expenses or dips in revenue can make it harder to meet operational liabilities such as payroll or vendor contracts.  
• Increasing balances on credit lines: Drawing down revolving credit lines as expenses rise can leave companies in a vulnerable position when they need additional capital.  
• Over-investment in illiquid assets: Depending on the type of company, holding illiquid assets that are challenging to sell and may drop in value over time can cause cash challenges.

Take Steps to Unlock Working Capital  

In addition to identifying early warning signs of a cash flow problem, leaders can take incremental steps to optimize their cash flow to improve liquidity. Consider adopting the following strategies to help strengthen cash flow:

1. Maximize Your Accounts Receivable  

One of the simplest ways to improve your cash holdings is to accelerate your receivables. 

Start by looking for opportunities to streamline and tighten up internal AR workflows, shifting toward automated processes that sidestep the delays — and the potential for error — associated with manual processes, including sending invoices. 

Additionally, look for opportunities to onboard new customers with shorter payment terms. And consider offering existing customers incentives for paying early or in full.

2. Leverage Accounts Payable  

On the AP side of the equation, look for opportunities to optimize your agreements with suppliers and vendors to better support your cash flow. 

Look for opportunities to negotiate longer payment terms that enable your organization to retain its cash for as long as possible. Send supplier payments when they are most advantageous to you; For example, right before the payment due date or soon before the cut-off to access early payment incentives. 

3. Improve Inventory Management  

Holding excess inventory can quickly become a financial liability. So consider ways to streamline your inventory management so that your organization has what it needs and not more. 

During leaner times, you might adopt a “just-in-time” strategy that aligns procurement with orders in real time. Investing in visibility and inventory forecasting can also help optimize cash flow, since you can ensure you’re prepared for demand without overstocking. 

Finally, look into supply chain visibility tools that enable you to take advantage of bulk discounts or meet sales benchmarks to access preferential rates, helping the organization improve cost efficiency and keep more cash on hand.  

4. Take Advantage of Treasury Management Tools  

Treasury management tools are critical for improving liquidity management and putting cash to work. Put simply, business moves too fast for treasury leaders to rely on manually-generated reports or siloed datasets to make important decisions. 

Automated solutions, like Investment Sweep and Line of Credit Sweep help you maximize the return on your deposits and minimize your interest expense, respectively. And Zero Balance accounts enable leaders to access multiple accounts from a single pool of funds, eliminating the need to manually fund individual accounts. Finally, treasury management tools that improve cash visibility create a single source of truth, helping leaders find their next right move. 

Key Takeaways: 

• Middle-market companies are facing mounting liquidity pressure from rising interest costs, increased leverage, and ongoing economic volatility — making proactive cash flow management critical in 2026.
• Treasury leaders can identify early liquidity stress points by monitoring indicators such as declining interest coverage ratios, volatile operating cash flow, increased credit utilization, and over-investment in illiquid assets.
• Incremental improvements in accounts receivable, accounts payable, inventory management, and treasury management tools can unlock working capital and strengthen financial resilience without a major financial overhaul.

Get the support you need to optimize your cash flow at Old National. Our suite of Liquidity Management Solutions can help your money work harder for you, with solutions on reducing idle cash and maintaining day-to-day liquidity. Visit us online to learn more.