Revenue is up 40%. The overdraft is up 90%.

Profitable growth can drain cash faster than it generates it, and the arithmetic behind why is simpler, and more useful, than most owners expect.

By Steve 5 min read
Abstract bridge artwork for Revenue is up 40%. The overdraft is up 90%.

A business grows 40% in a year, holds its margin, and ends the year deeper into its facility than it started. Nothing has gone wrong operationally. No customer has defaulted. The management accounts show a profit that never appeared in the bank. This is one of the most common and least discussed patterns in a growing SME, and it has a name older than most of the businesses it catches: overtrading. The confusion sits in the gap between profit and cash. Profit is recognised when the work is done. Cash…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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