Every new customer is profitable. For ten weeks, you fund them.

Growth that passes every margin test can still drain the account, and the reason isn't profitability, it's how much cash each extra pound of revenue locks up.

By Steve 5 min read
Abstract bridge artwork for Every new customer is profitable. For ten weeks, you fund them.

A business can have its best trading year and its worst cash year at the same time, and the two facts are not in conflict. They are the same fact seen from two different statements. The profit and loss account records the sale when it is earned; the bank account records it when it is paid. Growth widens the gap between those two moments and then multiplies it by volume. The old word for what happens next, overtrading, is unfashionable, but the mechanism has not changed. The useful question is…

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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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