Every order made 35%. Growing 40% still emptied the account.

Profitable businesses run out of cash for arithmetic reasons rather than managerial ones, and the arithmetic can be worked out before the overdraft does it for you.

By Steve 5 min read
Abstract bridge artwork for Every order made 35%. Growing 40% still emptied the account.

There is a particular kind of crisis meeting that happens in a business doing well. Order intake is up. Gross margin has held. Nobody has lost a big account. And yet the bank balance is lower than it was a year ago, the finance director is negotiating an overdraft extension, and someone in the room is quietly wondering whether the numbers have been wrong all along. They haven’t. Growth consumes cash before it produces cash, and the rate at which a business can grow without outside funding is largely fixed…

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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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