Your deposits are a loan from your order book

Some businesses hold a healthy bank balance that belongs entirely to work they haven't done yet, and the balance shrinks when operations improve.

By Steve 5 min read
Abstract bridge artwork for Your deposits are a loan from your order book

There is a particular kind of business that never seems to worry about cash. Deposits land on order. Suppliers are paid at thirty or forty-five days. The bank balance sits comfortably above the payroll run, and it has done for years. Then bookings go flat for a quarter (not down, just flat), and within eight weeks the same business is watching the balance daily and wondering what changed. Nothing changed in the P&L. What changed is that the balance was never earnings. It was a float: money collected from customers…

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