Fully Costed or Fully Funded

I'm reminded by the current election campaign that there's a big difference between knowing what something costs and having the funds to provide for it.

Working with growing businesses we often see the challenge of funding the costs of production. Cash (and profit) comes much later from the fruits of that growth. Fully funded plans may take a bit more care to realise, but then are sustainable.

Companies can't keep building debt to fund growth, and many profitable businesses fail because they grow too fast for their cashflow. In my experience when boards use the language of 'fully costed' I worry that they may not be watching the cash well enough.

Sustainable profits can come from growing more slowly, or shifting the business model to change the funding, perhaps by bringing staged payments forward, or negotiating new supplier deals. Done collaboratively,  faster growth and sustainable profits will follow.

William Buist

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