Where has all the money gone?


Afew years back I was called by a frus­trated busi­ness owner. He and his busi­ness part­ner were work­ing their butts off ev­ery day and didn’t have any­thing to show for it. Their ac­count­ing sys­tem told them they were mak­ing a profit but, de­spite their best ef­forts, they couldn’t find it.

Sales were grow­ing so they should have been bet­ter off. As men of­ten do when they can’t find some­thing, they blamed some­one else. So they started look­ing sus­pi­ciously at their staff and at each other. And, as is com­monly the case when men can’t find some­thing, the rea­son was right un­der their noses.

It was lurk­ing down be­low. Just as the shark in Jaws was lurk­ing be­low, feed­ing on un­sus­pect­ing in­no­cents, there is a sim­i­lar feed­ing frenzy be­low the profit and loss line of a busi­ness gob­bling up your money. You can’t see it hap­pen­ing but you know the money is dis­ap­pear­ing as fast as you can make it.

Your money has prob­a­bly been eaten by stock, debtors, the bank, toys for boys and IRD.

When you look around your ware­house, you can see boxes and boxes of stuff just wait­ing to be con­verted into cash. Stock­ing up in an­tic­i­pa­tion of growth takes money out of play.

Your com­mer­cial cus­tomers may be us­ing you as their bank. As you grow, more cus­tomers owe you more money for longer – of­ten in­ter­est free! Your cus­tomers will ap­pre­ci­ate your gen­eros­ity.

When you grow a busi­ness, you of­ten need a fix from your bank – a cash in­jec­tion. Get your fix and pay on tick! Sadly, as with any ad­dic­tion, there’s a price to pay. The bank has an in­tra­venous drip di­rect into your ac­count to draw out what they want, when they want.

And while you’re on a growth high, with sales break­ing all pre­vi­ous records, who can re­sist the latest look-at-me ma­chine/car/ brand new premises. You de­served it for all the hard work – good on ya mate! And chances are this was a spon­ta­neous de­ci­sion made with­out con­sul­ta­tion or bud­get to see if it can be af­forded. More money gone from the sys­tem.

And fi­nally, if it hasn’t all been eaten, the IRD is there to take their cut and the money you have been col­lect­ing for them – GST, Pro­vi­sional Tax and Ter­mi­nal Tax all lurk be­low the bot­tom line.

When you’re hav­ing fun in the sun and lov­ing the growth, be­ware of what is lurk­ing be­low the sur­face of the ocean of cash. ‘‘Jaws’’ will take your money and if you’re not care­ful – you with it. Re­mem­ber cash is king – keep plenty handy at all times.


Work­ing hard, busi­ness grow­ing, but still skint? Sharks are prob­a­bly bit­ing be­neath your bot­tom line. Fi­nances can be drained by all sorts of leaky fac­tors.

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