Why I Built BusinessSolvency — The Research Behind the Platform

Where this began — personal experience

This project did not begin in a university or a consulting firm. It began in the wreckage of small business closure — my own, and the closures I witnessed around me over many years of operating and advising in the SME sector.

What I observed, again and again, was that businesses did not fail because their owners were incompetent or their products were poor. They failed because nobody had ever shown them how much revenue they needed to generate each period to pay every bill — not just operating expenses, but loan repayments, creditor commitments, tax obligations, and private drawings. The profit and loss statement told them how profitable they were. The cashflow statement told them what had happened. Neither told them what they needed to do next to survive.

That gap became the obsession of the next decade of my working life.

The research finding that shocked me — April 2016

In April 2016 I completed my initial analysis of Australian business startups and closures. The numbers were staggering and have stayed with me ever since.

My rough 2016 estimate — 250,000 sole traders exiting annually at $25,000 each in capital commitments, plus 50,000 micro businesses at $100,000 each — produced a figure of approximately $11.25 billion in losses per year in Australia alone. Extrapolated to the US, that would equate to more than $20 billion annually. These are not abstract economic statistics. Each number represents grief, family breakdown, loss of a home, and in some cases the end of a life.

Why the profession has not solved this

My research led me deep into the history of how financial analysis and accounting software developed — particularly in the United States. What I found was a profession shaped by a specific culture: profit maximisation and compliance reporting for taxation authorities.

Clayton Christensen's work on disruptive innovation — particularly The Innovator's Dilemma (1997) and Competing Against Luck (2016) — helped me understand how industries get locked into serving their best customers while neglecting an unserved need. The accounting software industry did exactly this. Xero, MYOB, and QuickBooks all evolved to serve the compliance culture: reporting profit to the ATO, producing true and fair financial statements for auditors and lenders. They are brilliant at what they do. But what they do is not cashflow management for trading survival.

Milton Friedman's 1970s doctrine of profit maximisation for shareholders — documented by Simon Sinek in The Infinite Game — became the operating philosophy of finance broadly. Accountants and advisors focused on the profit and loss statement and the balance sheet. The cashflow statement was an afterthought. Yet it is the cashflow statement that tells you whether a business can pay its bills next month.

Professor Roger Martin's work on the difference between strategy and planning gave me the language to express why this matters. Business owners spend enormous effort correcting estimated expenses and sales expectations in operational plans — but these plans are built on profit logic, not cashflow logic. They do not ask the right question: how much revenue must this business generate to pay every cash commitment in this period?

Professor Amy Edmondson's research gave me a second, equally important piece of the picture: the parallel is exact. Just as nursing teams and flight crews face complex operating systems where critical variables are initially unknown and must be discovered through structured process, a business owner forecasting future cashflow faces a system where each component of the Cash OUT equation is initially unknown and must be researched and quantified before the required Cash IN can be determined.

Edmondson's work gave me the conceptual language to articulate what had previously been difficult to express: that business cashflow forecasting is a complex error management problem, not a simple arithmetic one. Each side of the Formula — Cash IN and Cash OUT — contains unknown unknowns that must be specifically identified and resolved before the formula can yield a meaningful solvency answer. This is not a limitation of the formula; it is its defining characteristic.

The Sustainable Cashflow Formula — the missing equation

Over seven years of research and iteration, I developed what I call the Sustainable Cashflow equation — deceptively simple but structurally different from anything in standard financial practice. The full breakdown of the formula itself, what it tests, and why it differs from a profit plan now lives in The Formula, where it belongs alongside the framework it underpins. What matters here is what happened next.

Seven years of being ignored — and why the timing is now right

I will be honest about the journey. For most of the years I spent on this research, the response from accountants, advisors, and financial professionals was indifference at best. The cashflow management culture I was advocating was not the culture of the profession. The profit culture dominated, and it still dominates. Experienced advisors and business owners understood the importance of the cashflow statement — but they were busy, and the tools they used did not require them to think this way.

Professor Amy Edmondson's research on how organisations resist acknowledging dangerous signals helped me understand why. In her book Right Kind of Wrong, she documents how intelligent, experienced professionals can systematically fail to act on evidence of risk — not from malice, but from the cultural pressure to confirm existing practice. The financial profession's focus on profit reporting is not wrong. It is simply incomplete for the purpose of solvency monitoring.

For sole traders and partnerships, there was never a regulator watching the pathway at all — which makes the same discipline, if anything, more urgent, not less, since no statutory safe harbour stands behind you if things go wrong. What changed, for the incorporated end of this problem, was ASIC's update to Regulatory Guide 217 in December 2024: for the first time, the regulator made explicit what I had been arguing from research for nearly a decade — that company directors have a proactive obligation to monitor solvency continuously, not reactively after a crisis, with safe harbour requiring documented evidence of that monitoring. There is no dedicated tool to meet either case, for any structure.

From SME cashflow to a platform for every business

BusinessSolvency is the direct extension of this research to the whole spectrum of Australian business. The same analytical gap that causes small businesses to fail — the absence of a cashflow-first framework that incorporates all cash obligations — exists identically whether a business trades as a company, a sole trader, or a partnership. The legal mechanism differs; the cash mechanism does not. When a business cannot pay what it owes, the cash simply runs out — the same way, regardless of what's written on the letterhead.

Most business owners, of every structure, rely on management-prepared or self-prepared financial reports built in the profit and compliance culture. Those reports do not present the integrated three-statement cashflow analysis an owner needs to assess whether the business can meet its obligations as they fall due. That is the gap BusinessSolvency fills.

BusinessSolvency gives every business owner that analysis — independently and continuously. The platform is built on the same Sustainable Cashflow framework developed over seven years of research, translated from an Excel-based tool into a Python web application. Its sibling platform, BoardSolvency, applies the same framework to incorporated companies and the statutory obligations directors carry under Section 588G and RG 217 — see Chapter 2, Section 2.1 of either manual for why that split is incorporation, not business size.

The research was always right. It just took the law catching up, for one part of the market, to make the case impossible to ignore. For the rest of the market, the case was always there — it simply had no regulator forcing the conversation.

For the full academic and legal foundation — including the Corporations Act, ASIC RG 217, and the derivation of the Sustainable Cashflow Formula — see the Research Foundation →