Most financial reporting looks backwards. The annual accounts arrive months after the year has closed, and they describe a position that can no longer be changed. By the time a cash problem shows up there, the cheapest ways of fixing it have usually gone.
BusinessSolvency is built the other way round. Its reports still record the past, because the past is the evidence. But the report that matters most is the Solvency Forecast: a year-by-year test of whether the business's own plan for the next three years could pay every bill, every loan repayment, the owners' drawings or dividends, the tax, and the reserves the business needs. When the forecast fails a test, there is still time to change the plan.
This chapter explains what the reports check, how often to look, what to do when a warning appears, and how to keep a simple record of it all. Keeping the record still matters. It is just no longer the main reason for reporting.
A management report, or the annual accounts, explains what happened. It is often written in the most hopeful light: the shortfall was timing, the costs were one-off, next quarter will be better. That is human nature, not dishonesty. The Solvency Forecast asks a different question: if the plan goes as written, does all cash in cover all cash out, year by year?
- "Revenue grew 10% — a solid year."
- "Profit rose to $48,679."
- "The overdraft is seasonal and should clear."
- "Drawings were similar to last year."
- "Next year we expect to grow again."
- Revenue is $16,022 short of the $351,522 Breakeven needed for all cash in to equal all cash out.
- Cash is forecast to close overdrawn at −$21,556.
- Owner Drawings of $54,900 are 113% of profit — more than the business earns.
- Wages and overheads have no headroom: the year already fails before costs rise at all.
- Action now: lift prices, hold costs and agree a written plan with the accountant before the year starts.
Both columns describe the same business — Ridgeline Landscaping's FY2028 forecast (Chapter 8). The left column is not wrong. It simply answers a question that no longer helps. The right column gives the owner something to do while there is still time to do it.
Remember this — the prevention window
At green, every option is open: prices, costs, drawings, timing of equipment, building reserves.
At amber, most options are still open, but they need to be used now, and some will cost more.
At pink, the options narrow quickly to borrowing on harder terms, selling assets, or formal advice. The cheapest fix is almost always the earliest one.
Each forecast year is tested against the signals below. They appear on the Forecast Breakeven page and in the Year by Year section of the Solvency Forecast, where every year has its own remarks and its own list of actions, most urgent first. The wording follows the business structure: personal liability for sole traders and partners, Director Penalty Notices and safe harbour for companies.
The forecast signals — what each one means, and what to do
How the six demos show these signals
Ridgeline (sole trader) misses Breakeven in FY2028 and is overdrawn, then meets Breakeven in FY2029 and FY2030 with revenue growth of 10% a year (about 5.8% after inflation). The overdraft is only just cleared in FY2030, with the bank at $0 and ATO obligations still not covered — a recovery, but a thin one.
Noosa Care (partnership) misses Breakeven in all three forecast years. Revenue grows 5% a year (about 1% real), but the partners' drawings, $104,000 rising to $112,600 — are around 180% of profit. The overdraft deepens to −$81,857 by FY2030.
Bayside (Pty Ltd) meets Breakeven in FY2028, but only just: it is still overdrawn after its expansion, so no reserve is built that year, and its cost headroom is 0.4% — almost none. The shareholders would like a dividend; they are advised to wait, because paying one would have left almost no headroom at all. It then recovers strongly.
Coastal Freight (Pty Ltd) misses Breakeven in FY2028 with a loss, and again in FY2029, when cash grows but part of it is tax still owing. A growing bank balance with a failing Breakeven is still a warning, and it is why the $500,000 dividend the shareholders would like is held back.
Riverbend (incorporated association) meets Breakeven in all three forecast years under the committee’s plan, with revenue growth of 14%, 7% and 6%. But FY2028 meets it only because of a one-off $30,000 members’ levy. From FY2029 it pays its way on trading, helped by solar panels paid for with a $40,000 grant, and by FY2030 it makes a $25,925 surplus and holds a cash reserve of two months’ running costs.
Coastline (company limited by guarantee) misses Breakeven in all three forecast years if the board carries on as before. Revenue grows 3% a year while costs rise about 4%, and the shortfall grows from $745,090 to $904,291. The bank is overdrawn by $148,252 in FY2028 and by $1,608,587 by FY2030 — the clearest warning of the six.
Why reserves matter
When the signals turn amber, a reserve buys time to act. Without one, the overdraft and suppliers’ credit are the only cushion, and in hard times they shrink first.
BusinessSolvency works on one simple rhythm for every business — sole trader, partnership or company: a quarterly review, timed with the BAS. The figures already exist because the BAS has to be lodged anyway, so no new bookkeeping is needed.
The reports, in the order of their horizon
Remember this — how often to look
Green: a quarterly review with the BAS is the minimum, for every business structure.
Amber or pink: do not wait for the next quarter. Enter figures by hand on the Quarterly Forecast & Review page as often as you need, check them against the next BAS import, and see your accountant now.
A company's board may meet more often than quarterly, but the BusinessSolvency review cycle is the same.
Practise it
Reviewing every quarter is a habit, not a one-off course. Test the next decision on practice figures first. Training: training never really stops →
A warning is only useful if it changes the plan. When a forecast year fails a test, work through the levers in the order a real business would use them — the earlier levers are cheaper and do not add risk.
The levers, in order
- Prices. Revenue must rise at least as fast as inflation, plus any growth on top. A price rise is the lever owners use least and need most.
- Costs. Wages and overheads first, then cost of goods. Every dollar saved goes straight to cash, while extra revenue also brings extra costs.
- Drawings or dividends. They must come from what the business earns, not from what it borrows.
- Funding — only when it buys something. Borrowing or new equity is healthy when it pays for equipment or builds a reserve. When it only carries a trading gap, it is threatened borrowing (Section 12.2).
- Timing. Defer equipment, renegotiate terms with suppliers, or collect debtors faster — useful, but they move cash between years rather than create it.
Ridgeline's plan. With costs rising 4% a year and the owner's drawings rising with them, Ridgeline's forecast only recovers because revenue grows 10% in FY2028 and 12% in each of FY2029 and FY2030 — mostly through price rises, since wages grow only with inflation. Its owner would need to show the accountant how those prices hold with customers. If they cannot, the plan is not yet realistic, and FY2030 would still be overdrawn.
Noosa's plan. Noosa's partners would need to close a gap of $71,097 in FY2028, about $5,925 a month. That could come from higher hourly rates, fewer unbilled hours, lower drawings, or a mix. The forecast lets them test each choice before committing to one.
Use the Forecast Breakeven page to test each change: the Breakeven, the inflation checks and the cost headroom all recalculate as you go. Once the plan passes, agree it with your accountant in writing, and keep it with that quarter's saved reports.
Watch out
A plan that passes only because of one optimistic figure — a big jump in revenue, a cut in drawings the owners will not really make, costs that stop rising — has not really passed. Check that every figure would survive the accountant's “pub test”.
Whoever the reports go to — yourself, your accountant, your lender, or a board — present them the same way.
Presenting the reports — recommended approach
Lead with the forecast, not last year. Open the Solvency Forecast and read the Year by Year actions, most urgent first. Last year's result explains how you got here; the forecast decides what happens next.
Make it a standing item. For a sole trader or partnership, it is the first item in each quarterly review with your accountant. For a company, it sits on the board agenda as the “Solvency Monitoring Report”, straight after the management accounts.
Where the stories differ, that is the conversation. If the management view says “strong pipeline” while the forecast shows a widening Breakeven gap, resolve the difference before moving on.
For a lender, the forecast's Breakeven, DSCR and cash by year show that the business can service the loan, and that the owners are watching. Showing a lender a warning together with the plan to fix it builds more trust than showing a clean page.
The record is the second benefit of regular reporting. It shows that you watched, that you saw the warnings, and that you acted on them in time. For a company it supports the safe harbour; for a sole trader or partnership — who carry the debts personally, with no separate entity in between — it is simply the soundest protection available.
What BusinessSolvency provides, and what you keep yourself
BusinessSolvency provides the analysis: every report carries its own “Prepared” date and time the moment it is produced, and uses the same method every time.
You keep the file. After each quarterly review:
- Save the Solvency Forecast and the Quarterly Solvency Report as PDF (Print / Save as PDF), named by date.
- Write a short dated note: what the reports showed, what you decided, and who you told. BusinessSolvency has no notes field yet, so keep this in your own file.
- Record any advice sought: the date, the adviser, what was asked and what was recommended.
- For a company, the board minute serves as the note.
A folder of dated reports with a note beside each one is evidence of a habit, not a single snapshot prepared after the event.
How the record matches what is expected of you
Properly informed — the full three-statement analysis, prepared from the business's own figures at each review.
Proper financial records — the data entry and BAS import process, which needs a complete, consistent set of figures each quarter and year.
Advice from a qualified adviser — the report's actions say when to involve your accountant or an insolvency practitioner; your note records that you did.
A plan reasonably likely to produce a better outcome — the forecast itself, tested on the Forecast Breakeven page and agreed in writing (Section 12.4).
Acting promptly on warning signs — the Year by Year actions, plus your dated notes of what was done and when.
For an incorporated company, these are the elements of the safe harbour test (Chapter 2A). A sole trader or partnership has no statutory test, but the same pattern of behaviour is the best protection available.
The earlier you act, the more options you have and the less each one costs. The table below is a guide; the report's own Year by Year actions are the starting point for each year.
| Signal | What you would see | What to do | When |
|---|---|---|---|
| Green | Breakeven met in every forecast year, with cost headroom above the inflation rate. No forecast overdraft. DSCR above 1.25x. | Keep the quarterly review. Save the reports and a short note each time. Use the headroom to build reserves. | Quarterly, with the BAS |
| Amber | Breakeven met only thinly, or cost headroom below inflation. Revenue or drawings not keeping pace with inflation. DSCR between 1.0x and 1.25x. Cash trend falling. | Brief your accountant now. Test changes on the Forecast Breakeven page (Section 12.4). Check figures by hand between quarters. Write down what you decided. | Now — do not wait for the next quarter |
| Pink | Breakeven missed. Cash forecast to be overdrawn. ATO obligations not covered by cash. Threatened borrowing. DSCR below 1.0x. | See your accountant immediately and agree a written plan. Contact the ATO and lenders before payments fall due. Take no new debt without advice. Where the plan cannot close the gap, engage an insolvency practitioner. For a company, consider the safe harbour formally with the board. Record every step the same day. | Immediately |
Urgent — this will catch you out
A business can be profitable and still run out of cash. Ridgeline earns a profit in every forecast year and is still overdrawn in two of them. Do not let a profit figure talk you out of acting on a pink cash warning.
BusinessSolvency does not replace professional advice. It gives owners and their accountants the same forward-looking picture, early enough for advice to change the outcome.
For accountants
Most accounting work looks back: the year-end accounts, the tax return, the BAS. The Solvency Forecast lets you offer a client something forward-looking at each quarterly BAS — whether next year's plan could pay its way, whether prices are keeping pace with inflation, how much cost headroom there is, and whether drawings are realistic. Conservative wording throughout: the forecast shows what could happen if the plan holds, not what will.
Practise it
Accountants: practise on a training copy of a demo, then take the owner through their own figures together. Training: who training is for →
A business can move from sound to distressed within a single quarter — a large customer pays late, a supplier tightens terms, a tax debt builds up quietly. The Quarterly Solvency Report means the time between annual reviews is never a blind spot.
It is built from the BAS figures the business lodges anyway — revenue and cash at minimum, with Trade Debtors, Trade Creditors, Short-term Loans and ATO/GST Payable adding early-warning value where available, and closing stock when it comes from a stock system.
BusinessSolvency Quarterly Solvency Report — contents
A BAS does not contain interest, loan repayments, inventory or a full balance sheet, so the quarterly DSCR and Current Ratio are estimates: loan repayments, inventory (unless a closing stock figure is imported) and GST receivable are taken from the year's forecast and spread evenly, and the quarter's cash movement stands in for operating cash flow. Every estimated figure is labelled as such on the page. The Annual Solvency Report remains the authoritative figure; the quarterly report tells you whether you can wait for it, or should act now.
Working capital terms, every quarter
Under each quarter, Working capital terms lines check customers, suppliers and stock against your business’s own terms (3.10), with the trend from the quarter before. The levels are the same as the annual reports: within terms is on track; up to 10 days past is overdue (yellow, keep watch); more than 10 days past asks for action now (pink).
- Customers: Trade Debtors ÷ the quarter’s own sales × 91.25 days. The line shows how your terms are made up when some sales are paid by card.
- Suppliers (estimated): Trade Creditors ÷ a quarter of this year’s annual purchases from suppliers. A BAS has no purchases figure of its own.
- Stock (estimated): closing stock ÷ a quarter of this year’s annual cost of goods, checked only when a closing stock figure is imported.
For the latest quarter, anything more than 10 days past sits in a pink ACT NOW box under the verdict, with its action, and anything overdue in a yellow keep-watch box. The verdict itself still rests on Breakeven and the DSCR. The report gives a simple reading so that the accountant can decide, with the client, what action to take; each quarter shows the credit trend, and the Annual Solvency Report shows it year by year.
A story: Ridgeline Landscaping, FY2027 Q1. Ridgeline takes 20% of its sales by card, settled in 2 days, and gives account customers 7 days, so its customer terms are 6 days. In the first quarter customers took 31 days, 25 days past terms: the pink box reads “Customers paying late: collect now”. Suppliers were paid in 22 days against terms of 15 (estimated), 7 days past: overdue, keep watch.
Closing stock from a stock app. If your business keeps its stock in a stock system, include the closing stock figure when you import the quarter. Import Quarterly Data reads a column headed Closing stock, Stock on hand, Inventory or Stock (an Opening stock column is ignored). The quarter’s stock then replaces the year’s figure in the estimated Current Ratio, and Stock on hand appears with the other leading indicators. The Excel export now writes Trade Debtors, Trade Creditors, Short-term Loans, ATO/GST Payable and Stock on hand, so a file exported and imported again keeps them.
BusinessSolvency keeps one colour for one job. A light pink box with a red edge means a real cashflow warning: something needs action now. Things still to settle with your accountant stay cream or yellow, and what is on track stays green. Pink is kept for real warnings, so that it is never ignored.
Why pink
We take cashflow seriously, because prevention is better than a crisis and threatened insolvency. A red line on a cream box was too easy to read past. A pink box asks you to stop and act while the options are still cheap.
Where pink appears
The READ FIRST box, “Where cash could go wrong”, at the top of the Data Entry and Forecast pages. It follows the year tab you have open, one year at a time, and turns pink when that year needs action: a working capital deficit, short of Breakeven, the bank overdrawn at year end, or an urgent action such as tax or loan repayments not covered, or customers, suppliers or stock more than 10 days past your own terms (3.10).
The cash conversion cycle box, when your business funds more than 60 days of its own trading (Chapter 11.9).
The reports. In the Annual Solvency Report, the Solvency Forecast, the Breakeven reports and the Quarterly and Monthly reports, every warning shows in the same light pink: a Solvency Score in the lowest band, the one test not met (or met only on a condition), a year short of Breakeven or overdrawn, an urgent action, and an indicator card at risk. A Year by Year card turns pink for any urgent action, and the Quarterly report puts the latest quarter’s working capital terms more than 10 days past in a pink ACT NOW box (12.9).
Folded and printed. A pink box stays pink when folded, and it always prints open (12.11).
A story: Hero Coffee Van. In FY2027 the van was $59,417 short of Breakeven and its bank closed the year $10,186 overdrawn. Because its forecast years held no urgent warnings, the READ FIRST box used to stay cream. Now the box follows the year you have open: with FY2027 selected on the Data Entry page, it says in plain words that the year was short of Breakeven and closed overdrawn, and turns pink, so the owner and the accountant talk about it at the next review, not after the next crisis.
Inside BusinessSolvency: How It Works: the colour rule → (log in first).
A printout is how a warning reaches the meeting with your accountant, so BusinessSolvency prints what matters and leaves the rest out. Press Save All Data first: a printout made before saving mixes old and new figures.
Data Entry and Forecast pages — the page as it is on screen
One year per printout: the year that is open on screen, with a note at the top saying which year it is. To print another year, open it and print again.
Folded boxes print folded, as their one-line heading, for a shorter printout. An open box prints open.
A pink box always prints open, headed ACTION NEEDED, whether it is folded on screen or not. The role of a printout is to show that action is needed.
Menus, buttons and year tabs are left off, and the three statements fit together on one A4 page.
The Balance check. Under the Balance Sheet, “Balance check: Assets = Liabilities + Equity ✓” shows the figures balance. If they don’t, it shows a red ✗ and the gap, to settle with your accountant.
The Annual Solvency Report and the Solvency Forecast
When anything needs action (a year short of Breakeven, cash overdrawn, an urgent action, loan repayments or tax not covered, a Solvency Score under 68, the 3-Year Sustainable Cashflow not achieved, or cash tied up over 60 days), a pink note beside the Print button names up to three reasons, and every page prints, for your accountant to go through with you.
When everything is on track, a green note offers Print summary (the front page, the 3-Year Sustainable Cashflow, the cash conversion cycle table and the Year-by-Year Summary, often two pages instead of six) or Print whole report. Some owners don’t want the detail when things are normal, and accountants don’t like wasting paper.
Pressing Ctrl+P always prints the whole report.
Printer settings: tick Background graphics so the colours print, and untick Headers and footers in Chrome to leave off the date and web address. Save each report as a PDF for your records (12.6).