Best way to measure when spending should be phased back

Wondered if anyway could help me. I work for a licence based business who receive 12 months income in advance which funds working capital without the need for borrowing.
We are entering a rapid growth phase which involves significant staff investment resulting in negative reserves which are forecast to increase during this phase, however our cash balance is forecast to remain positive due to phasing of invoicing.
Could anyone recommend what metrics could be used to measure when spending should be phased back as it is difficult to explain negative reserves must be curtailed when there is an ongoing healthy bank balance so any measurement would be helpful.


  • Pian32
    Pian32 MAAT Posts: 474 Dedicated contributor 🌟 🐵 🌟

    I'd probably look at the profitability margins, the 12 months in advance is prepaid so should be deffered to the appropiate time to be included in the accounts. (Management or financial). It would also be worth using the liquidity ratios to compare assets and liabilities.
    AAT Level 4, MAAT
    ACCA in progress
    F4- Passed Aug 2020
    F5- Passed Dec 2020
    F6- Passed Sep 2020
    F7- Passed June 2021
    F8 - Passed Sep 2021
    F9 - Passed June 2021

    SBL -
    SBR - Passed Mar 22
    ATX - Passed Dec 21
    APM - Passed June 22
Privacy Policy