One business division is dragging down the others.
A weak division may be using more cash than its accounts reveal. Separate its contribution, shared costs and dependencies before deciding where the business should change.
Corporate Recovery Partners
01 / 06
The busy workshop is supporting another operation
A maintenance company runs a profitable service team and a small fabrication division. The fabrication team stays busy, yet the combined bank balance keeps falling. The owner wants to close it immediately. Before deciding, the accountant needs to know which costs would actually disappear and what work the service team depends on.
Separate revenue, direct labour, materials and subcontractor costs using supporting records. Identify transfers between divisions and check that internal charges are not counted as external customer income.
Keep estimates visible where timesheets or stock records are incomplete. A confident-looking total is not useful if costs were allocated solely to make one manager’s result appear better.
List rent, administration, vehicles and supervision used across the business. Ask which amounts would remain if fabrication stopped and which could genuinely change. Do not remove an arbitrary share of rent from the future forecast.
Also identify services the weaker division supplies internally. Buying those elsewhere may cost more than the current internal accounting charge, changing the apparent saving.
Review job pricing, rework, utilisation and the type of work accepted. Compare an evidence-based operational change with reducing or closing the activity. State the resources and time each option requires.
Avoid setting a sales target without checking margin and capacity. Extra low-return jobs can occupy the same staff and equipment while increasing the funding needed.
Business.gov.au cash-flow guidance helps place revised receipts and payments on their dates. Include transition costs and continuing commitments, not only the hoped-for steady-state result.
Ask qualified advisers to assess any employment, contract or solvency issues before implementing a change. The decision should improve the surviving business in practice, with responsibilities and review dates recorded.
