Reading a balance sheet before you cut

Operating Model Recomposition exists because boards like cuts that photograph well. A closed site looks like action. Prepaid revenue sitting on the balance sheet does not photograph. If you cut the line that still attracts deposits, you have not reduced cost; you have reduced the only cash that arrives before the work.

Start with the liabilities that have a calendar: tax, super, rent, the overdraft that reprices when a covenant blushes. Then look at inventory that actually turns, not inventory that exists. Distressed Cash Discipline spends a whole clinic on this distinction because ledgers in Australia are often tidy in the wrong places.

Receivables need a behaviour note, not an aging bucket alone. A customer who pays on day 54 every time is not a 45-day customer no matter what the terms PDF says. Cuts that assume the PDF will suddenly become true are how a “restructure” becomes a surprise in week six.

None of this is an argument against cutting. It is an argument against cutting first. Read, name the waterline, then freeze. The studio sequence is boring on purpose. Boredom is cheaper than a brave announcement.

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