Distributing cash without weakening the business
An exceptional payment needs two separate checks: cash capacity across upcoming payment dates and the right to distribute. A large bank balance answers neither on its own. The amount must fit the downside case and be reviewed with your advisers.
This analysis concerns an exceptional payment to shareholders. For recurring income, see owner remuneration. For established SMEs and startups, confusing the two can remove operating flexibility at the wrong moment.
Start with genuinely available cash
Reconcile bank balances at a common date. Identify restricted funds, customer advances needed for future delivery and existing commitments. Unconfirmed credit is not available cash.
Model the payment on its actual date
Add the distribution to the cash plan without subtracting expenses twice if they are already included. Make future collections explicit and test delays. Set a reserve appropriate to the business and identify the lowest balance after payment.
Fictional exceptional payment example
An entirely fictional forecast shows minimum cash of €90,000 over the coming months, including all modelled flows. A €25,000 payment before that point reduces the minimum to €65,000, with other assumptions unchanged. A downside scenario reducing collections by another €20,000 takes the minimum to €45,000. Against an illustrative €50,000 reserve, the payment is too high. A €20,000 payment reaches the reserve with no additional headroom.
These figures do not establish an authorised dividend. They show only the financial effect under the stated assumptions.
Validate distribution rights and treatment
Distributable amounts, company approvals, tax and social charges depend on country, company and shareholders. Dividends, remuneration and shareholder loan repayments are not interchangeable. Confirm treatment, formalities and consequences with your accountant or qualified adviser.
Keep the decision in the ongoing review
After payment, compare actual cash with the chosen scenario. Include later investment and distributions in the same forecast. Mercova prepares the financial review and updates through ongoing support, alongside your advisers’ validations.
Frequently asked questions
Is available cash the same as distributable profit?
No. Liquidity is payment capacity; distributable amounts depend on accounts and applicable rules. Both need checking.
Why keep future collections in the model?
Subtracting all future expenses from current cash without modelling receipts is incomplete. An explicit schedule also allows collection delays to be tested.
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