The bank balance is not the distribution case

A distribution discussion often starts with an amount that shareholders would like to receive and a bank balance that appears large enough to provide it. The arithmetic can look straightforward. Yet the bank statement does not explain every claim already attached to the money, and it does not show the payments that fall due before expected receipts arrive. I regard the bridge from the balance to the proposed use as part of the recommendation itself. Directors should not have to discover that bridge in a supporting schedule after the discussion has already settled around a persuasive total.

Identify the money that can serve this decision

At Kulvani, a proposal to distribute ₹12 crore began with ₹23 crore in bank balances. The total was correct. Of that amount, however, ₹9 crore was held in restricted performance-security deposits. The usable opening position for the decision was therefore ₹14 crore. This was not a discovery that the bank statement was wrong. It was a recognition that the statement and the distribution proposal answered different questions, and that our paper had not connected them clearly enough.

That distinction matters in a subsidiary because different people may be looking at different levels of the business. A parent finance team has its own cash commitments and may reasonably ask when an investment can return funds. Local shareholders may have similar expectations. The subsidiary must still show the constraints attached to the cash it holds. A group view is useful for planning, but it cannot make a locally restricted balance available merely by including it in a consolidated total.

I asked treasury to present the restriction before the recommendation. We described the amount, its purpose and the evidence supporting the expected release conditions. We did not treat a possible future release as though it had already occurred. If management believes a restriction can be removed in time, that should appear as a supported scenario with an owner and a date, rather than as an optimistic adjustment that silently enlarges the cash available today.

The same discipline applies to other balances whose use depends on something happening first. The important question is specific: can this money fund this decision within this period? A label such as cash, deposit or receivable is a starting point for that enquiry, not its conclusion. Finance earns its place in the discussion by explaining the relationship between the amount and the proposed action in language the decision-makers can use.

Put the operating calendar beside the amount

After separating the restricted deposits, our ninety-day operating forecast showed ₹8 crore of receipts and ₹18 crore of payments. Starting from ₹14 crore usable cash, that left ₹4 crore before any distribution. A ₹12 crore payment would create an ₹8 crore shortfall on the forecast. It was no longer credible to describe the proposal as funded by the opening bank balance. We also needed to discuss the uncertainty in collection timing rather than assume every forecast receipt would arrive exactly when expected.

The parent team asked whether collections could be accelerated or deposits released. Those were appropriate questions. We examined the available evidence and found no sufficiently supported route within the proposed period. A scenario should earn its place through facts and actions that can be assessed. Simply moving an expected receipt to an earlier week would have improved the spreadsheet while leaving the business dependent on a collection we had not secured.

I recommended deferring the full distribution proposal. The managing director supported the recommendation, and directors agreed to revisit it after receipts cleared and the forecast had been refreshed. That was a decision about affordability and timing. Other requirements for a distribution remained separate matters for the relevant review processes. A cash model should not be presented as a legal opinion, just as a legally available distribution should not be assumed to be operationally affordable.

The quality of the forecast also deserves examination. Which receipts depend on unresolved customer action? Which payments are committed, and which can be changed through a real decision? Are we using a stable operating pattern or a period with unusual demands? These questions are more useful than attaching a single confidence label to the whole forecast. They help directors understand where a change in assumption would alter the recommendation and what management can actually do about it.

Keep the cost of waiting in the account

Deferring the ₹12 crore payment had a consequence for shareholders. The parent needed to revise part of its own cash planning, and the Indian owners waited for a distribution they had expected. I did not present the decision as a financial improvement with no disappointed party. A recommendation becomes more credible when it acknowledges the legitimate purpose of the alternative, even when that alternative cannot be supported at the requested time.

Nor did the decision create ₹12 crore of new cash. It left a proposed use unexecuted. Reported profit did not increase, and no operating cost was removed. That may sound obvious, but management accounts can turn restraint into a claimed saving surprisingly quickly. I prefer to describe the effect precisely: the company did not undertake a distribution that its usable-cash forecast could not fund. The next decision would depend on an updated position, not on celebrating the same deferred amount again.

We changed later papers so that usable cash, restrictions, operating commitments and uncertainty appeared before the recommendation. This was a modest reporting change with an important purpose. It reduced the chance that directors would form a view from the headline balance and then interpret every constraint as an objection introduced late by finance. The constraint belonged in the initial account because it was part of the financial reality of the proposal.

I also took responsibility for the earlier presentation. It is not enough for a CFO to say that the restriction was somewhere in the pack. Decision papers are designed artefacts: their sequence, labels and emphasis influence what readers believe they are being asked to approve. If the most prominent figure cannot support the interpretation naturally placed on it, the paper needs to change. Accuracy includes the relationship between the facts and the recommendation, not only the correctness of each number in isolation.

For a board, the useful challenge is to ask management to show that relationship. What money is available, which obligations come first, what uncertainty could change the position and what alternatives have been examined? Directors can then weigh the cost of waiting against the risk of proceeding. They should not need to become daily treasury managers. They do need a recommendation that makes the company's actual choices visible, rather than allowing an accurate bank total to carry a conclusion it cannot support.