Why I Built BoardSolvency — The Research Behind the Platform

Where this began — personal experience

This project did not begin in a university or a consulting firm. It began in the wreckage of small business closure — my own, and the closures I witnessed around me over many years of operating and advising in the SME sector.

What I observed, again and again, was that businesses did not fail because their owners were incompetent or their products were poor. They failed because nobody had ever shown them how much revenue they needed to generate each period to pay every bill — not just operating expenses, but loan repayments, creditor commitments, tax obligations, and private drawings. The profit and loss statement told them how profitable they were. The cashflow statement told them what had happened. Neither told them what they needed to do next to survive.

That gap became the obsession of the next decade of my working life.

The research finding that shocked me — April 2016

In April 2016 I completed my initial analysis of Australian business startups and closures. The numbers were staggering and have stayed with me ever since.

My rough 2016 estimate — 250,000 sole traders exiting annually at $25,000 each in capital commitments, plus 50,000 micro businesses at $100,000 each — produced a figure of approximately $11.25 billion in losses per year in Australia alone. Extrapolated to the US, that would equate to more than $20 billion annually. These are not abstract economic statistics. Each number represents grief, family breakdown, loss of a home, and in some cases the end of a life.

Why the profession has not solved this

My research led me deep into the history of how financial analysis and accounting software developed — particularly in the United States. What I found was a profession shaped by a specific culture: profit maximisation and compliance reporting for taxation authorities.

Clayton Christensen's work on disruptive innovation — particularly The Innovator's Dilemma (1997) and Competing Against Luck (2016) — helped me understand how industries get locked into serving their best customers while neglecting an unserved need. The accounting software industry did exactly this. Xero, MYOB, and QuickBooks all evolved to serve the compliance culture: reporting profit to the ATO, producing true and fair financial statements for auditors and shareholders. They are brilliant at what they do. But what they do is not cashflow management for trading survival.

Milton Friedman's 1970s doctrine of profit maximisation for shareholders — documented by Simon Sinek in The Infinite Game — became the operating philosophy of finance broadly. CFOs and auditors focused on the profit and loss statement and the balance sheet. The cashflow statement was an afterthought. Yet it is the cashflow statement that tells you whether a business can pay its bills next month.

Professor Roger Martin's work on the difference between strategy and planning gave me the language to express why this matters. Managers spend enormous effort correcting estimated expenses and sales expectations in operational plans — but these plans are built on profit logic, not cashflow logic. They do not ask the right question: how much revenue must this business generate to pay every cash commitment in this period?

Professor Amy Edmondson's research gave me a second, equally important piece of the picture: the parallel is exact. Just as nursing teams and flight crews face complex operating systems where critical variables are initially unknown and must be discovered through structured process, a director forecasting future cashflow faces a system where each component of the Cash OUT equation is initially unknown and must be researched and quantified before the required Cash IN can be determined.

Edmondson's work gave me the conceptual language to articulate what had previously been difficult to express: that business cashflow forecasting is a complex error management problem, not a simple arithmetic one. Each side of the Formula — Cash IN and Cash OUT — contains unknown unknowns that must be specifically identified and resolved before the formula can yield a meaningful solvency answer. This is not a limitation of the formula; it is its defining characteristic.

The Sustainable Cashflow Formula — the missing equation

Over seven years of research and iteration, I developed what I call the Sustainable Cashflow equation. It is deceptively simple but structurally different from anything in standard financial practice. In plain terms, the Sustainable Cashflow Formula is a test of balanced cashflow: is all cash IN equal to or greater than all cash OUT, every trading period.

The critical difference from a profit plan is the inclusion of capital repayments, private drawings, and reserve requirements. These are cash obligations that do not appear on a profit and loss statement. A business can show a healthy profit and still be insolvent because it cannot meet these commitments. The revenue breakeven point for cashflow sustainability is almost always substantially higher than the revenue breakeven point for accounting profit.

When the cash balance at the start and end of a trading period is equal, the business is at cashflow breakeven. When it is less, the business is in deficit — and each deficit period erodes the reserves that protect against the next crisis.

Seven years of being ignored — and why the timing is now right

I will be honest about the journey. For most of the years I spent on this research, the response from accountants, advisors, and financial professionals was indifference at best. The cashflow management culture I was advocating was not the culture of the profession. The profit culture dominated, and it still dominates. CFO accountants and experienced business owners understood the importance of the cashflow statement — but they were busy, and the tools they used did not require them to think this way.

Professor Amy Edmondson's research on how organisations resist acknowledging dangerous signals helped me understand why. In her book Right Kind of Wrong, she documents how intelligent, experienced professionals can systematically fail to act on evidence of risk — not from malice, but from the cultural pressure to confirm existing practice. The financial profession's focus on profit reporting is not wrong. It is simply incomplete for the purpose of director governance.

What changed everything was ASIC's update to Regulatory Guide 217 in December 2024. For the first time, the regulator made explicit what I had been arguing from research for nearly a decade: that directors have a proactive obligation to monitor solvency continuously, not reactively after a crisis. The safe harbour provisions require documented evidence of monitoring. The duty to prevent insolvent trading is now a live, enforceable obligation — and there is no dedicated tool to meet it.

From SME cashflow to board governance — built for every director

BoardSolvency is the direct extension of this research into the governance context. The same analytical gap that causes small businesses to fail — the absence of a cashflow-first framework that incorporates all cash obligations — exists at board level across every type of Australian company. Section 588G of the Corporations Act and ASIC's updated RG 217 do not distinguish between ASX-listed companies and private Pty Ltds. When insolvency occurs, regulators look at every director on the board during the period of suspected insolvent trading. The obligation is universal. The liability is personal.

All directors — executive and non-executive, listed and unlisted, large corporates and family-owned companies — rely on management-prepared financial reports built in the profit and compliance culture. Those reports do not present the integrated three-statement cashflow analysis a director needs to assess whether the company can meet its obligations as they fall due. That is the gap BoardSolvency fills.

BoardSolvency gives every director that analysis — independently, continuously, and aligned to ASIC's updated regulatory requirements. The platform is built on the same Sustainable Cashflow framework developed over seven years of research, translated from an Excel-based tool into a Python web application.

The research was always right. The regulatory framework has now caught up with it.

For the full academic and legal foundation — including the Corporations Act, ASIC RG 217, and the derivation of the Sustainable Cashflow Formula — see the Research Foundation →