Work it through: Can We Afford It?

Start with cash, because profit does not pay wages and a business can be profitable on paper and overdrawn on the day it matters. Lay the purchase into a month-by-month forecast and look for the trough, not the total: the month when the new outgoing lands on top of the VAT quarter and the big customer has not paid yet. If the trough breaches the facility, the answer is no for now, however good the case, and the rest of this sequence is about making it yes later.

Watch forA forecast that places income on the invoice date rather than the day the money clears. That single habit flatters every forecast that later goes wrong.

Now ask what the thing has to earn to pay for itself, and how much room you have to be wrong. A new machine, a new hire, a second site: each adds fixed cost, and break-even tells you the extra volume that fixed cost needs before it stops losing money. The number that matters is the margin of safety, the gap between the volume you expect and the volume you need. A thin margin means the plan works only if everything goes right, and nothing goes right every month.

Watch forExpected sales taken from the optimistic case. Run the break-even against the volume you would bet your own money on, not the one in the pitch.

The accounts have an opinion, and the bank will read it even if you do not. Liquidity says whether you can meet what falls due; gearing says how much debt the business already carries; profitability and efficiency say whether the engine underneath is sound. A purchase that is affordable on cash and break-even can still push gearing past what a lender will accept, or expose a business whose current ratio was already thin. Read the ratios before you ask for the facility, so the conversation starts with you knowing the answer.

Watch forRatios read in isolation. Each one is a comparison, against last year, against the sector, against the covenant; a number on its own tells you nothing.

Only now, with the cash, the earning and the strength known, is it worth asking whether this is the best use of the money. Put every material cost and benefit into today's pounds, including the ones that are awkward (the owner's time, the disruption, the thing you will not do because you did this), and compare the totals with the alternatives, doing nothing among them. The discipline is the list, not the arithmetic: most bad purchases were never compared with anything.

Watch forBenefits that cannot honestly be priced forced into pounds anyway. Where reputation or safety dominates, say so in words and use a decision matrix instead of pretending.