by Dr Greg Chapman
This is another in the series of posts on Small Business Best Practice Benchmarks.
In ancient times, a merchant would test for the purity of a gold item being traded with acid. Pure gold wasn’t affected by acid, but if the item was made with a low cost metal alloy, the acid would react.
In business, the Acid Test refers to a business’ solvency in the event there was a shortfall in sales or delayed payment from debtors. This is the ability to operate at very short notice if there was a loss of income for any reason. It is the most stringent test of a business’ ability to cover short term obligations.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.