Window dressing (period-end debt)
What is window dressing in a balance sheet, and how does a lender spot it?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
Window dressing is arranging a business's affairs so that its balance sheet looks stronger on a reporting or test date than it does across the period: collecting debtors hard, delaying supplier payments, repaying an overdraft and redrawing it days later. The figures can be accurate for that day and still describe one good afternoon. A lender compares the period-end position with month-end or average balances, reads the interest charge against the debt reported, as when US$1.2m of interest at 8% implies average debt near US$15m against US$5m at year-end, and watches the weeks after the date for the reversal.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// THE FULL PAGE
Window Dressing: a Worked Example →
One good afternoon a year, and eleven months of overdraft.
// WHAT IT IS NOT
A test date is the day a covenant is measured; window dressing is what a borrower does to the balance sheet on that day, or on a reporting date that carries no covenant at all.
// WORKED IN
// NEXT TO IT
THE ACCOUNTS AND THE AUDIT FILE
- Going concern
- Management accounts
- Related-party transactions
- Capitalised costs
- Contingent liabilities
- Bank confirmation (audit)
- Qualified audit opinion
- Subsequent event
- Debt classification on a covenant breach
- Shareholder current account
- Contract assets (unbilled revenue)
- Right-of-use asset and lease liability (IFRS 16)
- Percentage-of-completion revenue (input and output methods)
- Customer prepayments (deferred income)
- Intercompany balances
- Doubtful debts provision (expected credit loss allowance)
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