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A working capital guide for growing businesses that need to fund wages, stock and suppliers before customers pay.
More sales should mean more cash. Eventually, maybe. Immediately, not always.
Growth often asks the business to spend money before it receives money. You may need to hire staff, buy stock, pay subcontractors, fund wages, carry debtors, increase insurance, expand software and manage larger supplier runs. The profit may be real, but the cash can arrive late.
That’s the growth cash gap.
More sales should mean more cash. Eventually, maybe. Immediately, not always.
Growth often asks the business to spend money before it receives money. You may need to hire staff, buy stock, pay subcontractors, fund wages, carry debtors, increase insurance, expand software and manage larger supplier runs. The profit may be real, but the cash can arrive late.
That’s the growth cash gap.
Image Caption
The working capital cycle
A simple version is:
Debtor days plus inventory days minus supplier payment days.
If customers pay in 45 days, stock sits for 20 days, and suppliers are paid in 30 days, the business has a 35-day cash gap before considering payroll and tax timing.
For service businesses, inventory may be zero, but wages can create the same problem. Staff are paid weekly or fortnightly. Customers may pay after the job, after approval, or after the end of month.
The one bit of gold
A profitable customer can still be a cash problem.
A large customer on 60-day terms might look impressive on revenue reports but dangerous in a cash forecast. If you have to fund wages and suppliers for two months before being paid, the business needs working capital. If the customer also disputes invoices or delays approvals, the gap gets worse.
A simple version is:
Debtor days plus inventory days minus supplier payment days.
If customers pay in 45 days, stock sits for 20 days, and suppliers are paid in 30 days, the business has a 35-day cash gap before considering payroll and tax timing.
For service businesses, inventory may be zero, but wages can create the same problem. Staff are paid weekly or fortnightly. Customers may pay after the job, after approval, or after the end of month.
The one bit of gold
A profitable customer can still be a cash problem.
A large customer on 60-day terms might look impressive on revenue reports but dangerous in a cash forecast. If you have to fund wages and suppliers for two months before being paid, the business needs working capital. If the customer also disputes invoices or delays approvals, the gap gets worse.
The levers
There are only a few ways to improve the cash gap.
Invoice earlier.
Ask for deposits.
Use milestone billing.
Shorten payment terms.
Reduce debtor days.
Negotiate supplier terms.
Reduce inventory days.
Improve job turnaround.
Use eInvoicing where appropriate.
Set customer credit limits.
Price for the funding burden.
None of these are glamorous. They’re how growth becomes survivable.
Test the customer before you celebrate the sale
Before taking on a large customer, ask:
What are their standard payment terms?
Do they require portals, purchase orders or approved timesheets?
Can invoices be rejected for admin reasons?
Who approves the invoice?
Can you require a deposit or progress billing?
What is the maximum exposure you are comfortable carrying?
A big customer isn’t automatically a good customer. The cash terms matter.
There are only a few ways to improve the cash gap.
Invoice earlier.
Ask for deposits.
Use milestone billing.
Shorten payment terms.
Reduce debtor days.
Negotiate supplier terms.
Reduce inventory days.
Improve job turnaround.
Use eInvoicing where appropriate.
Set customer credit limits.
Price for the funding burden.
None of these are glamorous. They’re how growth becomes survivable.
Test the customer before you celebrate the sale
Before taking on a large customer, ask:
What are their standard payment terms?
Do they require portals, purchase orders or approved timesheets?
Can invoices be rejected for admin reasons?
Who approves the invoice?
Can you require a deposit or progress billing?
What is the maximum exposure you are comfortable carrying?
A big customer isn’t automatically a good customer. The cash terms matter.
Use the calculator
The Growth Cash Gap Calculator estimates the extra funding required from new monthly sales. It looks at debtor days, inventory days, supplier days, deposits, direct wages and buffer.
Run the base case first. Then test three improvements:
collect 15 days faster;
require a 20% deposit;
negotiate supplier terms 15 days longer.
You will quickly see which lever matters most.
The Growth Cash Gap Calculator estimates the extra funding required from new monthly sales. It looks at debtor days, inventory days, supplier days, deposits, direct wages and buffer.
Run the base case first. Then test three improvements:
collect 15 days faster;
require a 20% deposit;
negotiate supplier terms 15 days longer.
You will quickly see which lever matters most.
What to do this week
What to do this week
Choose your biggest growth opportunity. Before you ask whether it’s profitable, ask whether it’s fundable. If the cash gap is too large, change the terms before the work begins. The worst time to negotiate payment terms is after the customer already has the work.
Website disclaimer note: This article provides general information only and does not take into account your circumstances. It is not a substitute for tax, legal, financial, employment, cyber security or other professional advice.
Choose your biggest growth opportunity. Before you ask whether it’s profitable, ask whether it’s fundable. If the cash gap is too large, change the terms before the work begins. The worst time to negotiate payment terms is after the customer already has the work.
Website disclaimer note: This article provides general information only and does not take into account your circumstances. It is not a substitute for tax, legal, financial, employment, cyber security or other professional advice.
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Got questions?Maybe it’s time for a macchiato with Chris.
Got questions?
Maybe it’s time for a
macchiato with Chris.
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self-made journey?
© 2026 Denari Advisory. Liability limited by a Scheme approved under Professional Standards Legislation.
Strategy and Site by Touching Base
Ready to kick-start your self-made journey?
© 2026 Denari Advisory. Liability limited by a Scheme approved under Professional Standards Legislation.
Strategy and Site by Touching Base
Ready to kick-start your
self-made journey?
© 2026 Denari Advisory. Liability limited by a Scheme approved under Professional Standards Legislation.
Strategy and Site by Touching Base
