“Can you double our November order?”
For a Canning Vale business, that can be a very good phone call.
It can also be the moment the cashflow calculation changes completely.
The customer wants more product. The margin still works. There is enough production or warehouse capacity. The business can physically fulfil the order.
Then the supplier confirms the catch.
A larger deposit is required.
Packaging needs to be ordered.
Extra employees or overtime will be needed.
Freight increases.
And the customer will not pay until well after the goods have been delivered.
This is the part of growth that does not always show up in the sales forecast.
The order may be profitable from beginning to end, yet the business could still need a substantial amount of additional cash between accepting the order and collecting the customer payment.
On 26 September, there is still time to work that out before Christmas and final-quarter commitments become difficult to change.
The number on the purchase order is not the number in the bank
Suppose a commercial customer increases an expected order from $120,000 to $220,000.
That extra $100,000 of revenue sounds attractive.
But it does not mean another $100,000 suddenly becomes available to the business.
First, the business may need another $55,000 of product or raw materials.
Packaging could add $8,000.
Extra labour might cost $12,000.
Freight and handling could add another $5,000.
The business could therefore need tens of thousands of dollars before it receives one extra dollar from the customer.
That is the calculation worth doing before accepting a materially larger order.
Not because the business should turn the work away.
Because it should know what saying yes requires.
The difficult week may happen well before the sale
Cashflow pressure often has a date.
It might be the week a major supplier payment falls due at the same time as payroll.
Or the week a deposit is required for one order while another customer invoice remains unpaid.
Or the fortnight when production has increased but none of the larger invoices have reached their payment date.
That date can matter more than the total profit expected from the quarter.
Take the order and map the cash around it.
When does money first leave?
When are wages paid?
When is the supplier balance due?
When can the customer actually be invoiced?
When does the customer usually pay?
Somewhere between those dates is likely to be the point where the order places the greatest demand on working capital.
That is the number I would want a business owner to understand.
“We can afford the supplier bill” is only half the test
A business might have $180,000 in available cash and a $90,000 supplier payment due.
Technically, it can pay it.
But what happens to the remaining $90,000?
There may still be:
payroll next week,
GST or PAYG obligations,
rent,
fuel,
another supplier account,
equipment repayments,
insurance,
normal stock purchases,
and another customer order that needs funding.
The useful question is not simply whether the supplier can be paid.
It is:
What position does paying the supplier leave the rest of the business in?
A large order should not be allowed to consume every dollar needed to keep ordinary trading moving.
Christmas ordering can magnify the overlap
As October and November approach, more than one customer may increase requirements.
That is where the numbers can become uncomfortable quickly.
One customer wants an extra production run.
Another wants additional stock held.
A third brings a delivery forward.
The business may be carrying the costs of all three orders at once.
Yet their payments could arrive at different times.
This is where a profitable business can look strong in its sales reports while its available cash tightens.
There is nothing contradictory about that.
Revenue measures what has been sold.
Cashflow measures when the money actually moves.
The two do not always move together.
Food and product businesses can carry the cost through several stages
For a business producing, processing or distributing goods, cash can be tied up long before an invoice exists.
A supplier is paid.
The product arrives.
Production or preparation takes place.
Employees are paid.
Packaging is used.
The goods may sit briefly in storage.
Freight is arranged.
The customer receives the order.
Only then can an invoice be raised.
And if the customer has commercial payment terms, another waiting period begins.
The money can therefore travel through several forms:
cash ? stock or inputs ? work in progress ? finished goods ? customer invoice ? cash again
The business has value at every stage.
What it does not necessarily have is money available in the bank.
More volume can expose supplier limits you rarely notice
Normal supplier arrangements can work perfectly until purchasing suddenly increases.
A business may have a $75,000 account limit that has never caused a problem.
Then Christmas-related orders build and purchasing moves beyond it.
The supplier might require the existing account to be reduced before releasing more goods.
Or part of the next order may need to be prepaid.
Or a larger deposit may be requested because the transaction is outside the normal trading pattern.
That can change the funding requirement at short notice.
A useful September conversation with key suppliers is simply:
If our orders increase materially over the next two months, will our existing terms and limits still apply?
The answer is worth knowing before the customer order lands.
Packaging and freight can quietly become large numbers
Stock and raw materials usually get most of the attention.
The supporting costs can be easy to underestimate.
Packaging may need to be ordered in larger quantities.
A larger production run can increase pallets, cartons, labels or containers.
More customer deliveries can increase transport expenses.
Urgent orders can carry different freight costs.
Additional warehouse labour might be required.
None of these expenses may look enormous individually.
Together, they can change the peak funding requirement significantly.
A good working capital forecast includes the full cost of fulfilling the order, not just the product sitting on the invoice from the main supplier.
A 30 day customer may create a much longer cash cycle
Imagine the business pays a supplier on 20 October.
Production takes place through late October.
The customer receives the order on 7 November.
The invoice is raised immediately.
The customer pays on 30 day terms.
Even if everything runs exactly to plan, money committed in October may not return until December.
And that assumes the customer actually pays precisely according to the stated terms.
If their normal payment behaviour is closer to 37 or 40 days, the cycle becomes longer.
If another November order starts before the first invoice has been collected, the business is now funding the next cycle while still waiting for the previous one to close.
That is where growth can demand substantially more working capital.
Do not forecast the due date if the customer never pays on the due date
The debtor ledger already contains valuable information.
Look at what major customers actually do.
One may consistently pay in 28 days.
Another might average 36.
Another could require invoices to be approved before they enter the payment cycle.
The forecast should reflect the behaviour of each significant customer where possible.
If a business builds its Christmas plan around every debtor paying at the earliest possible moment, it may create a cashflow forecast that looks comfortable but has very little room for reality.
Can the customer fund part of the increase?
Before immediately looking for external finance, consider the commercial arrangement.
If the order is unusually large, specialised or being produced specifically for one customer, could part of the cost be covered by:
a deposit
an upfront component
staged payments
payment for special materials
a shorter payment term
Not every customer will agree.
Larger organisations may have fixed procurement policies.
But it is worth asking where the order requires the supplier to carry a significantly larger amount of cash than normal.
The customer is asking the business to increase its commitment.
It may be reasonable for the payment structure to reflect that.
The supplier side may also have room to move
Perhaps the customer cannot change its terms.
The supplier might.
Could the order be split?
Could deliveries be staged?
Could part be paid now and the remainder later?
Could the account limit be temporarily increased?
Could the business order according to confirmed customer volumes rather than purchasing the entire forecast upfront?
Even modest changes to the timing of supplier payments can reduce the highest point of the working capital requirement.
Sometimes improving the structure on both sides solves much of the problem before additional finance is considered.
What if the business needs another machine, forklift or vehicle as well?
Higher volumes can expose an entirely different capacity issue.
The business may need another vehicle.
A forklift may need replacing.
Production equipment could be required.
A refrigerated vehicle or other specialised asset might become necessary.
This should not automatically be bundled into the same cash decision as stock and payroll.
An eligible asset may have a useful life of several years.
The stock might turn within months.
Payroll is paid within weeks.
Those are different financial requirements.
Depending on the business and asset, asset finance may be worth comparing with an outright cash purchase so the business can assess whether it wants to preserve more cash for the shorter operating cycle.
Trade finance can be relevant before the customer sale
Where the main pressure point is an eligible supplier purchase, trade finance may be worth investigating.
Depending on the lender, transaction and goods involved, a facility may assist with certain domestic or overseas supplier payments.
The business still needs to demonstrate a sensible commercial transaction and an expected repayment source.
Requirements vary.
But conceptually, this is finance aimed at the supplier side of the cycle.
The business needs goods before it can complete the customer sale.
That is different from financing an invoice that already exists.
Debtor finance comes later in the story
Once eligible B2B goods have been supplied and a qualifying commercial invoice has been raised, the working capital issue may shift.
The business has made the sale.
The profit may already be recognised.
But the customer still has the cash.
Depending on the lender and facility, debtor or invoice finance may allow the business to access part of the value of qualifying receivables earlier.
The lender may look at factors including customer quality, invoice age, debtor concentration, payment history and the underlying transaction.
For a business growing quickly, this can become relevant because the debtor ledger often grows alongside sales.
One order can expose two completely different gaps
This is why I would not start by saying, “You need a business loan.”
First identify the point at which the cash disappears.
Is it when the supplier requires payment?
During the weeks of production and payroll?
After delivery while the customer invoice is outstanding?
Or across all three stages?
The answer changes which finance structures may actually be relevant.
It also helps avoid borrowing more than is required or choosing a structure that does not match the business’s cash cycle.
Do not use the Christmas order to empty the operating account
A strong order can feel too good to turn down.
That does not mean the business should commit almost every available dollar to it.
There still needs to be room for ordinary trading.
Another customer may place an order.
A truck might need repairs.
A supplier invoice could arrive earlier than expected.
Payroll still happens.
Tax still happens.
The business should know the minimum cash or facility buffer it wants to retain while the larger order is being funded.
Liquidity is not idle money when it is protecting the business’s ability to keep operating.
Run the uncomfortable version of the forecast
Most businesses can model the expected outcome.
The more useful test may be the one nobody particularly wants to see.
What if the supplier needs payment a week earlier?
What if production takes five days longer?
What if freight costs more?
What if the customer pays ten days later?
What if another large order arrives before the first one is paid?
If one small change causes the business to run out of room, that tells you something important before the order is accepted.
The purpose is not to assume things will go wrong.
It is to make sure the transaction still works if everything does not happen on the perfect day.
January can be hiding inside a November sale
An order delivered in late November or December may not turn into cash until January.
Meanwhile, the business could already be placing the next supplier order.
Employees return after leave.
Normal overheads continue.
Tax and finance commitments remain.
If Christmas sales absorb a large amount of working capital, the business needs to know when that cash is actually expected to return.
A strong December sales figure is valuable.
It just should not be confused with a strong December bank balance.
What should be ready before approaching a lender?
If the business identifies a genuine funding requirement, useful information may include:
recent business bank statements
financial statements or management accounts
the customer order or contract
supplier quotations or invoices
expected production costs
payroll requirements
freight costs
debtor and creditor ledgers
customer payment terms
existing finance commitments
ATO position
amount required
intended use of funds
expected repayment source
Requirements differ between lenders and products.
But a clearly defined transaction is much easier to understand than a vague request for “extra cashflow”.
Five questions Canning Vale businesses may ask when a larger order lands
We can make a profit on the order. Why would cashflow still be a problem?
Because many of the costs of delivering the order may need to be paid before the customer pays you. Profitability and payment timing are different issues.
Can business finance help us pay a supplier before our customer pays?
Potentially. Depending on the circumstances, trade finance, working capital finance or another commercial structure may be considered. Lender requirements vary.
What if the customer has already issued a purchase order?
A purchase order can help demonstrate the commercial transaction, but lenders will generally still assess the business, the transaction and their own credit requirements.
Could debtor finance help once we have delivered the order?
For eligible B2B transactions, debtor or invoice finance may be considered once qualifying commercial invoices exist.
Should we use our cash if we have enough to pay the supplier?
Possibly, but the better question is how much cash remains afterwards and whether that is sufficient for payroll, tax, other suppliers, unexpected expenses and the next customer order.
A larger order should create opportunity, not a cash squeeze
A business does not need to fear a large customer order.
But it should respect what that order does to working capital.
The sale might be exactly the growth the business wants.
The margin may be attractive.
The customer may be excellent.
The operational team may be ready.
The final piece is making sure the business can fund the gap between committing to the order and getting paid for it.
Thrive Broking can help Canning Vale businesses review that transaction and compare relevant working capital, trade finance, debtor finance, asset finance and other commercial funding options across our lender panel where appropriate.
On 26 September, the value of doing this work is that most Christmas and final-quarter commitments are still ahead.
There is time to understand the numbers before the supplier order, production schedule and customer promise are locked in.
A Broker’s Observation
If a customer rings tomorrow and says, “We want twice as much,” I would not want the first reaction to be either yes or no.
I would want the business to cost the cash cycle.
Not just the margin.
How much leaves first?
What is the biggest amount tied up?
How long before it comes back?
And what does the rest of the business have left while it waits?
A bigger customer order should be good news.
Knowing the cash requirement before accepting it helps keep it that way.