September is often when business owners start looking at what the final few months of the year could bring.
For a business in Tarneit, in Melbourne’s west, that might mean more building work, additional customer orders, an increase in deliveries, busier retail trading, more staff or new commercial contracts expected before the Christmas and New Year period.
The extra revenue may still be months away.
Some of the costs required to generate it may come much sooner.
A growing business can therefore find itself in an unusual position. There is more work ahead, but also more money that needs to leave the bank account before that work turns into collected revenue.
September is a good time to ask:
If the business grows over the next few months, how much additional cash will that growth require?
Growth can increase the amount of working capital a business needs
More revenue sounds like the answer to a cashflow problem.
Sometimes it creates one first.
A construction business taking on additional projects may need more materials and subcontractors.
A transport operator may need more fuel, drivers and vehicle servicing.
A retailer may need additional stock.
A service business may employ another person.
A wholesaler may place larger supplier orders.
Each decision is intended to create more revenue, but the expense usually occurs before the additional income is received.
That means a business can be growing, profitable and busy while still experiencing pressure on available cash.
The important issue is not whether growth is good.
It is whether the business has enough working capital to fund that growth comfortably.
Start by calculating what the next stage of growth will cost
Rather than beginning with a finance product, begin with the expected changes in the business.
What is likely to be different between now and the end of the year?
For example:
larger stock purchases
additional employees
more overtime
higher supplier orders
additional materials
increased fuel and freight
subcontractor costs
new equipment
larger customer invoices
longer debtor balances
Then put approximate dates against each cost.
When does the supplier need paying?
When will the employee start?
When do materials need to be purchased?
When will the customer be invoiced?
When is that customer realistically expected to pay?
Once those dates are visible, the potential working capital gap becomes much easier to understand.
Construction businesses can outgrow their available cash
A construction or trade business can have a strong pipeline and still experience cashflow pressure.
Imagine several jobs are expected to commence during October and November.
Materials need to be purchased.
Subcontractors require payment.
Employees continue to receive wages.
Vehicles need fuel and maintenance.
Equipment may need to be hired.
The business could be spending across several projects at once while waiting for progress claims or customer invoices to be paid.
The jobs may all be profitable.
The issue is how much cash needs to be committed before those profits are actually collected.
Before adding more jobs to the calendar, it can be useful to estimate the highest amount the business is likely to have tied up across all active projects.
That figure may reveal whether existing cash reserves are likely to be enough.
Additional staff can create a gap before they create revenue
Growing businesses often need people before they need finance for anything else.
A new employee may start in October so they are trained and productive before activity increases later in the year.
But wages begin from the first pay cycle.
The additional revenue generated by that employee may take much longer to reach the business.
For businesses invoicing commercial customers, there could be several weekly or fortnightly payrolls between employing someone and receiving the customer payments their work helps generate.
When planning additional staff, calculate:
How many payroll cycles will the business need to fund before the related revenue is collected?
That can give a clearer picture of the real cost of expanding the team.
Retailers may need to commit to Christmas stock before sales increase
Businesses expecting stronger end-of-year retail activity face a different cashflow cycle.
Stock may need to be ordered early enough to arrive before customers want it.
Supplier deposits or full payment may be required.
Freight may need to be paid.
The inventory may then sit in the business until sales begin increasing.
During that period, the money used to buy stock is not available for payroll, rent, tax or other operating costs.
Before increasing stock levels, consider:
existing inventory
expected demand
supplier lead times
payment terms
margins
how quickly stock normally sells
how much working cash will remain after the purchase
The aim is not simply to have enough money to place the order.
The business also needs enough liquidity to keep operating while waiting for that stock to convert back into cash.
Transport growth should be measured in costs as well as kilometres
For transport operators, additional work can increase revenue while increasing weekly expenses almost immediately.
More freight may mean:
more diesel
additional driver hours
subcontractor costs
tyres
servicing
repairs
tolls
trailer and vehicle requirements
Commercial customers may still pay on their normal account terms.
That can mean the transport business is funding the additional activity for several weeks before collecting the associated revenue.
If additional work is expected toward the end of the year, estimate the operating cost of that work before accepting it.
A valuable contract can still create a significant cash requirement while it is being delivered.
A growing debtor ledger is not necessarily bad, but it still needs funding
As B2B businesses grow, the value of their outstanding invoices can grow too.
A business that previously had $100,000 sitting in receivables may eventually have $250,000 or $500,000 waiting to be paid.
That can be a sign of increased sales.
It can also mean more of the business’s cash is tied up outside the bank account.
If customers take 30, 45 or 60 days to pay, additional growth can increase the amount the business needs to carry during that waiting period.
For eligible businesses, debtor or invoice finance may be one option worth investigating.
Some facilities can provide earlier access to part of the value of eligible commercial receivables rather than requiring the business to wait until customers pay.
The suitability of debtor finance depends on the lender, invoices and customers.
Winning a major customer can create a bigger question than expected
Imagine a business receives an opportunity to supply a customer substantially larger than its existing clients.
The potential revenue looks excellent.
Before agreeing, ask:
What would we have to spend to service that customer before receiving their first payment?
There may be additional:
stock
employees
materials
freight
equipment
vehicles
supplier purchases
operating expenses
If the customer then pays on 45-day terms, the business could have a substantial amount of cash committed before receiving the first payment.
That does not mean the opportunity should be rejected.
It means the funding requirement should be part of the decision.
A business should ideally know whether it can afford to say yes before it signs the contract.
Existing finance may not have grown with the business
A business that has grown over several years may still be operating with facilities established when it was much smaller.
Perhaps an overdraft was originally sufficient.
Perhaps the owner has always used retained cash.
Maybe a credit card has gradually become part of the working capital cycle.
As turnover increases, those arrangements may no longer provide enough room.
September can be a useful time to review:
existing overdraft limits
line-of-credit usage
business loan repayments
credit card balances
asset finance commitments
available cash reserves
upcoming tax obligations
The question is whether the funding structure still reflects the size of the business today.
Different cashflow gaps may require different finance structures
There is no single product called “the Christmas finance solution”.
The appropriate structure depends on where the money becomes tied up.
If the business needs to purchase stock or raw materials before a sale, trade or working capital finance may be worth investigating.
If the business has already completed the work but customers have not paid, debtor or invoice finance may be more relevant.
If a vehicle or piece of equipment is required, asset finance could preserve working cash for day-to-day operating expenses.
A broader business loan or line of credit may suit other circumstances.
This is why the first question should not be:
Which loan should we apply for?
It should be:
What exactly is creating the funding gap?
Do not ignore the January side of the plan
A business can prepare carefully for November and December and still underestimate January.
Some commercial customers close over the holiday period.
Payment approvals can slow.
Employees return and payroll resumes.
Supplier invoices arrive.
Rent and finance repayments continue.
Tax obligations remain.
Retailers may need to replenish stock.
Trades may need materials for jobs restarting in January.
If the business uses most of its available cash during the lead-up to Christmas, it can begin the new year with very little buffer.
The forecast should therefore continue until normal trading and customer payment cycles are expected to resume.
Preparing early can create more options
Reviewing Christmas cashflow in September does not mean borrowing money in September.
It means understanding what may happen.
If a likely gap is identified now, there is time to consider different responses.
The business might:
use existing cash reserves
negotiate supplier terms
request customer deposits
introduce progress payments
improve debtor collection
increase an existing facility
consider debtor finance
investigate trade finance
arrange other working capital
The eventual answer may involve no additional borrowing at all.
The advantage of early planning is having time to make that decision before the business is under pressure.
What information can help with a finance review?
If additional finance may be required, having information ready can make the discussion more productive.
Depending on the lender and type of facility, this may include:
recent business bank statements
current turnover
financial statements or management accounts
debtor ledger
creditor ledger
ATO position
existing finance facilities
customer payment terms
supplier terms
contracts or purchase orders
stock or material requirements
amount required
purpose of funding
expected timing
likely repayment source
The clearer the business can explain the reason for the requirement, the easier it becomes to compare relevant finance structures.
Is the business funding growth or filling a recurring hole?
This distinction matters.
A business temporarily needing additional working capital because it is taking on profitable new work is one scenario.
A business requiring new finance every month simply to pay ordinary expenses is another.
If the shortage is ongoing, it may be useful to look more closely at:
margins
pricing
debtor collection
supplier terms
tax provisions
stock levels
existing debt repayments
customer payment behaviour
current working capital limits
Finance may still form part of the solution.
But understanding why the cashflow shortage keeps occurring can help avoid turning a temporary facility into a permanent dependency.
Five questions Tarneit businesses may ask while preparing for Christmas
Can finance help if my business is growing faster than our cash reserves?
Potentially. Business growth can increase working capital requirements when stock, materials, wages or suppliers need to be funded before additional customer revenue is received.
Can we arrange funding before new contracts actually start?
Depending on the lender and circumstances, upcoming contracts, purchase orders, forecasts and existing business performance may be considered when assessing a working capital requirement.
What if we need both equipment and cashflow finance?
Different finance structures may be considered for different purposes. Asset finance may suit eligible vehicles or equipment while another facility may address wages, suppliers, stock or receivables.
Can unpaid invoices be used to help fund growth?
For eligible B2B businesses, debtor or invoice finance may provide access to funding against qualifying receivables. Requirements vary between lenders.
Is September too early to review end-of-year working capital?
No. If the business expects staff, stock, materials, supplier commitments or customer invoices to increase later in the year, September can be useful for estimating the potential gap before those commitments are made.
Work out what growth requires before committing to it
For businesses around Tarneit VIC, the months leading into Christmas can bring opportunity across multiple industries.
For one business it may be additional construction work.
For another it could be stock.
Another may need more drivers, employees or equipment.
A B2B business might simply find that more sales result in more money being tied up in unpaid invoices.
Thrive Broking can help Tarneit businesses review the expected timing of those costs and customer receipts and compare working capital, debtor finance, trade finance, asset finance and other commercial funding options across our lender panel where appropriate.
The purpose of planning now is not to predict a Christmas cashflow crisis.
It is to understand whether the business can comfortably fund the opportunities it expects to pursue over the next few months.
A Broker’s Observation
Growth is often discussed as if the only question is whether a business can win more customers.
There is another question that matters just as much:
Can the business finance the gap created by serving them?
Adding $300,000 in sales can be excellent.
But if generating those sales means funding another $180,000 of stock, wages and operating costs before customers pay, the business needs a plan for both numbers.
The best time to identify that gap is before the growth arrives, not when the business is already committed to delivering it.