For a trade, construction, transport or growing service business in Pakenham, in Melbourne’s south-east, late September can be when the next few months of work start becoming much clearer.
Jobs are being quoted.
Customers are making decisions.
Projects expected to start in October and November may already be appearing in the pipeline.
Businesses may be considering extra staff, larger supplier orders, additional materials, vehicle servicing or more subcontractor capacity.
Christmas is still well ahead.
On 24 September, this is not about responding to an end-of-year rush that has already arrived.
It is about working out what the business may need if activity increases over the coming months.
One question can help:
If more work comes in, how much additional cash will the business need to deliver it before customers pay?
More work usually means more money going out first
An improving pipeline is good news.
But additional revenue often requires additional spending before it becomes cash in the bank.
A builder might need materials.
A plumber or electrician may need parts and additional labour.
A civil contractor could need fuel, subcontractors and equipment.
A transport operator may run more kilometres.
A commercial maintenance business might need another technician.
Each additional job can be profitable.
But if several jobs start around the same time, the business can have substantially more money tied up than usual.
That is where working capital planning becomes important.
Start with the jobs already likely to happen
A business does not need to know exactly how busy November or December will be.
Start with what is already visible.
Which quotes are highly likely to proceed?
Which existing customers have indicated they need more work?
Which projects are scheduled to start?
Which contracts may increase in volume?
Then estimate what each opportunity requires before the first customer payment arrives.
Include:
materials
labour
subcontractors
fuel
vehicle expenses
equipment hire
supplier deposits
insurance or site costs
freight
other operating expenses
Looking at the pipeline this way can reveal a potential funding requirement before the jobs are formally underway.
Several manageable jobs can become one large cash requirement
A common issue is not one unusually large project.
It is several ordinary projects overlapping.
One job requires $25,000 of materials.
Another requires $18,000.
A third needs two additional subcontractors.
A fourth has already been completed but the customer has not paid yet.
Individually, none may cause concern.
Together, they can absorb a significant part of the business’s available cash.
That is why the business should look at the combined peak working capital requirement, not just whether each job looks affordable on its own.
Trades often pay for materials before they receive the job payment
For trade businesses, material costs can create an early gap.
Suppliers may offer account terms.
But larger orders can reach existing account limits quickly.
Some specialist items may need payment upfront.
Other materials may require deposits.
If workloads increase, the business might need to make larger supplier payments while still waiting for money from earlier jobs.
Before committing to the next round of work, consider:
How much will we owe suppliers before customers from the previous jobs have paid us?
That overlap is often where the cashflow pressure develops.
Customer deposits can materially change the equation
Not every job needs to be funded entirely by the business.
Depending on the type of work and customer, deposits or staged payments may be commercially appropriate.
For example, a business may be able to request payment for materials before placing a significant order.
Larger projects may allow progress payments.
Customised work might justify a deposit.
Even a partial upfront payment can reduce the amount of business cash tied up.
Before looking only at finance, it can be worth reviewing whether customer payment structures properly reflect the upfront cost of delivering the work.
Progress payments still need to be followed through to the bank account
A progress claim date is not necessarily a payment date.
The business completes the relevant stage.
A claim is prepared.
The customer assesses it.
Documentation may need to be supplied.
An invoice is processed.
Then the payment terms begin.
A claim submitted in November could therefore produce cash much later than the business initially expects.
When building a forecast, use the realistic expected receipt date rather than the date the claim is lodged.
That makes a considerable difference when payroll and suppliers continue in the meantime.
Payroll becomes more important as workloads grow
Businesses increasing capacity may add employees, casuals or overtime before all the additional customer revenue is flowing.
Suppose the business adds $10,000 to its weekly employment costs.
If it carries that additional payroll for six weeks before customer receipts catch up, that is already $60,000 of extra cash required.
Then add materials, fuel and other costs.
Hiring may still be absolutely justified.
The important point is understanding the cash commitment that comes with it.
Subcontractors can create a shorter payment cycle than customers
A trade or construction business may prefer to add subcontractor capacity rather than take on permanent staff.
That can provide flexibility.
But subcontractors may expect payment faster than the end customer.
A subcontractor could require payment in seven or 14 days.
The customer might pay in 30 or 45 days after a progress claim.
The business is funding the difference.
Before bringing several subcontractors onto upcoming projects, compare their payment timing with expected customer receipts.
Transport businesses need to turn additional work into weekly operating costs
For a transport operator, new work often creates immediate costs.
More trips can mean:
diesel
driver wages
subcontractors
tyres
servicing
repairs
tolls
trailer expenses
A new customer may pay on commercial terms.
That means the transport business could fund weeks of operating costs before seeing the first payment.
If additional freight is expected over October and November, calculate the likely weekly cost now.
Do not only forecast the extra revenue.
The business needs to know what it must spend to earn it.
Vehicle maintenance deserves a place in the forecast
If a business expects vehicles or equipment to work harder over the final quarter, late September can also be a sensible time to review their condition.
Does a truck need tyres?
Is a ute due for servicing?
Does equipment need repairs?
Will a trailer need work?
Planned maintenance may cost money now but reduce the chance of a larger interruption later.
Those expenses should be included alongside the expected growth in operating costs.
What if a new vehicle or machine is needed?
In some cases, additional work cannot be delivered without another asset.
A business may need:
a ute
truck
trailer
excavator
skid steer
forklift
specialised plant or equipment
That creates a decision between using cash and financing an eligible asset.
Paying cash may avoid another finance commitment.
But it also removes money that may be required for payroll, materials, fuel and suppliers.
Depending on the circumstances, asset finance may allow the business to preserve more working capital for operations.
The right answer depends on the business, asset and finance cost.
The important point is to consider the asset and working capital requirements together.
Construction suppliers can face the same problem from the other side
A supplier servicing builders, landscapers, trades or civil contractors may need to prepare for stronger orders without yet knowing the exact volume.
The supplier may increase inventory.
Cash is used to purchase that stock.
Then commercial customers may buy on account.
That creates two periods where money can be tied up:
first in inventory and then in receivables.
If customer demand increases, both balances can grow simultaneously.
For suppliers, the working capital forecast should therefore follow the full journey from supplier payment through to final customer receipt.
A growing debtor ledger can be a sign of success and still create pressure
A business that invoices other businesses may find its debtor ledger growing as sales increase.
That is not automatically a bad sign.
It may simply reflect more work.
But every unpaid invoice represents money that has been earned and has not yet reached the bank account.
If monthly B2B sales rise substantially, the amount being carried can rise with them.
This is why a business can have excellent revenue and still feel increasingly tight on cash.
Debtor finance may be relevant once commercial invoices exist
For eligible B2B businesses, debtor or invoice finance may be worth investigating where qualifying invoices are awaiting payment.
Depending on the facility, a business may be able to access part of the value of eligible receivables earlier rather than waiting for normal customer payment terms.
Lenders may consider:
debtor quality
invoice age
customer payment history
debtor concentration
disputes or credits
nature of the underlying transaction
This can be particularly relevant where growth is causing the debtor ledger to increase faster than the business’s available working cash.
The period before invoicing may require something different
Debtor finance does not necessarily help when the business has not yet completed the job or raised an invoice.
That earlier stage may involve:
existing cash
an overdraft
line of credit
working capital finance
supplier terms
customer deposits
The right structure depends on when the gap begins.
It is useful to map the cycle before deciding which product is relevant.
Do not confuse a strong order book with available liquidity
A business might have $700,000 of confirmed work ahead.
That is encouraging.
But if it needs $180,000 to deliver the next stage before enough customer cash comes back, the business needs to know where that $180,000 is coming from.
Future revenue does not pay this week’s wages.
Confirmed jobs do not pay today’s supplier invoice.
The order book and the cashflow forecast need to be considered together.
Existing overdrafts should be measured against future usage
Many established businesses already have an overdraft or line of credit.
It may be enough.
But look at the actual available amount.
A $150,000 limit is not a $150,000 buffer if $120,000 is normally drawn.
Then forecast what additional materials, wages and suppliers may do to that remaining capacity.
The useful number is not the facility limit.
It is the amount expected to be available at the point when the business is using the most working capital.
Better terms can reduce the amount of finance required
There may be ways to improve the cashflow cycle without immediately increasing debt.
Consider whether the business can negotiate:
customer deposits
progress payments
more frequent invoicing
shorter payment terms
longer supplier terms
staged material purchases
A week gained on customer receipts and a week gained on supplier payments can materially reduce the amount of working capital needed.
Cashflow management should consider both sides.
Keep a buffer for the job that does not go exactly to plan
Real projects do not always follow the original schedule.
A customer may delay access to site.
Weather can slow work.
Materials may arrive late.
A progress claim may take longer to approve.
A vehicle can break down.
That is why the forecast should not use every available dollar.
The business needs some flexibility when timing changes.
A funding plan that only works when every customer pays on the earliest possible day can be too tight.
24 September is still early enough to model different outcomes
Businesses do not need to assume today that October and November will be exceptionally busy.
This is still the planning stage.
Run several scenarios.
What if the pipeline converts as expected?
What if only part of it converts?
What if substantially more work is won?
What if one large customer takes an extra two weeks to pay?
The purpose is not to predict the final quarter perfectly.
It is to understand how much room the business has under different outcomes.
Think through to January
Upcoming work can also create cashflow that crosses into the new year.
A job started in November may generate a December invoice.
That invoice could be paid in January.
Some customer offices may close over Christmas.
Accounts teams may operate with reduced staff.
Meanwhile, the business still has payroll, suppliers, fuel, rent and finance commitments.
A successful final quarter can therefore still lead to a tight start to January if the timing is not considered.
Follow the forecast until normal customer receipts are expected to resume.
What information can help if additional finance is considered?
Requirements vary by lender and facility, but useful information may include:
recent business bank statements
financial statements or management accounts
current pipeline or contracts
material and supplier requirements
payroll
subcontractor costs
debtor ledger
creditor ledger
existing finance
customer payment terms
supplier terms
ATO position
amount required
intended use of funds
expected timing
anticipated source of repayment
A defined requirement connected to upcoming work is easier to assess than simply saying the business needs extra cashflow.
Five questions Pakenham businesses may ask while planning upcoming work
Can working capital finance help if several jobs start at the same time?
Potentially. Depending on the lender and circumstances, commercial finance may be considered for eligible materials, payroll, suppliers and other operating expenses required to deliver additional work.
Can customer deposits reduce the amount we need to fund ourselves?
Yes, where deposits are commercially appropriate. Deposits or progress payments can reduce the amount of working capital the business needs to provide before work is completed.
What if our customers pay after we have already paid suppliers and staff?
That timing difference creates a working capital gap. Once eligible commercial invoices exist, debtor or invoice finance may also be worth considering.
Should we finance a vehicle or machine rather than use cash?
That depends on available cash, the asset and the business’s other commitments. Asset finance may be worth comparing where preserving working capital is important.
Is 24 September too early to start planning for end-of-year work?
No. If October and November projects are already appearing in the pipeline, this is a useful stage to understand what those jobs could require before the business commits to them.
Make sure the pipeline can be funded as well as delivered
For trades, contractors, transport operators, suppliers and growing businesses in Pakenham VIC, a stronger final quarter can create valuable opportunities.
It can also mean more money tied up in materials, labour, fuel, suppliers and commercial customer invoices.
Thrive Broking can help Pakenham businesses review that expected cashflow cycle and compare working capital, debtor finance, asset finance and other commercial funding options across our lender panel where appropriate.
On 24 September, the goal is not to assume Christmas demand has already arrived.
It is to understand the likely cost of the work coming through the pipeline and make sure the business has enough flexibility to deliver it comfortably.
A Broker’s Observation
A pipeline tells me what the business may earn.
It does not tell me what the business has to spend first.
If several jobs are due to start within a few weeks of each other, I would want to calculate the point where the most cash is tied up across materials, wages, subcontractors and outstanding customer invoices.
That is the number that can determine whether growth feels comfortable or suddenly puts pressure on the bank account.
The time to understand it is before the jobs start, while the business still has choices about how the work and funding are structured.