For an accounting firm, consultant, commercial service provider, maintenance business or other B2B operator in Dandenong, in Melbourne’s south-east, preparing for Christmas can create a cashflow issue without a single extra pallet of stock being purchased.
The issue can simply be timing.
Employees continue to be paid.
Rent continues.
Software subscriptions, vehicles, insurance and other overheads continue.
Work is completed.
Clients are invoiced.
Then the business waits.
On 21 September, Christmas is still well ahead. This is not about assuming December payment delays have already begun.
It is about looking at the invoices likely to be raised over the next few months and asking:
When is that money realistically going to reach the bank account?
For a service business carrying significant commercial receivables, that question can be just as important as the amount being invoiced.
A profitable month can still create a cashflow gap
A business can have an excellent month on paper.
It completes $200,000 of work.
Invoices are sent.
Revenue is recorded.
Margins look healthy.
But the bank account may not yet reflect any of it.
Meanwhile, the business still needs to pay:
employees
subcontractors
rent
vehicles
insurance
software
tax obligations
existing finance commitments
other operating expenses
This is one of the key differences between revenue and cashflow.
The business may have earned the money.
It simply has not collected it yet.
September is a useful time to look at the invoices that may cross into January
A business does not need to wait until December to think about December invoices.
Consider work likely to be completed during November.
When will it be invoiced?
What payment terms will the client receive?
When does that particular client normally pay?
If an invoice is issued on 30 November with 30-day terms, it may technically fall due at the end of December.
But will the customer actually pay then?
Will its accounts team be working?
Does the customer normally pay precisely on the due date?
Could the payment instead arrive in January?
Those are useful questions to ask while the business still has time to plan.
Professional and service businesses often fund payroll rather than stock
The working capital needs of a service business can be easy to underestimate because there may be very little physical inventory.
But people can represent a substantial weekly or fortnightly cash commitment.
An employee performs work today.
The employee is paid this week or fortnight.
The client may not pay the invoice relating to that work for another month or longer.
As the business grows, more money can become tied up in that cycle.
The cashflow gap is effectively:
pay for the people ? deliver the service ? invoice the customer ? wait for payment.
If client payment terms stretch over the Christmas and New Year period, the gap can become longer.
Count the payrolls between doing the work and getting paid
One useful exercise is to follow a client engagement from the first hour of work to the day the invoice is paid.
How many payroll cycles occur in between?
Suppose a business starts a substantial project in November.
Employees work throughout the month.
The invoice is issued at month-end.
The customer pays on 30-day terms.
Even if everything runs exactly to schedule, the business has funded several weeks of wages before receiving the revenue.
If the customer pays another ten days late, the gap gets longer.
The business should understand the dollar value of those payroll cycles.
That is often where the working capital requirement becomes clear.
The invoice date is not necessarily the start of the wait
For some businesses, there can also be a delay before the invoice is allowed to be issued.
A consulting firm may need client approval.
A maintenance contractor may need signed job sheets.
A project-based business may require milestone acceptance.
A labour provider may need approved timesheets.
A professional services firm may wait until a particular stage of an engagement is complete.
So the true cycle may be:
perform work ? pay staff ? obtain client approval ? issue invoice ? wait for payment.
If the forecast starts only from the invoice date, it can underestimate how long the business has actually been carrying the cost.
Should invoices be raised earlier?
Cashflow planning does not always mean arranging additional finance.
Sometimes the invoicing process itself deserves review.
Could the business invoice weekly instead of monthly?
Could a large project use staged billing?
Could an upfront retainer or deposit be appropriate?
Could milestones be invoiced progressively rather than waiting until the entire engagement is complete?
Could completed work be invoiced immediately rather than waiting for month-end?
The answer depends on the service and customer relationship.
But reducing the period between doing the work and issuing the invoice can improve cashflow without adding debt.
Payment terms can be worth revisiting before new work is accepted
A growing business may be pleased to win a larger client.
But a large customer requesting long payment terms can create a larger working capital requirement than expected.
Suppose a new customer generates $60,000 of revenue each month but pays in 60 days.
The business may need to fund a substantial amount of wages and overheads before its first significant payment arrives.
The contract may still be very attractive.
But the payment terms are part of the commercial decision.
Before agreeing to them, ask:
How much of our own cash will we need to use to provide this customer with those terms?
Large clients can make a debtor ledger grow quickly
As a B2B service business grows, the debtor ledger can grow with it.
That is not automatically a warning sign.
It can simply reflect higher sales.
But the business still has to finance the outstanding invoices.
If monthly invoicing rises from $150,000 to $300,000 while customer payment timing stays the same, there could eventually be twice as much cash sitting outside the bank account.
The business may be more profitable.
It may also need considerably more working capital.
This is why revenue growth and debtor growth should be looked at together.
Debtor finance may be relevant when the work is already done
Where a B2B business has performed eligible work and issued valid commercial invoices, debtor or invoice finance may be one option to investigate.
Depending on the facility, the business may be able to access part of the value of qualifying invoices before customers complete their normal payment cycle.
Lenders may consider factors such as:
debtor ledger value
customer quality
invoice age
payment history
concentration across customers
disputes or credits
nature of the underlying services
For a service business whose main cashflow issue is waiting for commercial customers to pay, this can be materially different from taking a fixed loan and repaying it regardless of invoice activity.
Suitability and requirements vary between lenders.
What if the business needs cash before an invoice exists?
This is an important distinction.
Debtor finance generally becomes relevant once eligible receivables exist.
But a business may need cash earlier.
It might be hiring employees for a new contract.
It may need to pay subcontractors.
A new office or operational requirement may need funding.
There may be several weeks of work before the first invoice can be raised.
Depending on the circumstances, working capital finance, an overdraft, line of credit or another commercial facility may be worth considering for that earlier stage.
The finance should match where in the cycle the cashflow gap actually begins.
Retainers can materially change the cashflow cycle
Some professional and service businesses are able to structure client arrangements around retainers.
Rather than completing a large amount of work and invoicing afterwards, the client pays an amount in advance for agreed services.
That can reduce the amount of working capital the business needs to provide.
Retainers will not suit every service or customer relationship.
But where commercially appropriate, they can shift part of the funding responsibility away from the service provider.
For businesses planning new client agreements later in the year, September is a sensible time to consider how those agreements will be billed before the work starts.
Watch the difference between 30-day terms and actual behaviour
A customer may officially be on 30-day terms.
In reality, it may pay in 38 days.
Another may routinely take 45.
Another may not process an invoice until its internal manager has approved it.
When forecasting the next few months, use actual payment behaviour wherever possible.
Look at previous invoices.
How many days passed between invoice and payment?
Are particular customers consistently slower?
Are there recurring invoice disputes?
Do missing purchase order numbers cause delays?
Improving the process around invoicing can sometimes release cash more effectively than simply seeking more finance.
Clean invoicing becomes even more important before Christmas
If the business expects invoices to be raised in November and December, it can be useful to make sure avoidable issues do not cause additional delays.
Check that invoices contain:
correct customer details
purchase order references where required
agreed payment terms
correct amounts
appropriate supporting documents
clear banking details
If a client normally needs timesheets, completion certificates or other evidence, make sure those requirements are understood before invoicing.
An invoice sitting in a customer’s system because one document is missing is money the business cannot use.
Do not wait until December to chase old invoices
The lead-up period is also an opportunity to review existing receivables.
Are there invoices already overdue?
Are there customers that regularly require follow-up?
Are credit notes or disputes holding up payment?
If the business enters December with an already-aged debtor ledger, it may have less room to absorb any additional payment delays over the holiday period.
A September review gives time to work through existing issues before new invoices are added.
Growth can amplify an inefficient billing process
When a business is small, a slow invoicing process may be inconvenient but manageable.
As revenue increases, the same inefficiency can tie up much larger amounts of cash.
If invoices are routinely sent a week after work is completed, a business billing $50,000 a month may carry an additional amount in unbilled work.
At $500,000 a month, that same delay becomes much more significant.
Growth makes the speed of administration more important.
Before looking for additional finance, it can be worth checking whether part of the cashflow gap can be reduced operationally.
Existing overdrafts may not have grown with the debtor ledger
A service business may already use an overdraft or line of credit to manage the period between payroll and customer payments.
That facility might have been established years earlier.
Since then, turnover may have doubled.
Payroll may have increased.
Invoices may be larger.
Yet the facility limit may have stayed the same.
September is a useful time to look at:
current facility limits
typical monthly usage
payroll
outstanding debtors
customer payment timing
tax obligations
existing finance repayments
A facility that was comfortable at one level of turnover may provide very little flexibility at another.
Christmas and New Year can extend the cycle without changing the contract
The customer does not need to formally change its payment terms for the business to experience a longer wait.
Staff take leave.
Approvers may be unavailable.
Accounts teams can operate with reduced numbers.
Some organisations close altogether for a period.
Payment runs can move.
That means a December invoice may remain outstanding longer than a similar invoice raised earlier in the year.
On 21 September, we do not know exactly which invoices will be affected.
But a business can already allow for the possibility when planning its cash position.
Include January payroll before deciding the business has enough cash
One of the easiest mistakes is to forecast through Christmas and stop.
Service businesses can still have substantial January commitments.
Employees return.
Payroll continues.
Rent is due.
Software subscriptions continue.
Finance repayments continue.
Tax obligations remain.
Some December customer invoices may still be outstanding.
The business may also experience a slower restart in new billable work.
For that reason, the cashflow forecast should extend until normal invoicing and customer payment patterns are expected to resume.
Build a week-by-week forecast rather than relying on the bank balance
The amount in the account today does not tell the business what it will look like in December or January.
A simple weekly forecast can be much more useful.
List expected receipts based on realistic payment dates.
Then include:
payroll
subcontractors
rent
supplier payments
tax
vehicles
insurance
finance repayments
other regular operating expenses
The lowest expected cash position can help identify whether a funding gap may emerge.
The purpose is not to predict every dollar perfectly.
It is to see the direction before the business gets there.
Planning now does not mean borrowing now
The business may complete the forecast and find that no additional finance is needed.
That is a good result.
Perhaps existing reserves are sufficient.
Perhaps invoicing changes improve cashflow.
Customers may agree to deposits or shorter terms.
Overdue debtors may be collected.
But if a gap is likely, identifying it in September provides time to review the options without making a rushed decision later.
What information may help if finance is being considered?
Requirements vary between lenders and products, but useful information may include:
recent business bank statements
financial statements or management accounts
current payroll
debtor ledger
creditor ledger
major customer contracts
customer payment terms
invoice history
existing finance
ATO position
anticipated November and December invoicing
amount required
intended purpose
expected timing
likely repayment source
A business should ideally be able to explain whether the requirement is a temporary timing gap, growth-related need or an ongoing shortage.
Those are different scenarios.
Five questions Dandenong businesses may ask while planning ahead
Can debtor finance help if our clients pay in 30 or 45 days?
Potentially. Eligible B2B businesses may be able to access funding against qualifying commercial invoices. The lender will generally assess the invoices, customers and overall debtor ledger.
What if we need money to pay staff before we can invoice the customer?
That occurs earlier in the cashflow cycle. Depending on the circumstances, working capital finance, an overdraft, line of credit or another commercial facility may be more relevant at that stage.
Can changing our invoicing terms reduce the amount we need to borrow?
Potentially. Deposits, retainers, staged invoicing, more frequent billing or shorter terms may reduce the amount of cash the business needs to carry, where those arrangements are commercially appropriate.
Should we plan for December invoices being paid in January?
It can be sensible to model that possibility, particularly where customers have Christmas shutdowns or historically take longer to process payments over the holiday period.
Is 21 September too early to start planning for this?
No. This is still the preparation stage. If the business knows that work performed over the next few months could create invoices falling due around Christmas or January, reviewing the likely timing now can provide more options.
Do not confuse an invoice with available cash
For professional and B2B service businesses in Dandenong VIC, the Christmas cashflow issue may not be stock, freight or raw materials.
It may simply be the period between paying for the work and collecting the invoice.
Thrive Broking can help Dandenong businesses review that timing and compare debtor finance, working capital and other commercial finance options across our lender panel where appropriate.
At this stage of September, the goal is not to assume customer payments will slow.
It is to understand what the business would look like if some November or December invoices take longer to turn into cash than they do at other times of the year.
A Broker’s Observation
One of the numbers I would want from a service business is not simply its monthly revenue.
I would want to know how many weeks of operating costs the business routinely funds before its customers pay it back.
A business can invoice $300,000 in a month and still feel tight if $500,000 is sitting in accounts receivable while another payroll is due.
That is why I look at the journey from doing the work to actually collecting the money.
The invoice proves the business has earned revenue.
The bank account tells us whether the cash has caught up yet.