The cash position after settlement can be as important as the purchase price.
Finance education
Cash Conversion Cycle and Funding Calculator
Estimate how debtors, inventory, creditors and overhead timing create a working-capital funding gap.
The cash conversion cycle measures the time between paying for inputs and collecting cash from customers, after considering supplier terms. A growing business can report profit while still needing more funding because cash is tied up in stock and receivables.
Cash flowFunding structureInteractive toolAustralian business
Consider interest, fees, flexibility, security, term and final obligations.
Stress test the facility against a weaker trading period.
Tax, GST and lender suitability depend on the individual circumstances.
Overview
Start with the business outcome.
The cash conversion cycle measures the time between paying for inputs and collecting cash from customers, after considering supplier terms. A growing business can report profit while still needing more funding because cash is tied up in stock and receivables.
General information only: The material and tools do not constitute a quote, approval, tax advice or a recommendation to borrow. Credit is subject to lender assessment, eligibility, terms, fees and security. Speak with an accountant about tax and GST consequences.
Comparison
Potential advantages and trade-offs.
Why a business may consider finance
- Explains why growth can consume cash
- Shows the effect of debtor, stock and creditor days
- Supports a more evidence-based facility size
- Helps distinguish a timing gap from a profitability problem
What the business gives up
- Average days can hide customer or product concentration
- The model does not capture every tax or capital item
- Poor margins cannot be fixed by working-capital finance alone
- The business needs accurate operational data
Interactive tool
Model the decision.
Adjust the assumptions to see how the structure changes liquidity, repayment pressure or estimated cost. The output is educational and intentionally conservative.
Indicative only. A forecast using actual debtor, stock, supplier, tax and payroll timing provides a stronger basis for decisions.
Practical example
Put the structure into context.
Illustrative scenario
A manufacturer that increases revenue may need more raw materials and carry more receivables before collecting the additional sales, causing the funding gap to grow before profit turns into cash.
Balanced decision
When cash or finance may fit.
A blended structure can also be considered—for example, contributing a deposit from surplus cash while financing the long-lived asset and retaining an operating buffer.
FAQs
Frequently asked questions.
Can a profitable business have negative cash flow?
Yes. Growth, stock and receivables can absorb cash before reported profit is collected.
How can the gap be reduced without borrowing?
Improve collections, reduce slow stock, negotiate supplier terms and strengthen margins.
Should the facility equal the calculator result?
Not automatically. It is only an indicative planning figure.
Further reading
Official Australian information.
These sources provide general government and regulatory information. They do not replace individual credit, legal or accounting advice.
Business.gov.au — Choose your fundingGovernment overview of debt, equity and common funding structures, including chattel mortgages.Business.gov.au — Apply for a business loanGeneral information on secured loans, asset-backed borrowing, invoice finance and trade finance.Business.gov.au — Leasing or buying vehicles and equipmentGeneral considerations when deciding how to acquire business assets.Australian Taxation Office — Claiming GST creditsOfficial guidance. Eligibility depends on the acquisition, business use, GST registration and tax rules.ASIC — Credit advertising guidanceGuidance on clear and non-misleading promotion of financial products and credit services.