Growth has to be funded before it's earned
New stock, more staff, more work in progress — all paid for or committed before the matching revenue is collected. The faster the growth, the larger this gap becomes at any given moment.
The debtor gap grows with revenue
If customers pay on 30 to 60-day terms and the business is growing quarter on quarter, the amount sitting in unpaid invoices grows at the same rate. Nothing has gone wrong — the cash is simply tied up further out with every new sale.
Margin can hide inside busyness
More revenue does not automatically mean more margin. Discounting to win growth, rework, and undercosted jobs can mean the business is working harder for a similar, or worse, cash result. Total revenue can rise while the cash the business actually keeps does not.
Fixed costs often move in steps, not smoothly
A new hire, a bigger premises or a new system is rarely matched exactly to the extra work it enables. There is usually a lag where the cost lands before the capacity it buys is fully used.
What to check before the next growth push
- Gross margin by job, customer or service — not just the blended total.
- The trend in debtor days, not just the current balance.
- The trend in stock or work-in-progress days.
- Whether committed fixed costs are increasing faster than cash conversion.
Matching the funding to the growth
A facility that grows with the debtor book, such as invoice finance, or a working-capital facility sized to the actual gap, can support growth without starving day-to-day cash. The common mistakes sit at either extreme: not funding growth at all and turning down work, or funding it with a facility that doesn't match the pattern of the gap.
Useful official guidance
The Australian Government's cash-flow guide recommends forecasting cash movement and matching funding to the business's actual pattern of receipts and payments, particularly during periods of change.
Growth shouldn't mean choosing between the next job and payroll.
See how much cash is actually tied up in the growth first, then match the right facility to the gap.
General information only. This article does not replace accounting, tax or credit advice for your circumstances.