For Australian importers, wholesalers, manufacturers, and exporters, the period between paying a supplier and receiving customer payment can put real pressure on day-to-day cash reserves. This is especially relevant for businesses managing stock across long domestic freight routes, busy ports, seasonal demand, or overseas supplier arrangements.
When a purchase order creates a gap before the related sales income arrives, a trade finance provider may be one option to assess. Scotpac has provided working capital solutions to Australian businesses since 1988, and its trade finance service is designed to help fund stock, inventory, raw materials, and supplier payments for domestic and international trade. Its specialist support across Australia, New Zealand, and China can be relevant for businesses working with overseas supply chains.
Why The Cash-Flow Gap Matters
A business can be profitable on paper and still experience a cash shortage. For example, an Australian wholesaler may pay an overseas supplier in March, receive the goods in April, sell them in May, and collect payment from trade customers in June. Cash leaves the business well before the completed sale produces cash in the bank.
Growth can widen this gap. A larger order may require more money for stock, freight, insurance, storage, labor, and tax before customer receipts catch up. Without a clear plan, a business can take on more sales while becoming less able to meet ordinary commitments such as wages, rent, and supplier invoices.
Map The Cash Conversion Cycle
The cash conversion cycle is the time between the first payment connected to an order and the final customer receipt. Mapping it helps business owners see how much cash an order is likely to absorb and for how long.
- A customer order is received, or demand is forecast.
- The business orders stock or raw materials.
- The supplier requests a deposit, payment on shipment, or payment against documents.
- Goods are produced, transported, cleared, and delivered.
- The business receives, stores, and sells the goods.
- The customer pays under the agreed credit terms.
Measure the days between each step, rather than relying on a general estimate. This makes it easier to compare suppliers, identify slow-moving stock, and understand the working capital required for a new order.
Count Every Import Cost
The supplier invoice is only part of the landed cost. Importers may need to allow for freight, insurance, customs charges, duties, GST, storage, broker fees, inspections, and currency conversion. The cost of importing goods can also depend on the goods’ nature and value, as well as any applicable exemptions or concessions.
- Supplier price, deposit, and payment date
- Foreign exchange rate and transfer costs
- Freight, insurance, port, and delivery charges
- Duty, GST, and import processing costs
- Warehousing, handling, inspection, and packaging expenses
- Expected sale date and customer payment date
Review Supplier And Customer Terms
Payment terms determine the shape of the gap. A supplier deposit or payment before shipment brings the cash outflow forward, while customer terms of 30, 60, or 90 days delay the cash inflow. Both sides of the transaction deserve the same attention.
- Ask suppliers whether staged payments are available.
- Check whether an early-payment discount is worth the cash cost.
- Set customer credit limits that reflect payment history.
- Issue invoices promptly upon delivery of goods or services.
- Use clear reminders and follow-up dates for overdue accounts.
Better terms do not always mean paying later. Reliable supply, consistent quality, priority production, or a sustainable discount may deliver more value than simply extending a payment date.
Build A Rolling Cash-Flow Forecast
A 13-week forecast, updated weekly, can make a cash-flow gap visible before it becomes a crisis. Start with the opening bank balance, then list expected customer receipts, supplier payments, payroll, freight, tax, rent, debt repayments, and other committed costs.
- Enter confirmed receipts by their likely payment date.
- List committed payments and regular overheads.
- Separate uncertain receipts from reliable collections.
- Highlight weeks with a low or negative projected balance.
- Test expected, best-case, and delayed-payment scenarios.
Use actual customer behavior. If a customer regularly pays late, forecasting their invoice at the contractual due date can create a false sense of security.
Compare Working Capital Options
Different funding options suit different trading cycles. The best choice depends on the order size, security requirements, total cost, flexibility, and the timing of repayment.
- Supplier credit: Can reduce upfront cash needs where suitable terms are available.
- Business overdraft: May help cover short-term fluctuations, subject to the facility limit and cost.
- Invoice finance: May release cash tied up in eligible customer invoices.
- Asset finance: Can preserve operating cash when purchasing equipment or vehicles.
- Trade finance: May support specific supplier-payment or purchase transactions.
- Equity funding: May reduce repayment pressure but can affect ownership and control.
Where Trade Finance May Fit
Trade finance is built around a trade transaction rather than a general need for cash. It may suit a business that needs to pay a supplier before it receives payment from business customers. Before proceeding, assess what the facility can fund, how supplier payments are made, when repayments are due, how fees and currency are calculated, and what happens if stock sells more slowly than expected.
Add Practical Risk Controls
Funding does not remove commercial risk. Shipping delays, damaged goods, supplier failure, currency movements, changing demand, and slow-paying customers can still affect the outcome of an order.
- Check new suppliers before committing to large purchases.
- Use written purchase orders with clear specifications.
- Confirm delivery, shipping, and insurance responsibilities.
- Review foreign-currency exposure before agreeing to a price.
- Track inventory by value, age, and sales speed.
- Keep a cash buffer for delays and unexpected charges.
Use A Pre-Order Checklist
- What is the complete landed cost?
- When are all supplier, freight, and tax payments due?
- When should the goods arrive and become available for sale?
- How quickly is the stock likely to sell?
- When will customers actually pay?
- What happens if sales or collections are delayed by 30 days?
- Does the order leave enough cash for wages, tax, and overheads?
Common Questions
Can A Profitable Business Still Have Cash-Flow Problems?
Yes. Profit may be recorded when a sale is made, while cash arrives later. If supplier payments and operating costs fall due first, the business can face pressure despite healthy sales.
What Is The Main Cause Of A Working Capital Gap?
It is usually a timing mismatch. The business pays suppliers and operating costs before customers settle their invoices.
Should Every Importer Use Trade Finance?
No. Some businesses may be better served by supplier credit, retained earnings, an overdraft, or invoice finance. The decision should follow a review of the entire trading cycle and total cost.
How Often Should A Cash-Flow Forecast Be Updated?
A weekly update is useful for businesses with regular imports, seasonal demand, or extended customer payment terms. Update it whenever an order, shipment, or expected receipt changes.
Conclusion
Cash flow becomes more manageable when every order is viewed as a journey from supplier payment to customer receipt. Australian businesses can reduce surprises by measuring the cash conversion cycle, calculating landed costs, reviewing payment terms, controlling risk, and maintaining a realistic rolling forecast. The strongest approach is usually a clear process that connects purchasing, inventory, sales, collections, and working capital decisions.
