Cash flow gap calculator
Cash tied up in the cycle
–
An estimate to help you plan, not an offer or approval. Lenders set their own policies, costs and limits.
Quick answer
This cash flow gap calculator uses your annual revenue, direct costs as a percentage of revenue, and the days customers take to pay, stock sits unsold and you take to pay suppliers. It shows the cash tied up in your trading cycle, your cash conversion cycle in days, how much customers owe you at any time and how much extra cash each additional day of customer payment ties up.
Key points
- The gap is what customers owe plus stock on hand, minus what you owe suppliers
- Every extra day customers take ties up one day of revenue
- A zero-day cycle can still show a gap, because what customers owe includes your margin
- A positive gap is permanent working capital: fund it with a facility built for that
Plenty of owners have watched a record sales year leave the bank account emptier than ever. The profit is real, but it’s sitting in customers’ unpaid invoices and on the warehouse shelves, while suppliers want paying now. That difference has a dollar figure, and it’s usually larger than owners guess. This calculator measures it from five figures that Xero, MYOB or QuickBooks will report in a few minutes.
Five inputs, all from your own books
| Input | Where to find it | Tip |
|---|---|---|
| Annual revenue ($) | Profit and loss, last 12 months | Exclude GST |
| Direct costs (% of revenue) | Cost of goods sold ÷ revenue | Include freight in and subcontractors; leave out rent and admin wages |
| Days customers take to pay | Aged receivables, or (debtors ÷ revenue) × 365 | Use what actually happens, not your stated terms |
| Days stock sits before it sells | (Stock on hand ÷ cost of goods sold) × 365 | Service businesses enter 0 |
| Days you take to pay suppliers | Aged payables, or (creditors ÷ cost of goods sold) × 365 | Again, actual days, not invoice terms |
The four results explained
Cash tied up in the cycle (the headline). The amount customers owe you at any moment, plus the stock you’re holding, minus what you owe suppliers. Customer debts are valued at full revenue; stock and supplier debts are valued at cost. Think of it as the standing pool of cash the business must carry just to operate at today’s size.
Cash conversion cycle. Customer days plus stock days, minus supplier days. It tells you how long a dollar spent on stock or direct costs takes to come back as cash.
Owed to you at any time. Daily revenue multiplied by the days customers take. This is the pool an invoice finance facility would lend against.
Each extra day customers take. One day of revenue. If a big customer stretches from 30 to 45 days, multiply this figure by 15 to see the hit.
If the headline is positive, the note says invoice finance or a line of credit is built for this gap. If it’s zero or negative, your suppliers are funding the cycle, which is a strong position.
Worked example: a food wholesaler
A wholesaler supplying cafés and independent grocers turns over $2.4 million a year with direct costs at 70% of revenue. Customers pay in 52 days on average, stock turns every 35 days and the business pays suppliers in 30.
| Component | Calculation | Amount |
|---|---|---|
| Owed by customers | $6,575 a day × 52 | $341,918 |
| Stock on hand | $4,603 a day at cost × 35 | $161,096 |
| Less owed to suppliers | $4,603 a day at cost × 30 | −$138,082 |
| Cash tied up | $364,932 |
The cash conversion cycle is 57 days, and each extra day customers take ties up another $6,575.
Now the owner tests two changes. Tightening collections to 40 days and negotiating 45-day terms with the two main suppliers brings the gap down to $216,986 and the cycle to 30 days, freeing about $148,000 without borrowing anything. The opposite scenario is sobering: if a large grocery customer drifts to 64 days, the gap rises to $443,836.
That 64-day figure isn’t plucked from the air. Data published by the federal Payment Times Reporting Regulator in January 2026 shows big businesses needed 64 days, on average, to settle 95% of what they owed small suppliers over the first half of 2025. In the previous reporting cycle the figure was 58. If your biggest customers are large corporates, it’s worth running the calculator with their actual payment days, not your terms.
Your gap is bigger than your overdraft? Tell us the figure and a specialist will suggest a facility sized to it. There’s no credit check for asking.
One quirk worth understanding: a zero-day cycle with a gap
Enter $900,000 revenue, 55% direct costs, 30 days for customers, 0 stock days and 30 supplier days. The cycle shows 0 days, yet the calculator still reports about $33,000 tied up. That isn’t an error. Customers owe you the full sale price, including your margin, while suppliers are owed only the cost. Until the customer pays, your profit and your overheads are funded out of your own pocket. It’s why service businesses with “matching” terms still feel squeezed.
The flip side: higher-margin businesses feel slow-paying customers more, because a larger share of each invoice is margin the business has already spent on wages and rent.
Free up cash first, then borrow for what’s left
business.gov.au’s cash flow guidance makes several practical suggestions, and the calculator lets you put a dollar value on each:
- Send invoices on delivery, not at month end. A three-day delay in sending invoices adds three days to customer days. In the wholesaler’s case, that’s nearly $20,000.
- Take a deposit when an order is big or made to spec. It shortens the effective customer days on the jobs that tie up the most cash.
- Clear slow stock. Every five days you cut from stock days released about $23,000 for the wholesaler.
- Agree supplier terms you can keep. Longer terms help only if you pay on time; stretching payments without agreement damages the relationship and can cost you trade credit.
- Set clear payment terms on every invoice, as the government’s small business site recommends, so customers know exactly when payment is due.
Our funding guide for covering a cash flow gap goes through the options in more detail.
Matching finance to the shape of the gap
A cash flow gap isn’t a one-off expense, so it’s usually best funded by a facility that grows and shrinks with your trade.
| Gap pattern | Finance that tends to fit | Why |
|---|---|---|
| Steady, tied to invoices to business customers | Invoice finance | Grows automatically as sales grow |
| Fluctuating month to month | Business line of credit | Funds are drawn in lean weeks and cleared once customers pay |
| Driven by large stock purchases or imports | Trade finance | Pays suppliers while goods are in transit or on the shelf |
| A one-off spike (a big order, a seasonal build) | A short-term loan sized to the spike | Clear start and end |
To see what an invoice facility might advance, try the invoice finance calculator. For a broader health check of short-term assets against short-term debts, use the working capital ratio calculator. And if the question is how long current cash will last, the cash runway calculator answers it.
Banks offer excellent overdraft and invoice finance products for businesses that meet their criteria, often at the lowest cost, so ask your bank first. If it can’t stretch to the size of the gap, there are specialist and non-bank lenders that can.
Now you know the number, let’s fund it properly
Most owners who run this calculator discover their gap is bigger than the overdraft they’ve been juggling it with. That’s not a sign of a struggling business; it’s often a sign of a growing one that has outgrown its facility.
Send us the gap figure and a little about your customers. The form takes about a minute, and lodging it won’t register on your credit file. We never on-sell enquiries or push them out to a lender panel, so you won’t be fielding a string of sales calls; a single specialist reviews yours and calls you back. Accurate revenue, customer days and stock days help us find the facility that fits your cycle on the first attempt.
Frequently asked questions
What is a cash flow gap?
It's the money a business needs to bridge the time between paying for stock or direct costs and getting paid by customers. If you pay suppliers in 30 days but customers pay you in 60, you're funding the difference from your own cash or a facility.
What is the cash conversion cycle?
It's the days customers take to pay, plus the days stock sits before it sells, minus the days you take to pay suppliers. A shorter cycle means cash comes back faster. A negative cycle means suppliers are effectively funding your trade.
What should I enter for a service business with no stock?
Enter 0 for stock days. Use direct costs such as subcontractors and job materials for the cost percentage. If wages make up most of your direct costs, use a lower creditor days figure, since wages are paid weekly or fortnightly rather than on 30-day terms.
Why does the gap grow when my sales grow?
Because debtors, stock and creditors all scale with revenue. A business with a 45-day cycle that grows sales by 20% needs roughly 20% more working capital, even if nothing else changes. Fast-growing businesses often run short of cash while profitable for this reason.
What's the best finance for a cash flow gap?
Something that rises and falls with your trade. Invoice finance advances against unpaid invoices, and a business line of credit lets you draw and repay as needed. A lump-sum term loan suits one-off gaps better than recurring ones.