Bridging receivables without slowing growth

Your clients pay on 60-day terms. Your staff are paid every fortnight. Suppliers want settling in 30. On paper the business is profitable, but the cash arrives weeks after it has gone out, and the faster you grow the wider that gap becomes.

Why growth makes the gap worse

Every new client or larger order means more wages, materials and overheads paid before the invoice is even raised. The debtor book grows in step with sales, and so does the cash you are waiting on. A business can be busier than ever and still find the account running thin on payroll day.

The usual responses are to slow down on new work, lean on suppliers, or push clients for faster payment. Each has a cost. Turning away work caps growth. Stretching suppliers strains relationships you rely on. Pushing good clients to pay early can cost you the client.

What a defined bridge covers

A short-duration facility can carry the business across a specific receivables gap. You know roughly what is owed to you and roughly when it will land, so the requirement can be sized and repaid over a defined term as those invoices are paid.

• Payroll and super through the weeks before large invoices are paid
• Supplier accounts that fall due ahead of your own debtors
• The start-up costs of a new client before their first payment cycle
• A seasonal peak where sales jump and collections lag behind

The point is that the facility is tied to cash you can see coming. Weekly repayments wind it down as the debtor book turns over, and once the gap has passed there is nothing left hanging on the balance sheet.

Look at your debtors before you borrow

Before you fund a receivables gap, look hard at the receivables themselves. Who owes you, how much, and how reliably do they pay? A debtor book spread across established clients with a good payment record is a sound thing to bridge. A book that leans heavily on one client, or on invoices that are already well overdue, is a different conversation.

It also helps to know your own numbers week by week. A simple cash-flow forecast, showing what goes out and what you expect in, tells you how large the gap really is and how long it lasts. That is usually the best guide to how much to draw and over what term.

When it is the wrong tool

A bridge works when the gap is timing. It does not fix a margin problem. If the work is underpriced, or costs are running ahead of revenue, funding the gap only delays the moment you have to deal with it. The same goes for a debt that is unlikely to be collected at all: borrowing against it does not make it any more likely to be paid.

If the gap is permanent rather than temporary, because your terms with clients will always be longer than your terms with suppliers, a recurring short-term facility may not be the right structure either. In that case it is worth looking at your payment terms, invoicing habits and pricing first.

Every facility is subject to credit approval and documentation. If clients are paying slower than your payroll runs and you can see the cash coming, an indicative read only takes a few minutes.