Written by FundTap for SBA

As a business owner, you may have found yourself in a familiar situation: things are going well, you have clients, and sales are strong. But when you take a closer look at your cash flow, the picture can look less promising.

This is where understanding working capital comes in. Simply put, working capital is the cash your business needs to run its day-to-day operations, paying staff, buying materials, covering operational costs, while you’re waiting to get paid. It’s the bridge between doing the work and receiving the payment, and it can make or break your ability to take on new opportunities or handle setbacks.

The Cost of Capital:  A Tool, Not a Burden

When cash flow gaps arise, many business owners turn to credit lines, loans or overdrafts to bridge the gap. Companies like FundTap now offer Invoice Finance, which helps businesses to get immediate cash based on their due invoices. There’s a cost attached to accessing capital, but rather than seeing this as an expense, it’s better to think of it as an investment. The key question isn’t about the cost of capital – it’s whether the return justifies the cost.

For example, if borrowing $5,000 today lets you complete a job that will bring in $20,000, that investment has paid off. What’s important is to view access to capital as a way to keep your business moving forward, not a last-resort lifeline.

Taking Control of Payment Terms, Without Discounting

One of the most common struggles for business owners is navigating payment terms. Many businesses feel they must accept whatever terms clients dictate, sometimes waiting 30, 60 or even 90 days to get paid. But this doesn’t have to be the case.

Instead of automatically offering discounts to encourage early payment, consider how you can take control of your terms. By setting clear, firm payment expectations from the outset, you can align cash flow with your needs and avoid unnecessary delays. In fact, if a client requests extended payment terms, it’s completely reasonable to build in a late payment premium, rather than discounting upfront.

Invoice Finance in Action

Emma runs a catering business in Christchurch. She recently landed a contract to supply catering for a series of large corporate events over several months. While the contract was a great opportunity, it also created a familiar challenge: Emma needed to hire extra staff, purchase large quantities of food and supplies and invest in equipment, all before receiving any payment. The client’s terms were 60 days from the final event date, creating a serious cash flow gap.

Instead of stretching her cash reserves thin or turning down the work, Emma used invoice finance to unlock the value of her unpaid invoices straight away. This gave her the working capital she needed to cover upfront costs and deliver the events to a high standard, without financial stress.

Invoice finance allowed Emma’s business to take on larger contracts, maintain service quality and continue growing, all without having to wait months to get paid.

The Takeaway:  Working Capital is a Business Strategy

The bottom line is simple: understanding working capital, being strategic about the cost of capital and taking control of payment terms can drastically improve your business’s financial health. The days of relying on personal funds or taking on debt to cover cash flow gaps are behind you. With smart strategies and tools like invoice finance, you can accelerate growth while maintaining control.

To find out more about FundTap, visit their website https://fundtap.co/nz/. You can also talk to your local SBA Accountant about FundTap and how it can work for your business. 

This article was written by FundTap, one of New Zealand’s fastest-growing FinTechs. FundTap is reimagining Invoice Finance to provide a small business finance solution that is flexible, simple and smart.