Manufacturing Cashflow 101 (2026)
Manufacturing cashflow for manufacturers – Switchboard Finance
🧠 cashflow 101 · manufacturers ·
Business Owners Hub · 2026
Manufacturing Cashflow 101 (2026): Raw Materials → WIP → Invoice — Which Facility Fits Each Stage?
Manufacturers don’t just need “a loan”. You’ve got three timing gaps: buying inputs, funding work in progress, and waiting to get paid. This page maps each stage to the right tool so you stop forcing one facility to do everything.
If you want the “avoid the traps” companion, read 5 Cash Flow Warning Signs Your Business Needs a Finance Safety Net. If you’re also upgrading plant, pair this with 11 Signs Your Business Is Ready for Asset Finance. For a simple government explainer on cash flow basics, see business.gov.au.
- A simple 3-stage cashflow map (raw materials → WIP → invoice).
- Which facility usually fits each stage: Business Line of Credit, Working Capital Loans, Invoice Finance.
- Mini examples so it doesn’t feel generic.
The 3-stage cashflow map (simple framework)
Think of manufacturing cashflow as a pipeline. Cash leaves early (materials), gets “stuck” midstream (WIP), then sits at the end (unpaid invoices). The right facility depends on where your money is trapped.
Stage 1: Raw materials gap
You need to buy inputs now (steel, timber, components) but customer cash is later. This is a “repeatable” gap.
Mini example: Supplier wants 7-day terms, your customer pays on 30–45. A revolving limit covers the gap without reapplying each job.
Stage 2: WIP / production gap
Cash is tied up in labour, overtime, subcontracting, and WIP while the job is being built. This is often “lumpy” and project-driven.
Mini example: A 6–10 week production run needs wages + materials buffers. A term-style working capital facility can match the project window.
Stage 3: Delivered but unpaid invoices
Product is shipped, the invoice is issued, but cash arrives later. This is a debtor timing problem.
Mini example: You’ve got $180k in invoices on 60-day terms. Invoice funding can turn those receivables into usable cash sooner (case-by-case).
Facility fit: the “right tool” rules (so you don’t force it)
If you use the wrong tool, it usually shows up as either (a) messy approvals, or (b) repayments that don’t match the cash cycle. Quick rule: revolving for repeatable gaps, term-style for production runs, receivables-backed for debtor timing.
| Stage | Typical problem | Facility that usually fits | What lenders typically want to see |
|---|---|---|---|
| Raw materials | Repeat buying cycle, supplier timing vs customer timing | Line of Credit (revolving) | Stable trading deposits + sensible utilisation + clean account conduct |
| WIP / production | Longer build cycles, wage weeks gap, project cash burn | Working Capital Loan (term-style) | Cashflow capacity + project narrative + buffers in statements |
| Invoices | Delivered goods, long payment terms, debtor delays | Invoice Finance (receivables-backed) | Invoice quality + debtor profile + collections behaviour |
Where people mess up (and why approvals get weird)
Most manufacturers don’t fail because they’re unprofitable. They fail because the facility doesn’t match timing. The common mistakes are applying for one product to cover all three stages, or pitching “working capital” without showing where cash is trapped.
- Purpose mismatch: saying “materials” but the real gap is Accounts Receivable timing.
- Wrong repayment rhythm: a term repayment hits weekly while your customer pays monthly (or slower).
- No pipeline story: you can’t clearly explain cycle length, invoice terms, and where the cash gets stuck.
Manufacturing cashflow is a 3-stage problem: raw materials, WIP, then unpaid invoices. The “right” facility is the one that matches where cash is trapped—so repayments don’t land before your pipeline turns back into cash.
Go deeper in the trio pages: Business Line of Credit · Working Capital Loans · Invoice Finance. For the hub overview, start here: Business Loans. If you’re also upgrading equipment, anchor to: Low Doc Asset Finance.
FAQ
Ask: “Where is the cash trapped?” If it’s inputs (repeat purchases), a revolving limit usually fits. If it’s build time (WIP), a term-style working capital structure often fits. If it’s debtor timing (unpaid invoices), invoice funding is usually the cleanest match. If you’re unsure, a Cash Flow Forecast makes the stage obvious fast.
When the gap is repeatable: you buy materials every week or month and get paid later. The cleaner the Trade Terms story (supplier terms vs customer terms), the easier it is to explain why a revolving limit fits (case-by-case).
Because invoice finance solves the “delivered but unpaid” stage. If your cash stress happens earlier (materials or WIP), you may still need the right structure for that stage—otherwise you’re waiting until invoices exist to unlock cash. The key timing moment is the Drawdown (when funds become available).
Usually: trading evidence (like Bank Statements), a clear purpose story (materials vs WIP vs invoices), and whether repayments fit your real cash rhythm. If you want the broader “what counts” explanation, start with Business Loan Definition (Australia) (2026).
Sometimes—because each tool solves a different stage. The key is keeping the “story” clean: what each facility covers, and how it gets repaid, so you avoid overlap and messy exposure. Depending on the structure, some lenders may also require a Director’s Guarantee (case-by-case).
Disclaimer: This content is general information only and isn’t financial, legal, or tax advice.
