How is the funding gap calculated?
There are two ways a business runs out of cash, and the calculator measures both:
- A timing gap. You pay wages and suppliers before customers pay you. At 45 debtor days, you're carrying about 1.5 months of outgoings at any time. Timing cushion = monthly outgoings × (debtor days ÷ 30).
- A trading shortfall. For a stretch, more goes out than comes in. Shortfall = (outgoings − cash in) × months, only when outgoings are higher.
Then: funding gap = timing cushion + trading shortfall − cash on hand. If the answer is zero or less, your current buffer covers the scenario.
Is my problem timing or trading?
This is the most useful question the calculator answers. If most of the gap is the timing cushion, the business is fundamentally working — it's just waiting to be paid. That's a good fit for a line of credit or working capital loan, and a strong case for chasing debtors harder.
If most of the gap is a trading shortfall, look at why. A seasonal dip that reverses every year is fundable — see seasonal cash-flow planning. A shortfall that's been growing for a year is a pricing, cost or volume problem that funding alone won't solve.
Worked example
A Tauranga landscaping company brings in $62,000 a month on average and spends $66,000 over the winter months. Customers take 45 days to pay. It has $18,000 in the bank and wants to plan six months ahead.
| Component | Calculation | Amount |
|---|---|---|
| Timing cushion | $66,000 × 45 ÷ 30 | $99,000 |
| Trading shortfall | ($66,000 − $62,000) × 6 | $24,000 |
| Less cash on hand | −$18,000 | |
| Estimated funding gap | $105,000 |
Cutting debtor days from 45 to 30 would shrink the timing cushion by $33,000 — more than the entire winter shortfall. That's why our guide to reducing debtor days is worth ten minutes of your time.
How accurate is it?
It's a planning model, not a forecast. It assumes steady monthly figures, which real businesses rarely have. Use it to size the problem, then build a proper month-by-month forecast in your accounting software or a spreadsheet — and test the bad months, not just the average ones. For the theory behind it, read the cash conversion cycle explained.
Funding the gap
Businesses trading six months or more can often cover a gap with unsecured funding based on turnover and bank statements, with decisions sometimes same day. If you own property, a property-secured loan from $20,000 up to $1m is another route. Your inputs stay in your browser; nothing is stored or sent.