How the calculation works
Each week you pay your temps a few days after the week ends. You invoice the client for the same week, the client pays on its terms, and usually a little late. The number of days between your money going out and the client's money coming in is the gap. Multiply the weekly pay cost by that gap, in weeks, and you get the cash your business has to carry at all times just to stand still.
With invoice finance, the funder pays you an advance against each invoice when it is raised. The calculator deducts the advance on the invoices still waiting to be paid, which shows how much of the gap the facility covers. It ignores the funder's fees, which you should weigh against what the facility saves you.
Why growth makes it worse
The gap scales with your contract book. Add five temps at £600 a week each and, on 30 day terms with a week's lateness, you need roughly another £15,000 of cash before the first client payment for them arrives. This is why fast growing agencies are the ones that run short, and why the bank balance can fall in the same month profit rises.
What it leaves out
VAT. If you account for VAT on invoices issued, you can owe HMRC VAT on sales your clients have not paid yet, which widens the gap further at each quarter end. The VAT cash accounting scheme, available to businesses with taxable turnover up to £1.35 million, changes that timing. Corporation tax, PAYE for your own staff and commission runs are also outside this calculator.
For the levers that close the gap, read weekly pay, monthly terms: the cash gap explained. For a week by week view of your own business, see our cash flow forecasting service.
This calculator gives a simplified estimate for general information. It is not advice on your specific circumstances or on whether to use invoice finance.