PFITZ Model: A Working Capital Check for Australian SMEs
By Sonja Pfitz
Before a lender looks at your business, you should know exactly what they're going to see. The PFITZ Model is the working capital framework I built to show you that. It shows a business exactly where it stands before a lender assesses it, so every application starts from strength.
It checks five areas of your business and gives you a reading: Strength, Stability or Pressure.
I spent years on the lender's side of the desk, on credit committees, deciding which businesses got funded and which didn't. Most of the declines I saw weren't bad businesses. They were businesses that walked in without knowing where their own cash was sitting.
This guide walks you through each part of the model so you can run a rough check yourself. Then, if you want the real numbers, we can do it together.
Why is a profitable business still short of cash?
Here's the myth: if the P & L shows a profit, the cash will follow. Wrong. Profit is an accounting result. Cash is what's in the bank account on Thursday when wages go out.
The gap between the two lives in your working capital. Money sits in unpaid invoices, stock on the shelf and jobs half finished. Every dollar there is a dollar your business has already spent and hasn't got back yet.
One labour hire client of mine turned over $4 million a year. Wages went out every fortnight and clients paid on 30-day terms. By the time I met them, they were behind on PAYG. Nothing was wrong with the business. The timing was wrong.
We set up confidential receivables finance that advanced 85% of each invoice on day one. Wages were covered, the PAYG arrears were cleared, and sales grew from $4 million to $6 million. The fix wasn't a bigger loan, it was using an asset on their balance, not personal property, to improve their cash flow cycle. It was finance matched to the gap.
The five parts of the PFITZ Model, and how to check each one
Each letter is one question. Work through them in order with your last 12 months of financials and your current aged debtors and creditors reports.
P: Position of cash strength
Where cash actually sits today, not where the P&L suggests it should.
How many weeks of wages, rent and loan repayments could you cover from cash on hand right now?
Has your bank balance moved in the same direction as your profit over the last year?
Are you relying on the overdraft or the ATO to get through the month?
If profit is up and cash is flat or down, the answer is in the next three letters.
F: Funding structure
Whether your current finance suits how your business actually operates.
Are you paying for long-term needs, like equipment, out of short-term facilities, like the overdraft or a short term fintech loan?
Does your working capital facility grow when your sales grow, or is it a fixed limit you keep hitting?
How many lenders do you have, and do any of them talk to each other or do you have an experienced finance broker manages your funding stack?
A business that's grown out of its bank facility isn't failing. It's a good problem to have. But it needs fixing before it becomes a bad one.
I: Investment in working capital
How much cash is tied up in debtors, stock and work in progress, and how it got there.
What's the total of your debtors over 60 days?
How much stock hasn't moved in 90 days?
Are you invoicing on completion, or on milestones you could be billing earlier?
This is where I usually find money. Not new money. Money you've already earned and haven't collected.
T: Trade and cash conversion
How long money takes to travel from paying your supplier to getting paid by your customer.
The cycle runs like this: pay suppliers, hold stock, invoice the customer, get paid. Every day in that loop is a day your business funds itself.
A rough check: debtor days + stock days − creditor days. Say your customers pay in 45 days, stock sits for 60, and you pay suppliers in 30. That's 75 days your business is funding on its own balance sheet.
On $5 million turnover, one day of sales is roughly $13,700. Pull your debtor days back by 10 and you free up around $137,000. No loan required.
Z: Zone of financial strength
The overall position the first four produce. It's the reading that tells you, and a lender, where you stand.
Reading your Zone: Strength, Stability or Pressure
Your answers to P, F, I and , land you in one of three zones. Each one points to a different next move.
Strength. Cash covers your commitments, your finance fits how you trade, and your cycle is under control. This is the time to plan growth, an acquisition or new equipment. You'll negotiate from a position lenders respect.
Stability. The business is sound but tight. Cash dips around BAS, payroll or a big order. Usually one pillar is dragging the rest down. Fix that one and you move up a zone, often without new borrowing.
Pressure. Creditors are stretching, the overdraft is maxed, or the bank has started asking questions. This is when owners grab the first loan on offer, which is not the right direction. More debt on a broken structure is just a workaround; and can be a costly on at that. The cause needs finding first, then the right mix of restructuring, operational change and finance.
One thing to be clear on: the Zone is a diagnostic indicator. It isn't a lending approval or a credit rating. It's your map, so you know what a lender will find.
What happens after the check
A self-check gives you a direction. The real value is in the numbers, and in knowing what to do with them. There are three ways to work through it with me.
Working Capital Assessment. A 10-minute self-assessment that gives you your first Zone reading.
Working Capital Review. We sit down and go through each pillar with your actual figures. You walk away with a tailored Funding Blueprint.
Bank Readiness Score. A 100-point assessment for businesses getting ready to approach a lender, so the application starts from strength.
The outcome isn't always finance. Sometimes it's a new facility. Sometimes it's restructuring the debt you already have. Sometimes it's an operational change: tighter collection terms, a stock policy, milestone billing, a different supplier arrangement or a revised business strategy. Often it's a mix.
Here's what that looked like for three clients:
A transport and logistics business lost two major customers and dropped from $30 million to $17.5 million in revenue. We led a turnaround alongside their accountants and moved them to trade finance and receivables finance. Every job was saved, and they now operate nationally.
A former manufacturer was juggling several lenders and aged creditors. A new financier retired the existing lenders, using asset finance and a long term business loan. Cash pressure eased and gross margin lifted.
A $10 million manufacturer was declined by the banks. Receivables finance against their department store receivables replaced the shareholder loans holding the business up. They grew into a national brand.
None of those started with "which lender?" They started with "where is the cash?"
Know your Zone before the bank does
If you've run through the questions above and something didn't sit right, that's worth a conversation. Especially now. The Christmas cash squeeze is coming, and January is when a lot of lenders start asking questions.
You can do the check yourself and bring me your results to dig into. Or hand it over and I'll run the full assessment for you, then put the right solution on the table, whether that's finance, a restructure, or changes to how the business runs.
Either way, you'll walk into your next lender conversation knowing what they'll see.
Book a free confidential consultation.
Information in this article is general in nature and doesn't take your circumstances into account.