Overview
Debtor finance (also known as invoice finance, debtor funding or factoring) is a facility that allows a business to draw down cash against the value of its outstanding debtors ledger, rather than waiting for customers to pay. It is commonly used to improve working capital and smooth cash flow, particularly in businesses with long receivable terms or uneven payment cycles.
How it Works in Castaway
In Castaway, the Debtor Finance element is an inbuilt element that models this facility within your three-way forecast, giving you precise control over how the facility operates.
You can model how the fundable amount is calculated, whether against a defined pool of debtors or a manually entered value; how drawdowns are managed, whether fully automatic, needs-based or manually entered; and how interest and charges are applied to the facility balance or drawdowns. As your debtor balances move, a dynamically linked facility will update automatically.
Only one Debtor Finance element can exist per Castaway model.
Illustrative Example
Facility
- Facility Limit of $40,000
- Able to draw on 85% of debtor balance
- 8% interest on balance
- 2.5% charge on drawdowns
Forecast Setup
- Active Actual Month (AAM) of Jun-25
- Modelled Sales A of $35,000 per month, 30 day terms
- Opening Debtor balance of $12,000, 50% received in Aug-25 and Sep-25 respectively
- Include General Trade Debtors set to Yes
- Drawdown Method set to All Available Funds
Key Observations
July 2025
- Selected Debtors amount to $38,500 (inc GST) in Sales A + $12,000 opening Trade Debtor carried into July
- Fundable Amount would be Selected Debtors of $50,500 x 85% ($42,925), but is CAPPED at $40,000 by the Facility Limit - Full $40,000 drawn down and 2.5% charge applied
August 2025
- 50% of $12,000 opening Trade Debtors paid off, reducing Selected Debtors to $44,500
- Fundable Amount of $37,825 ($44,500 x 85%) is UNCAPPED by the Facility Limit
- Paydown of $2,175 made in August
September 2025
- Remaining 50% if opening Trade Debtors paid off, reducing Fundable amount and incurring Paydown
See below for a comprehensive guide on the available Debtor Finance element settings, how they are used and their impact on other areas of your forecast.
Main Debtor Finance Element Settings
| Finance Setting | Options | Use |
| Facility Limit |
No Limit Enter Facility Limit |
Selecting Enter Facility Limit will allow you to cap the Fundable amount |
| Fundable Amount Method | Enter fundable amount | Manually enter the fundable amount |
| % Debtor Balance |
Determine the fundable amount by dynamically connecting debtors via a Link % in the element table This will bring up the Element Selector and Include General Trade Debtors setting |
|
|
Element Selector [Fundable Amount Method = % Debtor Balance] |
Tick to include |
Ticking the sales lines in this menu will include them in the Selected Debtors pool in the element table Enter the Link % by month in the element table |
|
Include General Trade Debtors [Fundable Amount Method = % Debtor Balance] |
Yes / No |
Select Yes to include the opening Trade Debtor balance in the Selected Debtors pool in the element table Enter the Link % by month in the element table |
| Drawdown Method | Enter Drawdown | Manually enter the amount drawn down |
| All Funds Available | Fully draw down the Fundable Amount | |
| As Needed (All Accounts) | Draws down enough funds to cover the deficit in cash across all bank accounts | |
| Interest Method | Enter Interest | Manually enter the interest cost |
| % of Balance |
A percentage of the Finance Balance determines the interest cost Enter the Interest % by month in the element table |
|
| Charges Method | Enter Charges | Manually enter the charges cost |
| % of Drawdowns |
A percentage of the monthly drawdown determines the charges cost Enter the Charges % by month in the element table |
|
| % of Balance |
A percentage of the Finance Balance determines the charges cost Enter the Charges % by month in the element table |
Other Element Settings
| Setting | Use |
| Bank Account | Select the account the finance will flow through (Default: Main Bank Account) |
| Data Entry Currency | Select alternative currencies setup under 'Global Settings' |
| Taxable Income Method | Exempt, Manual, Automatic (default), Adjusted |
| Cashflow Reporting | Determine Cashflow presentation - Net Movement (Inflow / Outflow / By Sign) |
| Interest Reporting | Determine P&L presentation - Operations / Finance |
If you need any assistance please contact our support team at: support@castawayforecasting.com