Track Overdraft Headroom and Return to Credit

Read the facility you already have

Record the current approved limit, account balance, interest and fee arrangements, review dates and any conditions affecting availability. Use your lender's current documents. A limit displayed in an old spreadsheet isn't confirmation that funds remain available today.

CommBank's business overdraft description illustrates the distinction: borrowing is available up to an approved limit, with interest and fees under the facility terms. No current lender rate or product recommendation is used in this worksheet.

Allow for payments that haven't cleared

Suppose the approved limit is $20,000 and the account is $12,000 overdrawn. Nominal undrawn headroom is $8,000. If $2,500 of pending payments and a $200 charge are not yet reflected in that balance, remaining planned headroom is $5,300.

Check what the bank's “available balance” already includes. Deducting a pending payment there and again in your worksheet understates headroom. Keep a reconciliation between the statement balance, pending items and the figure you use.

Follow the route back to a positive balance

Assumptions: AUD. Approved limit $20,000 throughout; opening account balance −$12,000. Week-1 net cash of −$3,000 includes all pending payments and charges, including the $2,700 above. Later net cash amounts include all estimated interest and fees; no rate is assumed.

Week	Net cash movement	Closing account balance	Borrowing drawn	Undrawn limit
1	−$3,000	−$15,000	$15,000	$5,000
2	+$4,000	−$11,000	$11,000	$9,000
3	+$6,000	−$5,000	$5,000	$15,000
4	+$7,000	$2,000	$0	$20,000

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

The closest week-end approach to the limit is week 1: $5,000 remains undrawn. In week 4 the account holds $2,000 of cash and has a separate $20,000 undrawn facility, assuming it remains available under its terms. Those are different resources, even if the bank combines them in an available-funds display.

Test the receipt that repays it

If week 3's $6,000 net inflow moves to week 5, week 3 stays at −$11,000 and week 4 ends at −$4,000. The account would still be overdrawn in week 4. Include any extra borrowing costs in the revised forecast rather than assuming they stay unchanged.

Use the large-customer delay test if one payment drives the recovery. Check daily balances around wages, supplier payments and interest dates; week-end headroom can miss an intraday or midweek breach.

Record a trigger for action

Set an internal alert before the limit is reached, based on actual payment volatility and the time needed to respond. Record who reviews it and when the lender should be contacted. This is a monitoring choice, not a recommended borrowing amount or permission to exceed the facility.

If borrowing keeps rising or the forecast never returns to credit, investigate the underlying trading position. More headroom won't repair an ongoing loss by itself. ASIC's financial-difficulties guidance recommends early qualified help where debts may not be payable.

Key takeaways

• Confirm the approved limit and avoid double-counting pending payments.
• Separate cash held from undrawn borrowing capacity.
• Attach the return-to-credit date to identifiable receipts and test delays.

Where to get help

Ask your lender about current availability, fees and conditions, and your accountant to review the cash forecast. Any choice to obtain or change finance needs a separate assessment of the business and the terms.