What does the next contract ask your business to fund?

A growing order book can create a cash problem before it creates a profit problem. The business commits to staff, stock or subcontractors, delivers the work, invoices and then waits to be paid.

The accounts may show a profit while the bank balance remains under pressure. I would look at the next contract’s cash requirement before treating the sale as an uncomplicated success.

Follow the timing, not just the margin

Identify what must be paid before the first customer receipt, when further delivery costs fall due and how billing milestones work. Payment terms matter, but so do invoice approval, disputes and the customer’s actual payment pattern.

Supplier terms, stock or work in progress, relevant tax payments and any retentions may also affect the amount and duration of funding required.

A useful test is to put the contract into the cash forecast and compare the lowest cash point with the position before it was added. Include other commitments rather than assessing the contract in isolation.

Change the commercial terms where possible

The answer is not always to borrow more. A deposit, staged billing, a different delivery schedule or better collection arrangements may reduce the gap. What is achievable depends on the customer, contract and business’s negotiating position.

Where funding is needed, allow time to discuss availability and terms. A forecast identifies the requirement; it does not ensure a facility will be available.

Persistent cash pressure may also reflect weak margins, losses or other structural issues. Growth is one explanation to test, not a diagnosis to assume.

Before accepting the next large order: ask how much cash must leave before the customer pays, and whether the business can carry that commitment if collection is delayed.

Further reading: Understanding the cash demands of growth.