Editorial note: This article is a fictional reconstruction of situations businesses may face. Its purpose is to inform and raise awareness about possible risks and responses. People, events, data and outcomes should not be interpreted as actual cases, verified facts or results achieved by LC. Each organization needs its own assessment.
Sofia wins a large contract and the projected income statement shows profit. To start, she must buy materials and pay wages. The customer will pay sixty days after delivery. Profit describes recognized revenue and cost; cash flow follows when money actually enters and leaves. They answer different questions.
Put dates on the promise
Sofia builds a weekly calendar of expected collections, required payments and available balance. She separates confirmed amounts from likely ones. The difficult point is not the contract's total value but the gap between buying inputs and collecting. She also models what happens if the customer pays late.
Negotiate the cycle, not just the price
Before the next contract, she considers milestone advances, supplier terms or phased delivery. Each option has commercial consequences and must be agreed with the parties. Credit may help, but it has a cost that must be compared with expected margin and collection risk.
Update forecasts with actuals
Every Friday the team records what arrived, what was paid and what changed. The calendar becomes an early warning rather than an optimistic sheet. If the customer confirms a delay, Sofia can adjust commitments before missing them. Cash needs ongoing attention, not only an end-of-month review.
A sale can have margin and still require cash before payment arrives.
BRING IT TO YOUR BUSINESS
Three questions to get started.
- Which payments happen before collection?
- Which collections are firm and which are assumptions?
- How long can we carry the gap?
Does this sound like a challenge in your business? We can start with a conversation.
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