The sales team celebrates a large order. Operations needs materials immediately, staff must be paid and the customer will settle later. The business may have won valuable work while creating a difficult cash-timing problem.
Growth and liquidity are different questions. An order book describes future activity; it does not show exactly when money enters and leaves the bank account.
Draw the order as a timeline
Mark the expected material purchase, production costs, delivery, invoice and receipt. Include realistic delays and the terms actually agreed. A forecast based on the invoice date alone misses the period before cash collection.
BDC’s working-capital guidance discusses the interaction of inventory, customer payments and operating needs. The useful principle is to understand those timings together rather than optimising one number in isolation.
Use a simple example to expose the gap
Imagine a business paying 30,000 units for materials and labour before receiving 45,000 units from a customer. The eventual difference does not remove the need to fund the earlier payments. This simplified illustration excludes other costs and is not a profitability calculation.
If several orders overlap, the timing gap may grow even while each order appears attractive. Model the combined calendar rather than assuming the first customer will pay in time to fund the next job.
Check assumptions with the teams doing the work
Ask purchasing about supplier terms, operations about lead times and sales about promised delivery dates. Confirm how invoices are approved and whether customer acceptance can delay payment. Small administrative details can shift the expected receipt date.
Discuss options with appropriate finance professionals: deposits, staged billing, stock management or suitable financing may be relevant, depending on the business and contract. Do not assume delaying suppliers indefinitely is a cost-free solution; it can damage availability and relationships.
Monitor a forecast against reality
Update expected receipts and payments regularly and explain significant differences. Keep confirmed orders separate from optimistic sales opportunities. A forecast is more useful when its uncertainties are visible.
The management question is not simply whether growth is good. It is whether the company can deliver the promised work while meeting its obligations along the way. Bringing the sales plan and cash calendar into the same conversation makes that question easier to answer before a successful order becomes an avoidable scramble.