You’ve heard the tired cash flow advice. Forecast more. Watch your spending. Keep selling.
Important. Also, only partially helpful.
After years in CFO and leadership roles, helping businesses scale and working through multiple exits, here’s the simple cash secret I want you to understand. Two words:
Terms and timing.
When do you get paid? When do you have to pay everyone else?
If you have a cash forecast, great. Keep the process as simple as possible. Use it. But the real work is negotiating customer and supplier terms that make the timing work in your favor, while making sure the activity is profitable.
Let’s look at the exact same deal with three different payment arrangements.
Same deal. Same profit. Very different cash situation.
You sell a project for $200,000.
Your supplier costs $100,000. Direct labor costs another $40,000. That leaves $60,000 before overhead, financing costs, and taxes.
Looks like a good job. Now let’s talk about paying for it.
Scenario one: You finance everybody.
Your supplier requires $100,000 upfront. You pay another $40,000 in labor over the first month. Your customer pays the full $200,000 on day 60.
You’ve paid out $140,000 before collecting a dollar.
The project may be profitable, but your business has to supply the cash to get it done. Meanwhile, rent, insurance, and the rest of your payroll haven’t politely paused.
Close three jobs like this at once and your sales team might be celebrating while you’re calling the bank.
Scenario two: You negotiate before you commit.
Same $200,000 project. Same $100,000 supplier cost. Same $40,000 in labor.
This time, your customer pays a 50% deposit before work begins, with the remaining $100,000 paid on day 45. Your supplier agrees to payment on day 60.
You collect $100,000 upfront. You spend $40,000 on labor. You collect the remaining customer payment, then pay your supplier.
Under those assumptions, the project funds its own direct costs.
You didn’t sell more. You didn’t cut someone’s salary. You didn’t squeeze another percentage point out of your supplier.
You changed when the money moved.
The $60,000 contribution is the same before financing costs. Your need to fund the project is completely different.
Of course, your customer and supplier have to agree, and your customer has to actually pay. These are illustrative arrangements, not terms every business can demand.
But if you never ask, you already know the answer.
Scenario three: You hit a wall.
Same project. Your customer still pays the $100,000 deposit before work begins and the balance on day 45.
But your supplier insists on $100,000 upfront.
Your entire deposit goes straight to the supplier. You still need to cover $40,000 in labor before the final customer payment arrives.
You’ve reduced the project’s funding gap from $140,000 to $40,000. You haven’t eliminated it.
This is where preplanning matters.
Before automatically borrowing, I’d explore other qualified suppliers and compare their pricing, reliability, and terms. I’d also ask whether the existing supplier would accept staged payments, or whether the customer would agree to a larger deposit or an earlier progress payment.
If financing is still the best option, price it into the decision and confirm that the remaining margin justifies it.
The problem isn’t that every project must fund itself. It’s committing to a project without knowing what you’ll have to fund.
Your sales team is negotiating your cash flow
Every time someone agrees to a customer’s payment terms, they’re making a financing decision for your company.
They may think they’re simply closing a deal.
But if they promise the customer 60 days while your supplier requires payment upfront, they’ve also volunteered your business to fund the gap.
Was that part of the pricing conversation? Did anyone establish how much cash the job would consume?
Or did everybody stop reading once the margin looked good?
A project cost document should answer more than “Will this make money?”
It should show:
- What the customer will pay and when.
- What suppliers require and when.
- When labor and other direct costs must be paid.
- The largest cash gap your business will need to cover.
- What happens if the customer pays late.
Put the payment dates next to the dollars.
That one change can make the document considerably more useful than another beautifully formatted report.
Bring me the plan, not just the purchase request
I don’t want every $100,000 purchasing decision to become a round of permission requests to the founder or CFO.
I want the person responsible to demonstrate that the project meets the required margin and that the payment arrangements work.
Show me the customer deposit. Show me the supplier’s agreed terms. Show me when the cash leaves and what covers it.
Now you’ve brought me a decision I can evaluate.
Within agreed spending limits and the company’s overall cash capacity, that can be a pretty easy thumbs-up.
A profitable project with a manageable funding plan is a different conversation from “We need to send $100,000 tomorrow.”
There still needs to be a company-wide view. Five project managers can’t each commit the same available cash. And buying equipment for years of future use requires more analysis than buying materials for one signed job.
But your team can own far more of this thinking than founders often expect.
That’s how you grow without becoming the approval department.
You don’t need inventory to have this problem
If you run a service business, payroll can create the same funding gap.
Imagine you bill $100,000 a month for a client engagement and spend $60,000 a month delivering the work.
You invoice at the end of the month. The customer pays 30 days later.
By the time the first payment arrives, you may have funded roughly two months of delivery costs. That’s $120,000 your business has supplied while waiting.
Now consider collecting the monthly fee at the beginning of the service month.
Same fee. Same work. Same delivery cost. A very different funding requirement.
Maybe full advance payment isn’t commercially realistic. Could you collect a deposit? Bill in stages? Invoice twice a month? Require payment before starting the next phase?
You have more options than “send the invoice and hope.”
The terms need to work in real life
“Net 30” doesn’t mean much if your customer routinely pays in 65 days.
Neither does a deposit requirement your sales team keeps waiving.
And when does the clock start? The invoice date? Delivery? Customer approval? Uploading the invoice to a portal nobody told you about?
Those details determine when you actually get paid.
On the supplier side, negotiate before placing the order. Ask about credit terms, staged payments, or aligning payments with delivery milestones.
Then honor the agreement.
Quietly paying late is not a clever cash strategy. It’s a good way to lose the supplier flexibility you need.
Longer terms also aren’t automatically better if they come with higher prices or mean giving up a valuable discount. Compare the cost with the cash benefit.
The goal is an arrangement both sides can reliably perform.
Keep the forecast simple enough to use
You’ll likely benefit from a cash forecast.
You need to see upcoming gaps, existing commitments, and the effect of a late payment. If the squeeze happens between payroll dates, a monthly total may hide it. Use weekly detail where it matters.
But building an increasingly complicated forecast won’t renegotiate a deposit or secure another 30 days from a supplier.
Someone has to have those conversations.
And collecting cash earlier doesn’t make it spare money. A customer deposit still has a job to do. Spending it elsewhere can recreate the gap you just solved.
Better timing also won’t rescue a business that consistently loses money. You need sound economics underneath it.
Once that foundation exists, though, terms and timing deserve far more attention than they usually receive.
Before you chase another sale, look at the next deal
Ask your team two questions:
When do you get paid?
When do you have to pay everyone else?
Then ask who is responsible for making those dates work together.
Your sales team doesn’t need to allocate every dollar of company overhead. Give them a clear gross margin target and responsibility for the project’s payment terms. Your founder and CFO responsibilities include making sure those margins cover overhead and that the combined cash commitments are manageable.
That’s a practical part of fractional CFO leadership: helping your team structure decisions so growth is something your business can fund.
At Astero Group, I want founders to understand their cash well enough to change what happens next.
Start with the next proposal, the next supplier order, or the next renewal.
Before you build a more complicated spreadsheet, have a better conversation about payment terms.
Jim Miller is the founder of Astero Group, a fractional CFO firm helping founder-led businesses improve profitability, manage cash flow, and make better growth decisions. Learn more at https://www.linkedin.com/in/iamjimmiller/
