Project cash flow: fund delivery before milestone receipts

Forecast project cash from the dates of deposits, delivery payments, acceptance, invoicing and collection. A contract margin does not tell you whether the business can pay the team before the customer pays. Calculate the lowest project cash balance and the amount needed to retain a chosen reserve.

Separate the five project events

Work can be performed before it becomes billable. A bill can be issued before the customer pays. A deposit can be received before the service is earned. Keep those events on separate rows rather than treating “project revenue” as a bank receipt.

Start with the actual contract milestones and collection terms. Record what permits each invoice: delivery, customer acceptance, a signed stage or another stated condition. IFRS 15 explains why revenue follows performance obligations; this guide focuses on operating cash dates and does not determine a project's accounting recognition policy.

Calculate the cash low point for a complete project

Assume a $40,000 contract, $26,000 delivery payments and $8,000 opening business cash before the deposit. The customer pays $12,000 at the start, $18,000 in week five following acceptance and invoicing, and $10,000 in week seven under the assumed terms. The opening $8,000 excludes that first deposit; add the deposit only once.

The contract leaves $14,000 after the included delivery costs, yet cash reaches −$6,000 before the large milestone is collected. With a chosen $5,000 reserve, additional upfront funding is $11,000. That funding lifts the low point to $5,000. The reserve and all project inputs are assumptions in this example.

If your starting bank balance already contains the $12,000 deposit, do not add the deposit again. That duplication would overstate every later balance by $12,000. Reconcile the bank cutoff before calculating a funding gap.

Keep unbilled work visible without inventing cash

By the end of week two, the business has paid $18,000 of delivery costs. Suppose the next billing milestone is not available until the customer accepts the work after week three. Track the work performed, remaining effort and acceptance condition. The $18,000 is paid delivery exposure in this operating example; it is not automatically a recognized contract asset or earned revenue of the same amount.

A useful project view shows hours or work completed, cost incurred, cost still required, invoices issued and cash collected separately. If project work grows by another $4,000 before the same milestone, update both the expected margin and the payment date. Do not leave “remaining cost” at the original estimate after scope has changed.

Distinguish a smaller deposit from later acceptance

If only $6,000 of the expected $12,000 deposit arrives at the start, with the other $6,000 collected in week five, the early cash low point falls from −$6,000 to −$12,000. Retaining the same $5,000 reserve now needs $17,000 additional upfront funding. The total contract receipts have not changed, but less money is available during delivery.

If instead the full deposit arrives but the $18,000 milestone moves from week five to week seven, with no extra costs, the existing low point remains −$6,000 for longer. The bounded project's peak funding amount does not increase merely because the wait is longer. It increases if additional payroll, rework, supplier payments or another project must be funded during that wait.

Evaluate a revised milestone structure

Under a separately agreed alternative, moving $6,000 from the week-five milestone into the start deposit raises the deposit to $18,000. The week-three low point then becomes zero; the reserve funding need falls to $5,000. Week-five receipts fall to $12,000, so this is earlier cash, not extra contract revenue.

The change helps only if the customer accepts the terms and pays before delivery costs fall due. Preserve the original payment case until the alternative is actually available. Combine all projects with shared payroll and overhead in the weekly cash forecast; the project's $14,000 margin excludes those wider commitments. Use the staffed-hours guide to check delivery effort and the downside-action method to work backward from the next payment deadline.