Pricing and delivery readiness
A profitable bid can still run out of cash: check the gap before you commit
Separate price, margin, and cash timing before bidding. Work through a simple funding-gap example and build a practical cash calendar for contract delivery.
Ask two different questions
Will the price cover the work? And can we pay the bills before customer payments arrive? A yes to the first question does not answer the second. An unpaid invoice cannot fund tomorrow's payroll, and a possible award is not money in your bank account.
The SBA's finance guidance recommends tracking revenue, expenses, available cash, and amounts owed to and by the business. Use that distinction when preparing a bid: keep a cost estimate and a dated cash forecast, rather than asking one profit number to do both jobs. This is a planning exercise, not personalized accounting or borrowing advice.
Know what your margin calculation includes
Begin with the work required, then estimate labor, applicable payroll costs, materials, subcontractors, equipment, travel, insurance, administration, and other relevant costs. Separate one-time mobilization from recurring delivery. Record the source and expiry date of supplier quotes, and label assumptions you have not verified.
Illustrative arithmetic: a $30,000 price minus $24,000 of modeled costs leaves $6,000. That is a 20% margin on revenue ($6,000 divided by $30,000), but a 25% markup on cost ($6,000 divided by $24,000). Those percentages are not interchangeable and are not recommended targets.
The $6,000 is only a surplus over the costs included in this example. If financing fees, taxes, overhead, or extra delivery costs are missing, it is not your final take-home profit. Have your accountant review the cost categories and accounting treatment relevant to your business.
Build a cash calendar from actual payment terms
Create a row for each week, or each day when cash is tight. Use columns for opening available cash, expected customer receipts, payments due, and closing available cash. Closing cash equals opening cash plus receipts minus payments. Carry the result into the next row.
Put payroll, supplier deposits, equipment payments, and subcontractor obligations on their actual due dates. Put customer receipts on dates supported by the contract and a stated planning assumption, not simply the day you finish the work or send an invoice. Keep money already committed to other projects out of the available-cash figure.
For federal payments, FAR 32.905 connects payment with a proper invoice and satisfactory performance, and describes supporting acceptance or authorization documentation. Read the actual contract's billing milestones, acceptance process, payment clause, and submission requirements. Do not assume every agency pays on one universal timeline, or that an advance payment is available.
Worked example: $6,000 on paper, a $14,000 funding gap
This invented six-week example illustrates timing, not a typical government payment schedule. Assume a $30,000 project, $24,000 of cash costs, no other project transactions, and $10,000 of business cash genuinely available for this job. Assumed customer receipts are $15,000 in week five and $15,000 in week six; verify any real milestone arrangement separately.
The assumed outflows are $4,000 at mobilization, then $5,000 in each of weeks one, two, three, and four. Before any receipt, cumulative spending reaches $24,000. Against $10,000 available, the forecast reaches negative $14,000 by the end of week four. A negative forecast is an unmet funding need, not permission to spend money you do not have.
Week five's assumed $15,000 receipt would move that projected balance to $1,000; week six's receipt would bring it to $16,000. The ending balance includes the original $10,000 plus the $6,000 modeled surplus. But that attractive ending cannot erase the earlier $14,000 shortfall. The job needs a credible way to bridge the gap before you commit.
Now add a hypothetical $2,000 replacement-equipment payment in week three. Modeled costs become $26,000, the pre-receipt funding gap becomes $16,000, and the surplus falls to $4,000. Move a receipt later as a separate stress test: even without changing profit, the cash shortage lasts longer. Neither stress assumption is a forecast of what the government will do.
Turn a shortfall into a bid decision
Identify the worst projected cash balance and how long the gap lasts. Then test the assumptions most likely to change: start-up cost, staffing, supplier payment dates, delivery rework, and customer receipt timing. Include the business's other obligations when deciding what cash is truly available.
Possible next steps include validating costs, discussing lawful payment arrangements with suppliers, or reviewing a financing proposal with a qualified adviser. Do not count an unapproved loan as available funds. If financing is considered, include its fees, repayment dates, conditions, and obligations in both the cost estimate and cash calendar.
If the gap has no credible solution, a smaller pursuit or a no-bid decision may be the responsible choice. Do not assume you can rewrite the customer's payment terms after award or postpone obligations to workers and suppliers. Raise unresolved contract questions through the designated channel before bidding.
Keep the decision attached to the pursuit
Write a short decision note: price version, included costs, lowest projected cash balance, receipt assumptions, unresolved funding needs, and the person responsible for checking them. Revisit it when the scope or schedule changes.
BidGovAI helps organize your company information and contract pursuits; available features depend on membership. Use it alongside your own cash forecast and accounting advice. A fit score is not a financing approval, a profit estimate, or a guarantee of an award. The related bid/no-bid guide below helps turn this check into a deliberate next step.
Your next steps
- Separate expected revenue, modeled profit, and available cash.
- Check that all relevant delivery and business costs are included.
- Verify billing milestones, acceptance requirements, and payment terms.
- Place receipts and outflows on a dated cash calendar.
- Calculate the deepest funding gap and its duration.
- Test higher costs and later receipts without calling them predictions.
- Resolve funding assumptions before committing, and record your bid decision.