Won a big contract? Plan the cash before you sign

Why do contract wins strain cash flow?

A large contract changes the shape of your cash flow. Before the first dollar arrives, you may need to:

• buy materials and components
• hire staff or engage subcontractors
• hire or buy equipment
• pay for insurance, bonds and compliance
• travel and set up on site

Then the payment cycle starts: submit a claim or invoice, wait for approval, wait for the payment run. On construction projects, retentions may hold back part of every payment.

Construction has been especially exposed. Companies Office data reported by B2B News showed 768 construction liquidations in the year to March 2026. When a head contractor fails, subcontractors further down the chain are often left unpaid.

Step 1: understand the contract’s payment terms

Before you sign, find out:

For construction contracts, the Construction Contracts Act sets out processes for payment claims and payment schedules. Understand them before you start.

Step 2: check the client

• Payment history. Ask other suppliers or subcontractors how the client pays.
• Financial standing. Check the Companies Register for company clients and consider a credit report.
• Concentration. If this contract will be a large share of your revenue, what happens if the client pays late or fails?

Step 3: build the contract cash flow forecast

Extend a 13-week cash flow forecast to cover the whole contract. For each week, record:

Cash out: materials, labour, subcontractors, hire, overheads for the job.

Cash in: expected payments, in the week they will realistically arrive, net of retentions.

Then add the forecast for the rest of your business. The contract does not replace your other work; it sits on top of it.

Step 4: find the funding gap

The cumulative cash position will typically dip deeply in the early months, then recover as payments catch up. The lowest point, plus a buffer for late payments and cost increases, is roughly how much funding the contract needs.

Illustrative example only. A Manawatū fabricator takes a contract worth several times its usual job size. Materials are bought upfront, wages run weekly and the client pays monthly claims on 30-day terms with retentions. The forecast shows cash falling to its lowest point in month three, before recovering. The owner arranges funding to cover that low point plus a buffer before signing.

Step 5: price the risk

Longer contracts carry cost risk. With cost expectations high across New Zealand business in 2026, according to the ANZ Business Outlook, fixed-price contracts can erode margins quickly. Consider:

• escalation clauses for materials and fuel
• realistic labour rates, including overtime
• contingency for delays outside your control

Step 6: arrange funding before signing

Funding arranged in advance is easier and usually cheaper than funding arranged in a hurry. Options for established SMEs include:

• An unsecured line of credit, drawn as costs arise and repaid as claims are paid. Decisions are sometimes same day. See unsecured loans and lines of credit.
• A property-secured loan sized to the forecast low point, as a first or second mortgage. See property-secured loans.
• A mix of both, for larger jobs with a long payment tail.

Our contract and tender funding page explains how these work for different contract types.

Step 7: manage the job’s cash actively

• Submit claims on time, every time, with complete supporting documents.
• Chase approvals so the payment clock starts promptly.
• Track variations and claim them as you go.
• Update the forecast weekly and compare to actual.
• Keep suppliers informed if a client payment is late, before your own payments slip.

When to walk away

Some contracts are not worth winning. Walk away, or renegotiate, if the payment terms are unreasonable, the client has a poor payment record, the contract transfers excessive risk to you, or the funding required would put the rest of the business at risk.