Cash flow and capacity

Winning a contract is not the same as getting paid. You are paid for delivering work the buyer accepts. Plan for the time in between.

When the government pays

On most federal contracts, payment is due 30 days after the buyer receives a proper invoice or accepts the work, whichever comes later. If the buyer pays late, it owes interest without you asking for it. Some contracts set different terms, so read the payment clause.

A proper invoice has every item the contract asks for. An invoice with a mistake can be sent back, and the 30 days start over once you fix it. Federal payments go by electronic transfer to the bank account in your SAM.gov registration. SAM.gov registration is free, so never pay anyone to set it up.

State and local buyers follow their own payment laws and terms. Texas, for example, has its own prompt payment law for state and local governments. Check each contract.

Plan for 60 to 90 days

Between starting the work and getting paid, you pay for people, materials, travel, insurance and subcontractors. Many first contracts need 60 to 90 days of costs covered before cash comes in. In a 2025 survey, 29% of small businesses said they could not cover their expenses before a first contract payment.

Ask yourself:

• What will this contract cost me each month?
• When can I send the first invoice, and when will the money arrive?
• Where does the cash come from until then?

Ways to ease the gap

• Bill early and often. Ask for billing at milestones you can reach in the first month. Think hard before taking a fixed-price job with no billable step for months.
• Invoice the day the work is accepted, and keep the record of acceptance.
• Line up a credit line before you need it. SBA's CAPLines, part of its 7(a) loan program, is one example. A contract is not cash, and lenders still check your credit and your finances.
• Factoring, which means selling your invoices, is possible on federal contracts only under the Assignment of Claims rules. It is costly. Use it last.

Skip the quick-pay discount

You may be tempted to offer a discount for fast payment. On sealed bids, these discounts are not counted when bids are compared, and the buyer takes the discount when it pays on time. Default to Net 30 with no discount.

Capacity: can you deliver?

Cash is one limit. People and time are the other.

• List who will do the work and how many hours each person really has.
• If you would need to hire, plan who, when, and how you will pay them before the first payment.
• Count your other customers. A government job that costs you your best commercial client is a bad trade.

If you will hire for the job, write that into your proposal as a firm plan with named roles. Never describe people you have not hired as current staff.

A simple rule

If the cash plan works only when everything goes right, it does not work. Add a buffer for a slow first payment. If you cannot carry the cost, look at starting as a subcontractor, so a larger prime carries the gap.