Worked example: 6,000 profit, 2,400 funding gap
A 24,000 project costs 18,000, leaving 6,000 gross profit. Collect 25% at each of four payment points and pay 40%, 40% and 20% of costs across three phases. With no starting cash, the balance reaches −2,400 after phase 2 costs. That is the extra funding needed to keep this particular payment sequence funded.
Read the sequence before reading the total
The deposit arrives first. Each phase's costs are then paid before the next milestone is collected. The final remainder arrives after phase 3. Negative balances represent a funding gap, not a simulated overdraft approval. If a payment arrives later than this sequence assumes, the actual gap can be larger.
Separate collections from invoices and profit
Use when cash is collected, not simply when an invoice is issued. This simplified three-phase plan excludes financing charges, tax, payment default, overlapping projects and within-phase timing. Read the deposit and milestone example, then use the proposal checklist to record the assumptions behind the payment plan. Starting cash changes funding need, but never changes the job's gross profit.
Frequently asked questions
Does a profitable project always have positive cash flow?
No. Costs can be paid before revenue is collected. A positive final project profit can coexist with a negative interim cash balance.
What if the client pays late?
This model assumes collections happen at the stated phase boundaries. Late payments can increase the funding gap; the tool does not estimate collection dates or default probability.