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The first month can consume cash
Fictional example: the business issues $80,000 of invoices, receives none of that customer cash yet and has $65,000 of payroll and other payments due. On those flows it uses $65,000 of cash before opening cash, financing or other items.
The $15,000 invoice-minus-payment difference is not automatically accounting profit: the figures do not establish every revenue and matched cost. Accrual accounting can recognise revenue before receipt; it cannot make the customer’s unpaid invoice fund wages.
Check when the payment clock actually starts
Read the contract for invoice prerequisites, acceptance, payment-clock start and disputes. A nominal 30-day term may run from acceptance rather than the technician’s visit. National-account concentration can also put many receipts behind one approval process.
Start with supported available cash, add each receipt and subtract each payment on its expected date, and find the cumulative low point. Include deposits, taxes, equipment and financing conditions. Do not add the same $65,000 again as a generic reserve; any extra contingency should cover a different risk.
Test collection delays, later customer starts and fixed staffing commitments separately. Use actual offered supplier-credit terms and conditional financing dates, not hoped-for cash.
Scope
- All amounts are fictional. Opening cash and other dated flows are needed for the full funding gap; no customer collection forecast or financed-launch guarantee is supplied.
Next step
Compare actual payment dates with supported available cash and identify the cumulative shortfall before committing to staffing.
Sources & review notes
U.S. Small Business Administration
Passage, dates and research notes
official-guidance · Start with a balance sheet; accounting methods
The balance sheet is the foundation of managing your finances.
Supports bookkeeping and cash/accrual distinction; fictional capital and cash-flow examples are original assumptions, not SBA benchmarks.
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