I’m winning bigger contracts. Do I need more working capital?

Winning bigger contracts is a sign your business is growing, but it can put pressure on your cash flow. Before you celebrate, it’s crucial to check whether your working capital can keep up. So, where do you start? In this article, we’ll break down why working capital matters for larger jobs and how to strengthen it so your business can scale confidently.

What is working capital and why does it matter?

Your working capital is your business’s current assets minus its current liabilities: the money you have available for immediate expenses. More than just a number on a balance sheet, it is the backbone of your day-to-day operations and a key measure of short-term financial health.

Having enough working capital keeps your SME running smoothly, because you can comfortably cover expenses as they flow in. It allows you to:

• Cover daily expenses like wages, rent, and supplier bills without delay
• Fund growth initiatives like opening a new location or launching a new product line
• Jump on time-sensitive opportunities like buying extra inventory at a discounted price
• Absorb unforeseen costs without having to cut essential spending
• Meet the high demands of peak seasons while building reserves for slower months
• Improve your creditworthiness to unlock better loan terms

How bigger contracts can impact your cash flow

Larger deals typically mean more money coming in. As a business owner, this is music to your ears.

However, more work also requires bigger investments, whether that is more staff, new equipment, or upgraded tech. This alone will impact your cash flow, so you need to make sure you have the resources to take on bigger contracts before making anything official.

But there’s more to consider here. With larger jobs, you may also deal with:

• Longer payment cycles: Bigger clients often require more time to pay invoices, which can create gaps between when you have to pay suppliers and staff and when you receive payment.
• Timing mismatches: Scaling up means you’ll have more contracts to manage, suppliers to pay, and payment schedules to keep track of. Best case scenario, it all flows smoothly. You get paid before expenses hit the bank, and there are no delays. But the opposite can also happen and end up putting real strain on your cash flow.

Now, we don’t say all of this to scare you. More work is a good problem to have. What’s most important is that you plan ahead and make sure your business is ready.

Signs you may need more working capital

If any of these sound familiar, your business is probably running on too little breathing room:

• A mismatch between when you pay expenses and when you receive payment for your work
• You’re regularly paying suppliers late or asking for extended terms
• Core day-to-day costs have become difficult to cover
• You don’t have the financial bandwidth to jump on growth opportunities
• Your cash reserves are consistently low, and you’re not confident you could handle an unexpected bill or slowdown

Ways to increase working capital ahead of a bigger contract

Before you take on a larger job, here are practical ways to strengthen your cash position:

• Speed up receivables by sending invoices immediately after your work is done and delivered and using an automated follow-up system
• Slash ‘nice-to-haves’ like unused software or catered lunches and redirect savings into operations or a rainy-day fund
• Spot slow-moving products and find ways to sell them by discounting or bundling
• Stay on top of cash flow forecasting to identify potential shortfalls ahead of time and plan proactively
• Get a working capital loan and access funds to help you manage cash flow gaps, handle seasonal fluctuations, or respond to short-term needs

How Valiant can help you fund bigger contracts without stress

Valiant gives your business the flexibility to take on more ambitious projects without worrying about cash flow gaps.

Our platform compares loans from over 90 lenders to connect you with ones that work with your unique needs. We manage the paperwork, handle the application, and help get your funding sorted, so you can seize opportunities and keep scaling up. Reach out today.

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