A bigger UK contract can consume runway before it creates cash. Put the payment terms into the funding plan before signing.

A large UK customer offers a scale-up a contract with 60-day payment terms. The revenue looks attractive. The less visible question is how much cash the startup must find before the customer pays.

Before signing, put the collection date into the cash forecast and compare it with when wages, suppliers and taxes must be paid. Then test what happens if payment takes longer. A profitable contract can still need funding, and a revenue target does not supply it.

This matters particularly for founders selling services or software to larger organizations. The customer may have enough money to pay. It may also have a procurement process that requires a purchase order, an approved invoice and a particular payment run. Winning the account and financing the account are different jobs.

Thirty more days can tie up nearly £400,000

Start with a simple illustration, not an actual company. Assume annual UK credit sales of £4.8 million, spread evenly through the year, with invoices issued as sales occur. Ignore VAT, seasonality, bad debt and other changes for now.

At 30 days from invoicing to cash, average receivables would be roughly £395,000. At 60 days, they would be about £789,000. The extra 30 days ties up approximately £395,000 in invoices, without adding a pound of annual revenue.

The calculation is annual credit sales divided by 365, multiplied by the extra days to payment. Here that is £4.8 million ÷ 365 × 30, or £394,521 rounded to the nearest pound. If only part of the customer base changes terms, use that part’s sales, not the whole company’s turnover.

This is an estimate of additional receivables, not a precise funding requirement. Cash already held, supplier terms, deposits and the timing of delivery costs affect the amount the company must finance. Fast growth can also make a steady annual average misleading. Model the actual expected invoices and receipts month by month before deciding how much liquidity is needed.

The distinction is important: the £395,000 has not necessarily been lost. It is unavailable for payroll or the next product release while the business waits. The British Business Bank makes the same underlying distinction in its cash-flow guidance: rising profit does not prevent a shortage of cash when growth requires working capital.

Price the timing as well as the product

Payment terms are part of a commercial offer, not a minor line for finance to discover after the sale. If winning a contract requires financing the customer for longer, make that cost visible alongside gross margin and acquisition cost.

Using the illustration, an assumed annual funding cost of 10% on the additional £395,000 would be about £39,500 a year. That rate is a modeling assumption, not a financing quote. Fees, eligibility, concentration limits and the available facility could change the actual cost substantially.

The answer need not be a higher headline price. A setup fee payable before work starts, milestone billing or a deposit may reduce the amount financed. These are commercial options to negotiate, not terms every enterprise buyer will accept. They must fit the product and the customer’s purchasing process.

An early-payment discount also has a cost. Compare that cost against the cash released and the number of days gained, rather than assuming that faster payment is always worth any discount. The aim is to win a contract that the company can afford to deliver.

Check the customer’s record, not just its policy

Sixty-day terms and late payment are not the same thing. A customer paying exactly on day 60 has used the agreed credit period. A customer paying on day 75 has introduced another 15 days of uncertainty.

For many large UK companies, founders can check published payment-practices reports through the government’s reporting service. The reports show measures including average time to pay and the proportion of payments not made on time. Check the contracting legal entity, not merely the group’s familiar brand name.

Those reports are evidence to question, not a guarantee about one invoice. A company-wide average may not describe the startup’s business unit or contract. Use the information to ask concrete questions before signing: when does the clock start, which purchase-order details are mandatory, who accepts delivery and what happens if an invoice is rejected?

Ask the sales team to resolve those questions while the customer still wants the contract signed. Otherwise, an apparent 60-day deal may include weeks of avoidable administration before the agreed period even begins.

Do not fund growth with an assumed recovery

Keep a distinction between invoices expected to pay normally and overdue balances whose timing is uncertain. Repeated promises should not become fresh, certain cash dates in the board forecast.

For a UK receivable that has genuinely become overdue, establish whether the issue is administrative, a dispute or an inability to pay. Reconcile the balance and set a decision point for seeking local collection or legal advice, whether directly or through a platform such as Debitura. That is a recovery decision, not a substitute for funding the next month’s operating costs. Neither an instruction to collect nor a legal claim makes the money immediately available.

The useful board conversation comes before a cash crisis: how much growth can current liquidity support if customers take the time already allowed in their contracts? Run a second version with plausible delays and identify the point at which hiring or delivery commitments would need to change.

A prestigious customer can be a good investment. But its logo does not pay wages. The payment terms belong in the funding plan on the day the contract is evaluated, not on the day the first invoice goes overdue.

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