By Deepak Shukla, Founder & CEO of Pearl Lemon Accountants
There is a particular kind of business success that looks wonderful in a sales meeting and considerably less wonderful when the electricity bill arrives. Revenue is climbing. The pipeline is healthy. Everyone is very busy. The bank account, meanwhile, appears not to have received the memo.
It is tempting to treat this as an accounting oddity. In a growing service business, it can be the central operating problem: selling work and collecting cash are two different sports, and a company can become excellent at one while remaining alarmingly amateur at the other.
Revenue can be an excellent storyteller
Imagine a consultancy celebrates a £20,000 project. It expects £8,000 of direct delivery costs and therefore describes the job as attractive. But the team must start work immediately, freelancers need paying within a fortnight, and the customer will not pay the invoice for 60 days. Those figures are illustrative, but the problem is familiar. The company may have earned an accounting profit while needing to fund the entire production process from somewhere else.
Now add three more clients, a recruitment drive and a new software subscription described on the invoice as ‘enterprise-grade’. The sales chart has never looked better. Neither has the business’s ability to borrow money from its future self.
A deal is not finished when someone says yes
Owners often scrutinise lead generation more closely than the journey from signed agreement to cash received. Yet the second journey has its own conversion funnel: proposal agreed, contract signed, deposit requested, purchase order issued, service delivered, invoice approved, payment collected. Every handover can introduce delay.
If a customer needs a purchase order, asking for it after delivery is not administrative housekeeping; it is a financing decision. If nobody owns invoice approval, payment terms are decorative. A 30-day payment term that consistently turns into 75 days should not be represented in a forecast as 30 days merely because the contract has nice typography.
For each substantial job, I want to know who can authorise the work, when we can invoice, what evidence the customer needs to approve it, and who follows up if that process stalls. There is nothing glamorous about these questions. That is precisely why they matter.
Measure cash commitments, not just cash received
A dashboard that shows today’s bank balance without tomorrow’s obligations is like checking the fuel gauge while ignoring that you’re towing a caravan uphill. The useful view includes payroll, tax, supplier payments, contracted tools, debt repayments and unavoidable delivery costs as well as expected receipts.
A rolling 13-week cash forecast is one practical discipline. It needn’t predict the future with theatrical precision. Start with opening cash, schedule the payments you know you must make, then separate incoming cash into confirmed and uncertain collections. Update weekly. When a customer promises to pay on Friday and doesn’t, change the forecast; don’t simply keep Friday in the spreadsheet until morale improves.
The real value is in exposing the next pinch point early enough to act. Can a staged payment be agreed before work starts? Can a supplier invoice reflect the same milestones? Should a planned hire wait until the cash has actually arrived? Those are operational decisions informed by finance, not finance problems politely left on an accountant’s desk.
Watch the three traps disguised as growth
The first is margin illusion: treating revenue minus one obvious supplier bill as profit while forgetting project management, revisions, account management, software, payment fees and the cost of fixing mistakes. A sale can be large and still be commercially unappealing.
The second is concentration. A very large customer can make the revenue graph look impressive while turning one late payment into an existential event. Review both customer concentration and collection patterns. A company that depends on a single client to pay on time is not simply customer-focused; it is exposed.
The third is capacity bought too early. It is natural to hire after a run of strong sales. But people, offices and software are recurring commitments; a promising pipeline isn’t. Ask how much of the forecast is signed, how much is billable, and how much is likely to convert into actual receipts before fixed costs rise.
Put the cash question into the sales meeting
A commercial meeting should not end at ‘What did we close?’ It should include: Which new projects require us to spend before being paid? Which invoices are blocked by a missing purchase order or sign-off? Which customers have stretched beyond their normal payment behaviour? What additional cash do we need to deliver what we have already sold?
This is not an argument for refusing growth or demanding cash up front from everyone. Some clients have legitimate procurement processes. Some projects require investment. The objective is to price and plan for those realities instead of treating payment timing as an unpleasant surprise arranged by the universe.
The bank balance gets the final vote
I have spent years building service businesses, and one lesson keeps returning: a busy company is not necessarily a healthy one. Growth becomes valuable when it produces sustainable margin, reliable delivery and cash that arrives early enough to meet the commitments made in pursuit of it.
Celebrate a signed contract, by all means. Just don’t confuse it with money you can spend. The invoice is a promise. The bank balance is the slightly less charming colleague who asks whether the promise has been kept.
