Can your company afford a larger contract? What to calculate before signing?

A larger contract often looks like the opportunity a company has been waiting for. A new client, a higher order value, the possibility of entering a longer-term cooperation and a real prospect of growth. In practice, however, the value of the agreement alone does not show whether the project will be safe for the company.

A contract may be profitable at the offer level, but difficult to carry financially. Costs may appear before revenue, payment may be stage-based or deferred, and the company still needs to cover current liabilities, salaries, taxes, leases and cost invoices.

That is why, before signing a larger agreement, it is worth asking not only: “how much can we earn on this?”, but also: “do we have the resources to finance the execution of this contract until the client pays?”. This article is not about how contract financing works. We discuss that topic in more detail in the article: Contract financing - how to take on bigger projects without blocking your cash. Here, we focus on the earlier stage: how to calculate costs, deadlines and risk before signing the agreement.

A larger contract is not only higher revenue

In small and medium-sized companies, a larger order often means the need to scale operations. The company may need to involve more people, buy materials, order goods, reserve subcontractors’ time, increase its operational base or prepare documentation required by a larger contractor.

The problem is that revenue from the contract appears only later. Sometimes after a stage is completed. Sometimes after work is accepted. Sometimes after an invoice is issued and 30, 45, 60 or 90 days have passed. During that time, the costs are already real.

This is especially important in B2B relationships, where late payments and extended payment terms continue to affect company liquidity. The Intrum European Payment Report 2025 analyzes the payment behavior of European companies and the impact of late payments on financial risk management. Data from BIG InfoMonitor and BIK shows that at the end of 2025, overdue corporate debt in Poland exceeded PLN 45 billion.

The conclusion is simple: a larger contract can be a good growth step, but only if the company understands its impact on cash flow.

1. Calculate the full execution cost, not only the margin

The first mistake in larger contracts is looking only at the value of the agreement and the planned margin. These are important, but not enough. The company should calculate not only how much it will earn, but also how much money it must spend earlier. The calculation should include:

materials, components or goods needed for execution,
salaries of the team involved in the project,
subcontractor costs,
transport and logistics,
equipment, tools, rental or leasing,
administrative and formal costs,
insurance, guarantees or security,
taxes and VAT,
project management costs,
the potential cost of financing,
a buffer for delays or cost increases.

The margin percentage alone may look good, but if most costs must be paid upfront, the contract can put strong pressure on company cash. That is why it is worth calculating the execution cost over time, not only in a table with final revenue and final cost.

Example: a contract may have good profitability, but require buying materials in the first week, involving subcontractors for two months and receiving payment from the client only after a project stage has been accepted. In that case, the question of profitability must be combined with the question of liquidity.

2. Check when costs and inflows will appear

The second step is to place the contract on a timeline. This is one of the simplest and most important elements of assessing a larger order.

The company should know:

when suppliers need to be paid,
when employees or subcontractors need to be paid,
when transport or logistics costs must be covered,
when an invoice or settlement document can be issued,
when the client can accept the stage,
what the payment term is,
when the money can realistically appear in the account.

Only this kind of overview shows whether the project creates a liquidity gap. It does not always result from a delay on the client’s side. Sometimes the contractor pays according to the agreement, but the schedule is still difficult for the supplier because costs appear much earlier than the inflow.

That is why, in larger projects, it is worth preparing a simple cash flow schedule. It does not need to be complicated. What matters is that it shows in which weeks the company will finance the project from its own cash and when it can expect funds to return.

If a company wants to better control invoices, costs, payments and upcoming obligations, organizing financial processes in PaveNow CFO Suite may help.

3. Check whether the contract will block current operations

A larger contract should not stop the rest of the company. This is especially important for SMEs, which often have a limited financial buffer and work on several projects at the same time. Before signing the agreement, it is worth checking whether the execution of the new order will make it harder to pay for:

salaries,
social security contributions and taxes,
leases,
fixed operating costs,
suppliers from other projects,
obligations towards subcontractors,
current cost invoices,
costs related to serving other clients.

This is the moment to separate “we can afford to start the contract” from “we can afford to deliver it safely”. A company may have funds to begin the project, but not enough buffer to safely get through the full period of waiting for payment.

If a larger order requires engaging most of the available cash, it is worth considering whether the company needs an additional source of financing before execution starts. Not to hide a problem, but to avoid blocking all liquidity in one project.

4. Check payment and acceptance terms

In larger contracts, checking the payment term on the invoice is not enough. It is equally important to know when a settlement document can be issued at all and what the acceptance of work depends on. Before signing the agreement, it is worth analyzing:

whether payment is advance-based, stage-based or final,
what conditions must be met to settle a stage,
who accepts the completed work,
whether acceptance can be delayed for formal reasons,
whether the agreement includes contractual penalties,
whether the client can deduct part of the payment,
whether payment depends on the main investor paying first,
what documents must be provided for settlement.

This is especially important when an SME works as a subcontractor for a larger company. In such a model, a delay at a higher level of the chain can quickly affect the smaller business. That is why the acceptance and payment schedule should be just as important as the contract price itself.

5. Calculate the minimum safety buffer

In a larger contract, it is worth assuming that not everything will go perfectly. Materials may become more expensive, delivery may be delayed, a stage may require corrections, the client may postpone acceptance, and payment may arrive later than planned. That is why, before signing the agreement, it is worth defining a minimum safety buffer. It may include:

additional funds for cost increases,
a reserve for delayed payment,
a buffer for subcontractors,
protection for current obligations,
funds to maintain the company for several weeks without an inflow from the contract.

A buffer is not a sign of a lack of trust in the client. It is part of responsible project management. The larger the contract is in relation to the company’s scale, the more important it is not to base the entire execution on an optimistic scenario.

6. Assess the contractor and payment risk

Even a well-calculated contract can be risky if the client has payment problems or if the settlement terms are unclear. That is why, before signing a larger agreement, it is worth checking not only your own capacity, but also the contractor’s reliability. You can look at:

cooperation history,
market opinions,
registration data,
capital links,
standard payment terms,
previous delays,
the way the purchasing process is managed,
clarity of communication and documentation.

This is not about excessive caution, but about awareness. A large contractor does not always mean safe payment, and a smaller contractor does not always mean higher risk. The key is whether the company understands who it is signing an agreement with and under what conditions.

The market context shows that payment risk is not abstract. In the European Payment Report 2025, Intrum indicates that the survey covered more than 9,000 decision-makers from 25 European countries, and one of the main areas was the challenge of payment management. In larger contracts, this knowledge should translate into practical decisions: contract terms, schedule, advance payments, security and possible financing.

7. Check whether the project still makes sense after adding the cost of financing

If the contract requires external financing, the cost of that financing should be part of the calculation, not an addition analyzed only later. The company should check:

how much funding it needs,
for what period,
when it expects repayment,
what the cost of financing will be,
how this cost affects the margin,
whether the project is still profitable after including it.

This is important because financing should support a profitable project, not rescue a contract that has too low a margin from the start. If the project still works after adding financing costs, additional capital may help the company maintain liquidity and accept the order without freezing all its own cash.

If the company has a signed contract or a confirmed larger order and needs funds to execute it before receiving payment from the client, it is worth checking business financing from PaveNow. In this context, we are talking about financing the execution costs of the project, not traditional factoring understood as financing an already issued invoice.

A simple test before signing a larger contract

Before signing the agreement, it is worth answering a few questions:

Do we know the full execution cost of the project?
Do we know when the largest expenses will appear?
Do we know when we will realistically receive payment?
Will the contract block current operations?
Do we have a buffer for delays and unexpected costs?
Are the acceptance and payment terms clear?
Have we checked the contractor?
Is the project still profitable after adding the cost of financing?
Do we have a source of funds if costs appear earlier than inflows?

If the company does not know the answers to several of these questions, the contract may still be a good opportunity. But it is worth refining the calculation first, instead of signing the agreement based only on the revenue value.

A larger contract should be a decision, not an impulse

A larger contract can open the way to growth, new clients and more stable revenue. It can also put pressure on liquidity if the company does not calculate costs, deadlines and risks before signing the agreement.

That is why the best moment for analysis is not when cash is missing during execution. It comes earlier - before the company signs the contract and commits to specific deadlines, costs and terms.

A well-prepared calculation helps make a conscious decision: accept the order, renegotiate the terms, ask for an advance payment, change the payment schedule or prepare financing. Thanks to this, a larger contract can become a real growth step, not a project that looks good only on paper.