New Contract Cash Requirement

Why this comes up

A new contract's early weeks are the most cash-exposed part of its whole life: payroll for the new headcount is going out in full while collections haven't started yet, and any startup cost (recruiting, onboarding, equipment) makes the trough deeper still. This engine runs the actual week-by-week timeline for one specific deal, rather than a rough estimate, so you know the real number before signing.

How we calculated this

For each period: Cumulative Cash += Receipts (billings collected after the delay) - Payroll Outflow - Other Outflows
Required Starting Cash = the largest negative cumulative cash point across the timeline

Worked example: an 8-week contract, $20,000/week payroll, $24,000/week billings, a $5,000 one-time startup cost in week 0, and a 4-week collection delay.

Weeks 0-3: no receipts yet; week 0 also carries the $5,000 startup cost
Cumulative: -25,000, -45,000, -65,000, -85,000 (the trough, week 3)
Week 4 onward: receipts start arriving ($24,000/week), cumulative recovers
Required Starting Cash = $85,000

A naive shortcut (weekly payroll x delay weeks = 20,000 x 4 = $80,000) misses the $5,000 startup cost entirely, understating the real trough by $5,000. That gap gets larger the more startup cost or ramp is involved.

What this means

• The trough, not an average across the contract's life, is the number that matters, it's the cash you need available at the worst moment, not on average.
• Startup and ramp costs concentrated in the earliest weeks push the trough deeper and often later than a simple multiplication would suggest.
• Feed this number directly into New Client Contract Go/No-Go before signing, a contract that clears margin can still fail on cash alone.

Common mistakes

• Using weekly-payroll-times-delay as a shortcut for a contract with any startup cost or ramp, which understates the real trough.
• Evaluating a new contract's margin without separately checking whether the agency can actually fund its cash trough alongside everything else already running.
• Forgetting that receipts due after the simulated window ends never show up in the results; extend the period count if the contract runs longer than your collection delay plus a few periods.

Frequently asked questions

What counts as "other outflows"?

Any one-time or period-specific cost beyond payroll, recruiting fees, equipment, onboarding, or facility setup for this specific contract.

Why does the trough happen before receipts fully catch up?

Because payroll starts on day one while collections don't arrive until the collection delay has passed; every week in between adds to the shortfall before the first receipt offsets any of it.

What if I don't know the exact ramp shape yet?

Model your best estimate and re-run this once actual terms are set; the trough is sensitive to how fast headcount ramps, so a rough estimate early is still more useful than skipping the calculation entirely.

Limitations

The simulation window is fixed to the periods you enter; receipts due to collect after the window ends aren't reflected. Extend the period list if the contract's collection tail runs past your entered range.

Next decision

• Feed this cash requirement into the full go/no-go decision
• Compare against your steady-state working capital baseline

Learn more

How Much Cash Does a New Staffing Contract Require? — the full decision workflow, from trough to go/no-go.