How to price in your cash flow cost

Step 1 — work out what waiting costs you

Every day between spending and being paid has a cost — the interest on the finance covering the cash flow gap, or the opportunity cost of cash you cannot use. Estimate it: if you finance a 45-day gap on a job at a given rate, that is a real percentage of the job's value gone before you count profit. Most businesses have never calculated this, which is exactly why it erodes them.

Step 2 — build it into your margin

Add the cost of financing the gap to your pricing as a line of thinking, if not a line on the invoice. If a job ties up cash for two months and that carries a cost, your price must recover it or your real margin is thinner than it looks. This is not about overcharging; it is about not silently subsidising your customers' slow payment. See cash flow vs turnover.

Step 3 — price different terms differently

A customer who wants 60-day terms is asking you to finance them for longer, and that should cost more than one who pays in 14. Offer a small discount for fast payment or a premium for extended terms. This makes the cash cost explicit and nudges customers toward terms that suit your cash flow, while still winning the business.

Step 4 — reconsider unprofitable-in-cash work

Some work looks profitable on margin but is a cash sink — long lead times, heavy up-front spend, slow-paying customers. Once you price in the cash cost, a few jobs or customers may prove not worth it. Being willing to decline or reprice cash-hungry work protects the business more than chasing turnover for its own sake.

Step 5 — fund what's worth funding

Where a cash-hungry job is genuinely profitable once priced properly, finance funds the gap so you can take it on comfortably.

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