Signed contracts, tenders and forecasts: What counts as working capital evidence?
Updated: 1 day ago
Strong working capital evidence explains how a business moves from a supported customer commitment to a collected receipt after paying the costs of delivery.
A large pipeline can be encouraging without providing money for next week’s wages.
Even a signed contract needs to be understood: what has been committed, what still has to happen and when the customer becomes obliged to pay.
For Australian owners, this guide develops the evidence question within the working capital application guide. It separates certainty, timing and cash value rather than treating every forecast sale as equally reliable.
The short answer
Distinguish signed work, conditional orders, tenders and internal sales forecasts.
Read cancellation, volume, acceptance and payment provisions before forecasting receipts.
Show the delivery costs and approvals required before collection.
Explain the repayment source using current documents and realistic dates.
Why does working capital evidence need more than a contract value?
A headline contract amount may span several stages or years.
It may include optional work, variable quantities or amounts payable only after a particular outcome. The part expected to become near-term cash can be much smaller.
Begin with the executed document and identify the relevant customer and supplier entities. Confirm that the document is current, complete and accepted by the parties. An unsigned draft or an email discussing possible scope does not have the same evidential role.
The ACCC’s contracts guidance provides general background on understanding commitments. Ask a lawyer to review material provisions rather than assuming a contract’s title establishes certainty or enforceability.
The financial question remains separate: can the business fund delivery and meet the proposed repayments? A well-documented sale can still require a substantial opening cash commitment.
Sort the pipeline by what is actually committed
Use categories that reflect the evidence. Signed, unconditional work can be shown separately from work subject to customer approval or another event. Accepted orders should identify quantities, price and delivery expectations.
Tenders and proposals belong in a prospective category until awarded and appropriately documented. Their likely value can inform planning, but it should not quietly become confirmed income in an application or base forecast.
For repeat customers without fixed volumes, explain order history and the basis of the forecast. A longstanding relationship can support context without guaranteeing the next purchase.
The government’s business loan application guide is a reference for preparing financial and business information. The useful submission explains the status of each material opportunity and the assumptions attached to it.
Identify conditions that can change the cash amount
Read minimum quantities, optional extensions, price adjustments and termination provisions. Ask whether the customer can reduce scope or defer orders and what notice or compensation applies. Obtain professional advice where the commercial effect is unclear.
Distinguish a maximum possible contract value from a minimum purchase commitment. An approved supplier arrangement can create access to work without committing the customer to buy a stated amount.
Also identify performance conditions. Payment may depend on delivery, testing, acceptance or another documented milestone. Amounts withheld for later events require their own collection assumptions.
The working capital needs guide helps connect these provisions to the funding requirement. Use the amount and timing supported by the agreement rather than dividing a large headline number evenly across the forecast.
Follow the path from work to payment
Map the operational steps: ordering inputs, delivering the work, obtaining approval, issuing the correct invoice and receiving cleared funds. Record who controls each approval and what evidence is needed.
A missing purchase order or unapproved timesheet can create a delay even when the customer intends to pay. Ask the customer’s accounts team about its process, while retaining the contract’s payment requirements as the reference point.
The government’s payment terms guidance supports clear expectations. Collection history can help test whether contractual due dates are realistic forecast dates, especially where payment runs or disputes have previously affected timing.
The profit versus cash flow guide explains why a completed sale and usable cash differ. For funding purposes, the timing of the receipt matters alongside the expected margin.
A worked example: An opportunity is not the same as a repayment source
Consider an original hypothetical pipeline of $600,000. Assume it consists of a $180,000 signed project, a $220,000 tender awaiting an award and $200,000 of management’s expected repeat orders.
The business should not present all $600,000 as equally committed. The signed project needs a review of its conditions, payment milestones and costs. The tender depends on an award, while the repeat orders depend on future customer decisions.
Suppose the first project has a $60,000 opening delivery cost and the first receipt follows an approval milestone. That specific gap can be modelled. It cannot be assumed to close from the tender proceeds unless that separate work is actually awarded, delivered and collected in time.
These assumptions illustrate evidence quality and timing, not an approval rule. An assessor may take a different view of particular information. The business should still present each category honestly and show which receipts support the proposed repayments.
Explain the cost of producing the receipt
Provide a job budget and procurement schedule alongside the customer commitment. Include labour, materials, subcontractors and other cash needed before each payment. Check whether the proposed work displaces existing work or requires additional capacity.
A positive overall margin does not eliminate mobilisation costs. Nor does it establish that the business can survive a delay in the first approval or final payment.
Use the 13-week cash flow forecast guide, extending the period through the relevant contract and financing schedule. The government’s cash flow statement guidance is a further reference for explaining estimates and cash movements.
Show the forecast before and after the proposed finance. Include net proceeds, fees and payments, and avoid allocating the same opening cash to several projects at once.
Keep the evidence current
A contract can change after the original submission. New variations, delayed starts, revised quantities or a customer dispute can affect the amount and timing of the repayment source. Update the documents and forecast together.
Explain the difference between the latest position and earlier material. A clear version date helps your accountant, finance broker and assessor avoid working from conflicting assumptions.
If invoice or contract rights are relevant to a proposed funding structure, obtain advice on assignment, security and any consent requirements. The finance structure comparison explains why pre-delivery needs and receivables-based funding may address different stages.
Do not assume that supplying a contract makes every stage fundable. Eligibility, repayment capacity and legal conditions still require assessment under the particular arrangement.
A useful evidence pack
Current executed agreements or accepted orders with relevant schedules.
A pipeline separating committed and prospective work.
The cost and delivery timetable for material jobs.
Payment milestones, invoice requirements and collection history where available.
A reconciled forecast explaining the expected repayment source and downside case.
Keep client information within the agreed assessment process and provide what is relevant to the request. Your finance broker can help clarify the required documents and secure submission method.
Frequently asked questions
Is an awarded tender the same as cash available?
No. The business may still need to execute documents, deliver work, satisfy milestones and collect payment. Show those stages and their costs.
Can repeat customer sales be forecast?
Yes, where assumptions are clearly explained and supported. Separate forecasts from actual commitments and test the effect of lower orders or later payment.
Does a signed contract guarantee finance?
No. Assessment can include delivery risk, current trading, existing debt, security and facility requirements. The contract is one part of the evidence.
Should every invoice use its due date in the forecast?
Use realistic collection assumptions informed by the agreement, approval process and history. Explain material differences between due dates and expected receipts.
Make certainty and timing visible
Present the pipeline in honest stages and connect supported work to the costs and approvals needed before collection. That gives your advisers a stronger basis for discussing the actual funding gap and its repayment source.
Planning Your Business Cash Flow?
Fairlane Finance can help you assess possible funding structures against your business’s cash-flow timing.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
