A cash flow gap can arise from several decisions at once: a customer pays late, materials are needed sooner than planned, a crew member asks for an advance, and a supplier offers a discount for immediate payment. When essential payments fall due, there may not be enough available cash.
A cash flow gap does not necessarily mean the project is making a loss. A project can be profitable on paper while the customer's money arrives after payments to suppliers and the team. That is why you need to check profit, actual cash and the dates of future payments separately.
Below is a diagnostic checklist, a 14-day payment calendar, steps to take when cash is short, and practices that can reduce the risk of another gap.
Contents:
What counts as a cash flow gap?
A cash flow gap is a shortage of available cash when an essential payment is due, whether for the team's work, materials, rent, taxes or subcontractors. It can happen even on a profitable project if receipts are due after payments. Profit, accounts receivable and the bank balance describe different aspects of the business's financial position.
In project-based businesses—construction, renovation, manufacturing, event production or agency work—receipts and expenses from different jobs can overlap. One site needs materials today, payment on another is late, and a third project will not have its completed work formally accepted until next month. Review the company's total cash balance alongside the obligations of each project.
One reason gaps recur is the lack of a cash flow forecast. An unplanned purchase can use money needed for essential payments coming due soon.
Diagnosis: where does the shortfall come from?
Before looking for a loan, gather the cash balances in bank accounts and on hand, dated payment obligations, expected receipts and how reliable each receipt is. Mark separately any amounts already committed to existing obligations. Do not treat a promised payment as cash you already have.
Next, review the records for each project. A positive balance on one project and a negative balance on another do not tell you how much uncommitted cash the company has. In 101, a project's balance is recorded receipts minus recorded expenses; it is not cash held by a team member, profit or the bank balance. If money actually moved between projects or the Company Fund, reconcile the transfers themselves, who was responsible and any restrictions on using the funds.
The mixed banknotes are a metaphor; the illustration does not show project balances or actual transfers of money.
Check obligations missing from the calendar: supplier invoices awaiting approval, agreed advances to workers, taxes, refunds and potential warranty costs. List accounts receivable separately, with the amount, basis for payment, expected payment date and person responsible for contacting the customer. Do not treat a disputed payment as a guaranteed receipt in your baseline forecast.
| What to check | What to look for | What to do |
|---|---|---|
| Receipts by date | Payment is expected after essential outflows, or its date has not been confirmed | Confirm the basis for payment, likely date and person responsible; test a delayed-payment scenario |
| Essential payments | Wages, taxes, rent and contractual payments are missing from the calendar | List amounts and due dates for the next 14 days; identify payments with legally fixed deadlines |
| Projects individually | A positive recorded project balance is mistaken for uncommitted company cash | Reconcile project entries against actual cash, obligations and transfers |
| Funds held by team members and small purchases | Money has been advanced, but supporting documents or entries are still missing | Reconcile amounts issued, receipts, expense reports and cash actually held by those responsible |
A plan for closing the cash flow gap
When cash is short, decide what to do first based on payment due dates and the consequences of missing them. Paying whoever asks most loudly can leave a more urgent obligation uncovered.
Build a payment calendar for the next 14 days. For each date, record the actual cash available at the start of the day, expected receipts, essential payments and projected closing balance. The projected balance equals the opening balance plus expected receipts minus payments. Prepare a separate scenario in case uncertain receipts are delayed, and update the calendar as actual figures come in.
Once you have checked the calendar, take these steps in order:
- Review non-essential spending: purchases for stock, new expenses and services you can defer without compromising obligations you have already taken on.
- Separate payments with deadlines fixed by law from those whose due dates can be changed. In Russia, wages cannot be postponed unilaterally, and changing a tax-payment deadline requires the procedure and decision provided for by the Federal Tax Service (FNS). In other jurisdictions, check the applicable rules. Discuss postponement or instalments with suppliers and other counterparties only within the contract's terms and document any agreement.
- Clarify outstanding customer payments: send invoices, agree on work-acceptance documents, remind customers to pay and ask for a realistic date. Test unconfirmed promises in a separate scenario.
- Reconcile funds advanced to team members, purchase documents and cash actually held. An expense or transfer entry must reflect a real movement of money; do not create a transfer merely to make the figures match.
- If agreed measures still do not close the shortfall, assess an overdraft, credit facility or loan: its total cost, including interest and fees, the repayment date, and whether you can repay even if the expected customer payment is delayed.
How should you arrange customer payments to avoid cash flow gaps?
A gap can arise when the company pays for work and materials before receiving money for the corresponding project. Identify the expenses due before the customer's next payment and how much of that interval the company must finance itself.
Advances and stage payments can reduce the risk if their amounts and dates match the work and expense schedule, are documented in the contract, and the customer actually pays on time. An agreed advance is not cash received: check that the money has arrived before spending it.
Show the customer how receipts and expenses are recorded, what reports they will see, and how completed stages are accepted. The discussion and transition to stage-based advances are covered in the article on advance payments and customer relationships (in Russian).
Discuss notice requirements and any possible suspension of work for non-payment in advance, and set out the terms in the contract; apply them subject to mandatory legal requirements. A zero or negative project balance in 101 does not, by itself, entitle you to stop work automatically: it reflects recorded receipts and expenses, not the terms of your contract.
How to reduce the risk of future gaps
The first foundation is regular reconciliation of actual cash flows and a separate forecast. A cash flow statement shows the money received and paid over a period. To assess a future shortfall, combine the actual cash balance with a calendar of expected receipts and essential payments. For more on the statement itself, see the guide to cash flow statements.
The second foundation is working capital and payment terms. Compare accounts receivable, inventory, short-term liabilities and available cash. Even positive working capital does not mean all of it is in the bank and can be spent today. As your project portfolio grows, check whether you will have enough liquidity until customers pay.
The third foundation is a reserve. Set its size based on regular payments, potential customer delays and available financing sources. A reserve makes unexpected timing changes easier to absorb, but it does not replace the calendar or expense controls. Read about approaches in the article on building a reserve fund (in Russian).
Control tools: the 101 App
With several projects, you need to distinguish each project's recorded receipts and expenses from the company's cash and funds held by team members. In 101, you can check project entries and balances; access to the Company Fund and other sections depends on the subscription plan and user permissions. Reconcile the app's records with bank and cash records.
In 101, the recorded project balance is calculated from entered receipts and expenses. It can help identify overspending already recorded, but it is not profit, money held by a team member, a bank balance or a forecast of the company's future cash. To anticipate a gap, complement the records with a payment calendar of expected receipts and obligations. Check the project balance, profit, Company Fund and funds held by team members separately. For the definition, see the 101 guide to project balances (in Russian).
For more on setting up reconciliation, see the 101 Blog articles on tracking funds advanced to team members (in Russian) and on cash flow, profit and loss, and the balance sheet (in Russian). They help you choose the right measure for each management question.
A workable system is straightforward: payments are entered in a calendar, project entries are reconciled, advances are tied to work stages, and the reserve size follows a clear rule. This reduces the risk of an unexpected shortfall, but it requires regular checks of actual cash and forecast dates.
