After summer I often see the same picture among professional-service firms. The schedule is filling and new enquiries are arriving, yet financial headroom is lagging behind. Not every hour has been confirmed, agreed or invoiced. A full schedule creates confidence while the revenue and cash flow it will actually deliver remain uncertain.
A full schedule is no guarantee
A small advisory firm with four employees expected approximately €30,000 in September revenue. The owner saw enough work and considered hiring an additional freelancer.
Together we reviewed which assignments had been formally confirmed, how many hours were genuinely available and when customers were likely to pay.
Work worth €4,000 still lacked an order confirmation. The schedule also contained around €3,000 of possible additional work. Holidays, internal meetings and commercial appointments meant that fewer billable hours were available than expected.
Of the planned €30,000, approximately €23,000 was sufficiently certain. Only €18,000 was likely to be invoiced and received during the same month.
I encounter this at advisory firms, creative agencies and other professional-service SMEs. They mainly sell time, knowledge and capacity. Revenue only becomes real when work is properly agreed, delivered and invoiced.
Look beyond the bank balance
The first step towards greater financial control is determining which cash is genuinely available.
A business bank balance often includes money already needed for VAT, tax and salaries. Freelancers, software and insurance still need to be paid too. A balance of €25,000 may therefore contain considerably less freely available cash.
Do not look only at today’s balance. First deduct all known commitments for the next eight weeks. The remainder is the buffer for delays, setbacks and new decisions.
Then identify work that has already been completed but not invoiced. In service firms, revenue easily remains hidden in time records, project milestones and verbally agreed additional work.
Unbilled work produces no cash flow. The payment term only starts after the invoice is sent. If invoicing is delayed by twelve days, a thirty-day payment term can become a 42-day wait for cash. The business finances that period while salaries and fixed costs continue.
Calculate what an assignment actually contributes
Timing was not the advisory firm’s only issue. Several assignments required more hours than originally estimated. Extra meetings, preparation and revisions were not fully reflected in the price, reducing the effective hourly rate.
A full schedule can therefore conceal a low margin. That remains invisible when management looks only at revenue.
For each assignment, compare invoiced revenue with the time actually spent. Include employee and freelancer costs. This reveals profitability by project and shows which customers contribute sufficiently and where unpaid work is created.
The analysis did not immediately lead to a general price increase. First, agreements about revisions and additional work were tightened. Deposits were also used more frequently for new assignments. Cash flow improved without selling more hours.
Base new costs on confirmed revenue
After the holidays, many commercial opportunities seem close. Conversations are under way and several proposals are almost approved. But an opportunity is not yet an assignment. A customer may postpone, reduce the scope or decide not to sign.
Separate confirmed revenue from expected revenue. Use only formally committed assignments as the basis of the financial plan. Likely projects can be included in a second scenario, keeping the forecast realistic without ignoring commercial opportunities.
This distinction matters when adding capacity. A freelancer may suit a temporary peak, while a permanent employee requires sufficient structural revenue and margin.
The advisory firm therefore did not reserve the freelancer for every available day. Two outstanding proposals were confirmed first, preventing costs from getting ahead of uncertain revenue.
Four figures for the next eight weeks
Financial advice in situations like this is not only about numbers. It is about the decision made from those numbers.
Place four amounts next to one another:
- available cash after known commitments;
- completed work that still needs to be invoiced;
- the expected margin on confirmed assignments;
- confirmed revenue for the next eight weeks.
Then answer one question:
If the answer is uncertain, you know where to intervene first.
Want to know where your business is losing financial control? Complete the free growth and value scan for an initial view of cash flow, profitability, organisation and business value.
Founder of Impact Growth Partner. She helps professional-service SMEs translate financial information into better decisions about cash flow, profitability, organisation and business value.
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