Manufacturing backlogs and input prices are rising together. Before accepting the next large order, calculate how much cash the business must advance to deliver it.
The latest manufacturing data looks encouraging at first.
The Institute for Supply Management reported that manufacturing continued expanding in September. New orders grew, and order backlogs increased.
But another signal was buried in the report: its Prices Index jumped to 77.9, with all six of the largest manufacturing industries reporting higher prices. Raw material prices have now increased for 24 consecutive months.
These are diffusion indexes, not percentage increases. They do not tell us how much any individual manufacturer’s costs have changed. But what they do show is why a growing backlog can become a cash-flow problem: orders and costs are rising at the same time.
Manufacturers buy materials, pay employees, cover freight and complete products before customer payments arrive. A large order may promise a profit while creating an immediate cash shortage.
I learned this while growing a gluten-free bakery from a farmers market booth into a $2.2 million retail and wholesale food company with 15 employees. Products were selling, ovens were running and wholesale orders were leaving the kitchen. Yet payroll remained stressful.
I expected higher sales to create breathing room. Instead, each new order required more ingredients, packaging and labor before customers paid. My books recorded what happened, but I couldn’t see which upcoming order was consuming cash or what decision would relieve the pressure.
That experience changed how I evaluate growth. Profitability matters, but so does what I call Order Cash Exposure: Cash required before the customer pays, minus customer cash collected before those costs are due.
The result is the amount your business must finance to deliver the order while continuing to meet payroll and other obligations.
Try this ten-minute test:
- Choose the largest order beginning in the next 30 days.
- Write down when the customer’s first meaningful payment will reach your bank account.
- Add the costs due before then: materials, direct labor and payroll burden, freight, outside processing and order-specific packaging.
- Subtract any deposit or milestone payment collected before those bills are due.
- Circle the remaining balance. That is your approximate Order Cash Exposure.
If the number is uncomfortable, you still have options before production begins. Request a deposit that covers materials. Add milestone billing. Negotiate longer supplier terms. Bill shipments separately. Adjust the price using current replacement costs.
This is what financial visibility should provide: not simply a clean record of what happened, but enough foresight to make a better decision before cash becomes a crisis.
For your next large order, ask: Can we afford to produce it on these terms?
If you’re not sure, reach out. We can look at payment timing, production costs and options together. Landing a big project should be exciting. It shouldn’t leave you scrambling to cover payroll while you wait to get paid.
Amanda Bedell is the founder of Bedell-Comstock Bookkeeping & Tax Services. After building and selling a $2.2 million food manufacturing company, she now helps business owners understand their numbers and make better decisions about cash, pricing and growth. She lives in Bend with her husband and son.
