Statement of Work

What is Statement of Work?

A statement of work (SOW) is the contractual document that defines what will be delivered, when it will be delivered, and how it will be paid for. It specifies project scope, deliverables, milestones, timeline, acceptance criteria, and payment terms.

The SOW directly determines cash flow timing. Payment terms in the SOW define when invoices are triggered and when payment is due. A SOW with three milestone payments creates a different cash profile than one with monthly billing or a single payment on completion.

SOWs also define scope boundaries that prevent scope creep from consuming margin. When work falls outside the SOW, it should trigger a change order with adjusted pricing and payment terms. Work performed outside the SOW without adjusted payment terms erodes project profitability silently. SOW payment terms connect directly to milestone billing schedules. Strong SOWs define not just what you deliver, but when cash should arrive relative to the work required to deliver it.

Why it matters

The SOW is the financial blueprint for a project. Payment terms written into the SOW determine when cash arrives. Weak payment terms in the SOW create cash flow problems that no amount of operational efficiency can fix.

Example

How RunwayCal helps

Common mistakes

• 1Signing SOWs with payment terms that do not cover contractor cost timing
• 2Not linking SOW milestones to cash flow projections
• 3Performing out-of-scope work without a change order