In a Fixed Price Contract, when is cash flow considered to occur?

In a Fixed Price Contract, cash flow is considered to occur upon delivery of the product or service specified in the contract. This means that payment is typically made to the contractor after they have delivered the goods or performed the services as per the contractual agreement.

The rationale behind this is that the buyer generally pays for the final product or service only after confirming that it meets the agreed-upon specifications and quality standards. This structure encourages the contractor to fulfill their obligations effectively, as payment is tied directly to the delivery of the promised items. By linking payment to delivery, it also helps the buyer mitigate risks associated with upfront payments without receiving something in return, ensuring that funds are allocated only once the contractor has met their end of the bargain.

In contrast, other options would imply different cash flow conditions that do not align with the standard practice in fixed-price arrangements, where the emphasis is on obtaining the deliverable before payment is made.