You can be booked solid and profitable on every job and still run out of cash. In construction, the timing between paying for labor and materials and getting paid by the customer is brutal—and it is why cash flow, not profit, is what actually keeps the doors open.
Why do profitable contractors run out of cash?
Because expenses come before income. You pay crews weekly and buy materials up front, but customer payments—and retainage—can lag 30, 60, or 90 days behind. Add a big new project and you can grow yourself straight into a cash crunch.
How do you forecast cash flow?
A rolling 13-week cash flow forecast is the contractor’s best friend. It maps expected cash in (draws, final payments, retainage release) against cash out (payroll, materials, subs, overhead) week by week, so you see a shortfall before it happens instead of after.
How can contractors improve cash flow?
- Bill progress draws promptly and accurately
- Negotiate deposits and faster payment terms
- Track and follow up on retainage
- Time large material purchases against incoming payments
- Keep a cash reserve for payroll
We build cash flow forecasts and manage the timing so growth does not sink you. Learn more about our cash flow & CFO services.