Ask a contractor about cash and you will often hear the same story. The backlog is strong, the jobs are profitable, and the bank account is still tight. Construction pays slowly and spends quickly, and the gap between the two is where cash problems live.
Why the gap exists
- Payroll is weekly. Crews are paid every week regardless of when owners pay.
- Materials are paid up front or on short terms, before they are billed.
- Owners pay on draw schedules, often monthly, after review of a pay application.
- Retainage is held back, commonly 5 to 10 percent, until the end of the job.
- Change orders may be performed before they are approved and billed.
Put together, a contractor finances a large part of every job until it is paid. Growth makes the gap bigger, which is why fast-growing contractors often feel the most pressure.
Build a weekly forecast
A thirteen-week cash forecast is the core tool. Build it from:
- Today’s bank balance.
- Open receivables, by owner, with expected payment dates based on each owner’s real habits.
- Upcoming pay applications and when they will realistically be paid.
- Retainage receivable, with its own expected release dates.
- Payroll on actual pay dates.
- Materials, subcontractor, and equipment payments.
- Overhead, loan payments, insurance, and taxes.
Our step-by-step guide covers the mechanics.
Plan around the pay application calendar
Pay applications drive receipts. Missing a submission deadline can push payment a full month. Track the deadline and supporting requirements for each job, such as lien waivers, certified payroll, and updated schedules, and build them into the office calendar.
Watch change orders
Unapproved change orders are a cash risk and a margin risk. Get approval in writing before the work, and include approved changes in the next pay application promptly. Keep a list of pending change orders and their value so the forecast can show them separately.
Use scenarios for the risky moves
Before taking on a large new job, hiring a crew, or buying equipment, test it in a scenario. What happens to cash if the new job’s first draw is paid 30 days late? If two jobs start in the same month? If retainage on a finished job is released three months later than planned?
Keep the WIP schedule and the cash forecast separate
The work-in-progress schedule from your accounting system tells you whether jobs are profitable and correctly billed. The cash forecast tells you when money moves. You need both. Over-billing can make cash look healthier than profitability, and under-billing can do the reverse.
PursuitBid builds the thirteen-week outlook from your accounting exports, keeps collection timing assumptions explicit, and lets you test hires and job timing in scenarios without disturbing the adopted budget.
Written by the Syntonyl team. This article is general information, not legal, tax, or financial advice.