Contractor Cash Flow Management

A job can be profitable on paper and still create a cash crisis if you're paying for materials and labor for weeks before the client's payment arrives. Construction is uniquely exposed to this because material costs are paid upfront, labor is paid weekly, and clients often pay on a schedule — deposit, progress payments, final — that lags behind your actual spending.

Requiring a meaningful deposit before work starts (commonly 10-30% depending on job size and local norms), billing progress payments tied to milestones rather than waiting until the whole job is done, and invoicing the same day work is completed instead of 'getting to it later' all shrink the gap between spending cash and collecting it.

A simple 13-week cash flow forecast — even a basic spreadsheet projecting money in and out week by week — catches a squeeze two or three weeks before it happens, which is exactly when you still have options like adjusting a payment schedule or delaying a discretionary purchase.

A cash reserve covering one to two months of overhead is the difference between a slow-paying client being an inconvenience versus a crisis. Building that buffer during good months, rather than trying to create it during a lean one, is the part most owners skip until they've been burned once.