Money goes out before it comes in
Crews are paid every week or two. Materials and subs are often due on 30-day terms or sooner. Customers may pay at completion, in stages, or 30 to 60 days after invoicing. That gap has to be funded from somewhere, usually your bank balance.
Deposits can hide a problem
A large deposit can make the bank account look healthy, but the work it pays for is still ahead. Spending deposits on older obligations can leave a project short when its costs arrive.
Retainage and slow final payments
When a portion of each billing is held back until completion, part of your profit sits with the customer for the life of the job.
Seasons and growth
Slow seasons stretch the same fixed costs over less revenue. Growth can strain cash too: more jobs mean more payroll and materials paid before more revenue is collected.
What helps
- A monthly look at expected receipts and upcoming payroll, bills and purchases
- Clear billing terms, and invoicing promptly at each milestone
- Reviewing outstanding customer balances every month
- Testing big purchases and hires against a forecast first
A monthly cash outlook is part of Profit & Cash Flow, and a rolling forecast is part of Strategic CFO Partnership.
This guide is general information, not tax, legal or accounting advice for your specific situation.