You can be busy, profitable on paper and still short on cash every Friday. In construction that's normal, because the money comes in weeks or months after the work is done. Here's how the contractors we work with keep that gap from turning into debt they can't handle.
Why Contractors Get Squeezed
Payroll is weekly. Suppliers want to be paid in 30 days. Meanwhile the GC or owner pays your pay app in 30, 45 or 60 days, and holds back 5 to 10 percent as retainage until the job is closed out. On a $400,000 job, that retainage alone can be $20,000 to $40,000 of your money sitting in someone else's account for months.
None of that means your business is in trouble. But it does mean you need a plan for the gap, because the gap is where most expensive financing decisions get made.
Seven Things That Actually Help
- Bill early and bill often. Submit pay apps on the first day you're allowed to, every time. A week's delay on your end turns into a month's delay on theirs.
- Ask for a deposit or mobilization payment. Especially on residential and smaller commercial work. Even 10 percent up front covers materials and the first round of payroll.
- Track retainage like its own receivable. Keep a list of every job holding retainage, how much and when it's due. Follow up on close out paperwork the same way you'd follow up on an unpaid invoice.
- Line up supplier terms with your draws. If your draws come every 30 days, ask your main suppliers for net 45 or net 60. A lot of them will say yes for a steady account.
- Send preliminary notices on time. Your lien rights are your leverage when a payment is late. Missing a notice deadline can mean losing them.
- Keep a 13 week cash forecast. One spreadsheet, every week: what's coming in, from which job, and what's going out. It shows you the tight weeks before they show up.
- Be careful with advances as a bridge. An MCA pulls money daily from your account while your customers pay you monthly. That mismatch is the reason so many contractors end up calling us.
Already Have An Advance?
We help contractors get payments in line with their draw schedule.
If You Already Have An Advance
Plenty of contractors took an advance to cover materials on a big job, and it made sense at the time. The trouble usually starts when a draw gets delayed or a job runs long, and the daily payments keep coming anyway.
If that's where you are, start by checking your agreement for a reconciliation clause. It may let you ask the funder to adjust payments when your receivables are slower than expected. And if you've ended up with more than one advance, read our piece on why stacking makes things worse before you take another.
The Bottom Line
Slow pay is part of the trade. The contractors who handle it best treat cash flow like part of the job, not something to deal with when the account runs low. Bill fast, know your numbers, protect your lien rights, and be very careful about bridging the gap with daily payment debt.
