Do these 3 things before closing this tab:
1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsManage construction cash flow by forecasting when each job’s costs are due against realistic payment dates, reducing avoidable billing delays, and arranging enough working capital to cover the gap. Progress payments and retainage can leave contractors paying labor, suppliers, equipment, and subcontractors well before customer cash arrives. Profitable work does not necessarily mean cash is available when bills come due.
Why long payment cycles create cash-flow pressure
Construction costs and customer receipts rarely arrive at the same time. A contractor may pay for labor and materials before submitting a progress billing; then the owner’s review, approval, or a billing dispute can push the payment date further out. Until the money arrives, the company is financing that work with its own cash or borrowing.
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Retainage creates a separate delay: a portion of payment may be held until a project milestone or completion. A subcontractor can finish its own scope well before the overall project reaches the release milestone. The contract, not a general rule of thumb, determines the actual terms.
Build a forecast for each job and the whole company
Before mobilizing, map the expected timing of cash in and cash out for the project. Include more than the owner’s stated payment schedule: track submission cutoffs, review and approval time, documentation requirements, and the costs that fall due while an application is pending. Then combine active-job forecasts so several projects do not quietly draw on the same cash or credit facility.
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What to include in the job forecast
- Deposits or mobilization payments, progress-billing dates, approval steps, and realistic collection dates.
- Payroll, materials, equipment, taxes, subcontractor payments, and other costs by due date.
- Retainage amounts and release conditions, plus expected timing for approved change orders and disputed or unapproved work.
- Available cash and credit, including any existing borrowing used to support other jobs.
Update the forecast when work pace, costs, approvals, or collection expectations change. Test a slower-approval or late-payment scenario as well as the base case. Make liquidity part of bid/no-bid and project-start decisions: a fixed-price job may require you to front costs before progress payments, so assess whether working capital and available financing can carry the exposure. CFMA describes working-capital needs as affected by progress payments, work pace, credit use across jobs, and payable aging: Thomas C. Schleifer, “The Second and Final Ingredient”.
Clarify payment mechanics before signing
Get the billing and payment process clear in the contract and project documents. A payment date is only useful to a cash forecast if you understand what must happen before the payment is approved and what can delay it.
- How often can you submit applications for payment, and what are the cutoff dates?
- What schedule of values, quantities, percent-complete calculations, payroll records, lien waivers, insurance documents, or other backup is required?
- Who reviews and approves the application, and how quickly are corrections or rejections handled?
- Can stored materials be billed? How are change orders and disputed work treated?
- What retainage applies, what event releases it, and how is it held? What deductions or claims may be applied to it?
CFMA recommends asking whether retainage is held in escrow and how workmanship deficiencies or lien claims may affect release: Ben Conry, “How a Construction Retention Payment Affects Ongoing Projects”. Payment, prompt-payment, lien, and retainage rules vary by jurisdiction and project type. Have a qualified construction attorney or adviser review terms when those legal requirements matter; this general guidance is not state-specific legal advice.
Make billing complete, accurate, and timely
Preventable billing friction can lengthen the cash gap. Set a recurring billing calendar for each contract, standardize pay applications and supporting documents, check quantities and percent-complete calculations, and route approvals early enough to meet the cutoff. Track submitted, approved, disputed, and paid amounts separately so a rejected application or unapproved change order is visible rather than hidden in a total receivables figure.
- Prepare early: gather required documentation and confirm the billed work matches the contract and schedule of values.
- Submit on time: use the correct forms and follow the project’s submission route and cutoff.
- Follow up: confirm receipt and approval status, and ask promptly what is needed to resolve a rejection or dispute.
- Escalate aging items: use a consistent collection process and update the forecast when expected receipt dates slip.
CFMA identifies late payments, unapproved change orders, and missing paperwork as recurring process problems, and recommends standard documents, reminders, and updated billing reports: CFMA retainage guidance.
Use receivables measures as signals, not universal targets
Review receivables aging and days sales outstanding (DSO), the average time taken to collect receivables. Watch the trend and investigate project-specific causes rather than treating one DSO threshold as right for every contractor. CFMA recommends monitoring DSO while improving invoice submission and follow-up: Aaron Mills, “How Contractors Can Use Financial Resource Optimization to Double Cash Flow”.
Forecast retainage separately
Do not treat retained money as available cash before its release is reasonably expected. Record the amount, release condition, estimated date, and any closeout work still needed. For a subcontractor, the interval between finishing its scope and the general contractor’s overall completion milestone can be especially important.
CFMA’s general article describes retainage as commonly 5% or 10%; that is an attributed general description, not a universal current rate or jurisdiction-specific rule. Actual contract terms and applicable law control. The same article discusses the delay between project completion and receipt: CFMA retainage guidance.
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Coordinate purchasing and payment terms
Procurement choices affect how much cash is tied up before customer payment. Plan orders to avoid buying materials too early or holding excess inventory. Where commercially workable, negotiate supplier and subcontractor terms in advance so outgoing payments better align with incoming receipts. CFMA notes that payable aging may be a source of working capital and recommends negotiating terms and ordering what is needed when needed: CFMA cash-flow guidance.
Any extension should be agreed, realistic, and included in the forecast. Simply paying late without agreement can damage supplier relationships and future access to terms.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Arrange a funding bridge before a shortfall
Compare the forecast peak deficit and how long it lasts with available cash, retained earnings, unused credit, and other company resources. A working-capital line or other borrowing may bridge the timing mismatch, but its availability, limit, collateral, qualifications, and cost depend on the company and lender. A facility may also be insufficient when several jobs draw on it at once; CFMA cautions that credit use across projects affects working-capital needs: CFMA cash-flow guidance.
When discussing financing with a lender or adviser, compare:
Best Value
- Timing: how soon funds can be accessed and how long they remain available.
- Total cost: interest, fees, discounts surrendered, and other costs over the expected borrowing period.
- Size and availability: whether the facility can cover the forecast peak deficit across concurrent jobs.
- Repayment mechanics: whether repayment is tied to customer receipts, a fixed schedule, or another trigger.
- Security and obligations: collateral, guarantees, covenants, assignment restrictions, and possible effects on surety or bonding relationships.
- Operational fit: documentation burden and fit with billing, accounting, and project controls.
These are comparison questions, not an endorsement of a particular product. The terms of any facility must be confirmed with its lender; there is no single financing choice or rate that fits every contractor.
Use historical figures with their dates attached
Industry figures can provide context but should not be mistaken for current benchmarks. CFMA reported average accounts-receivable days of 54 days in its 2018 Construction Financial Benchmarker, covering fiscal year 2017. In that same benchmark, Specialty Trade participants projected 15.1 days of cash on hand. These are historical figures, not current industry averages: Daniel Gaston, “Cash Flow Best Practices to Help Subcontractors”.
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