Cash Flow Basics for Contractors

Many contractors are profitable on paper and broke in the bank. The gap is timing: you pay for labor and materials today, and you get paid weeks or months later. Managing that gap is the single most important financial skill for a small construction business.

1. Forecast 13 Weeks Ahead

List the cash you expect to come in and go out each week for the next three months. A simple spreadsheet is enough. Update it every Friday, and you'll see shortfalls coming before they hurt.

2. Ask for Deposits and Progress Payments

Tie payments to milestones (deposit, rough-in, completion) instead of one final invoice. Put the schedule in writing before work starts.

3. Invoice the Same Day

Every day you wait to invoice is a day added to when you get paid. Bill change orders as they happen, not at the end.

4. Know Your True Job Cost

Track labor hours, materials, equipment, permits and overhead on each job. You can't fix underpricing you can't see.

5. Build a Cash Cushion

Set aside a small percentage of every payment until you have one to two months of fixed expenses saved. It's the difference between a slow month and a crisis.