You pay for materials the day you pick them up. Payroll hits every Friday or every other week. Subcontractors want payment within 30 days. But your customer doesn’t pay until the job is complete, and even then you’re waiting another 30 days if they’re on net terms. That timing gap is the core problem.

The gap compounds when you’re running multiple jobs. You’re buying materials for the Thompson project while waiting on payment from the Rodriguez job you finished last month. Cash goes out this week to fund work you won’t bill for three weeks and won’t collect on for another month after that. Stay busy enough and you’re constantly short despite being profitable on paper.

Retainage makes it worse. Customers hold back 10% until final completion and punch list items are done. On a $50,000 job, that’s $5,000 you earned but won’t see for weeks or months after you thought the project was finished. Multiply that across six active jobs and you have $30,000 sitting in limbo that should be in your account.

Change orders create surprise expenses that don’t get billed immediately. The customer asks for an upgrade mid-project. You do the work, incur the costs, but forget to bill the change order until invoicing at completion. Or you bill it but the customer disputes it and payment gets delayed while you negotiate.

Slow-paying customers drain cash flow even when they eventually pay. A customer who takes 60 days instead of 30 means you’re floating their project costs for an extra month. Do that with multiple customers and you’re essentially providing them free financing while struggling to make your own payroll.

Front-loading jobs helps if customers will pay deposits. Collect 30-50% upfront and you’re funding the job with their money instead of yours. But residential customers often resist large deposits and commercial clients want to pay on completion or in progress billing stages tied to milestones.

Progress billing based on percentage complete helps match cash inflow to work performed. Bill monthly based on work completed instead of waiting until the entire job is done. This requires good job cost tracking to know what percentage is actually complete, but it smooths cash flow significantly.

Line of credit covers gaps but costs money in interest. You’re borrowing to fund the timing difference between when you pay expenses and when customers pay you. Works as a temporary bridge but shouldn’t be the permanent solution. If you’re constantly maxed on your line of credit, the real problem is pricing, billing practices, or collection speed.

Better receivables management means following up on invoices before they age past 45 days. Send reminders at 15 days, call at 30 days, escalate at 45 days. The faster you collect, the less cash you need to float operations.

Job deposits, progress billing, and faster collections reduce the cash gap more than any line of credit. But these require systems and discipline most contractors don’t implement until cash gets so tight they’re forced to change how they operate.

The accounting also needs to separate cash flow from profitability. You can be profitable and still run out of cash if the timing is wrong. Cash flow forecasting shows when money will be tight based on upcoming material purchases, payroll dates, and expected customer payments. Without forecasting, cash crunches surprise you instead of being planned for.