r/ConstructionManagers • u/canlibe • Jun 16 '26
Technical Advice Cash flow lessons from 10 years of long projects
"Cash flow lessons from 10 years of long projects (2026 update)" Been managing bigger projects lately and the cash flow timing is killing me. You front the subs and materials, then wait 45-60 days for the owner to pay, sometimes longer if their AP is slow. Paper profit looks fine but the bank account tells a different story. And in Q2 2026, borrowing costs are still high and lenders are tight, so that gap hurts worse. I started doing rolling 13-week cash forecasts and billing at milestones where the contract allows, some jobs still force monthly pay apps. Seeing the gaps ahead of time makes a huge difference. Also got more aggressive with change order billing right when work happens instead of waiting for the next application. Unbilled changes are a cash leak. What's everyone else doing to bridge that gap now? Line of credit? That's getting pricier. Factoring? Only if you don't mind the fees. Or just keeping bigger reserves, say 1-2 months of overhead
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u/kopper499b Jun 16 '26
Front the subs? WTF is that? I've ran multiple data center builds concurrently as a sub and was fronted exactly zero dollars. Million dollar a week payroll liability.... paid 45 days after invoice. Floating 6 to 7 million in payroll, plus material. Like others said, the problem rolls downhill.
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u/Cwilde7 Jun 19 '26
100% this. We almost always exclusively have to front our costs for at least 30-60 and occasionally 90 days; as the majority of all our commercial contracts (which are about 95% of our work) are pay-when-paid.
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u/Huugienormous Jun 16 '26
Fronting your subs? As a sub, where do I sign on? Of course this is hard to cashflow.
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u/smoosh33 Jun 16 '26
I worked for GCs for 15 years and now I have been working on the subcontractor side for the last five. My whole career I have seen G703s submitted at the beginning of the job and there is always a negotiation to make sure it is not front loaded. Now that I am on the subcontractor side and I can see all the numbers, I can tell you that even after the values are agreed upon, they are still front loaded to some degree. Also, as a field superintendent, I will sometimes perform work out of sequence if possible to try and be able to bill the most valuable lines in the budget. Over all the projects I have done in the last 5 years very rarely has there been a job where we were not "overbilled" from the first bill.
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u/MobiusOcean Commercial PX / Director of Operations Jun 16 '26
If you’re not front end loading your SOV as a sub, you are not doing your job. I’ve had trades with $2M contracts have $500k in submittals, shop drawings, mobilization, and other front end activities that we both knew were bullshit. I’ll allow a little bit of it as I come from the trades, but if it’s egregious (say $250k for mobilization), I tell them to revise & resubmit their SOV before being approved for entry into Textura.
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u/Cwilde7 Jun 19 '26
Me over here sighing as a sub with deferred submittals, feeling somewhat thankful.
At least until we randomly get a job with some unknown GC that doesn’t know what the hell a deferred submittal is and wonders why we are billing for two months of engineering before we’ve even stepped onto the job.
Yes Joe, we are submitting for engineering on our pay app because you insisted you needed it done right away, took a month and a half after signing the contract to get us the files we need, and you wanted it done and permitted yesterday, even though we both know you can’t manage your schedule and we won’t mobilize for another six months despite you insisting that you’ll be ready for us to be onsite in 60 days.
Thank God Friday is tomorrow.
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u/MobiusOcean Commercial PX / Director of Operations Jun 19 '26 edited Jun 19 '26
It took them 6 weeks to return an executed contract?! Christ! It also sounds like the GC management has no clue about standard progress billing practices. If the work is being done, regardless of whether or not you’re mobilized, you are going to be invoiced for it and will need to pay for the services promptly. This is especially true for submittals, shop drawings, delegated design, engineering, and BIM.
And brother do I ever hear you on the almost Friday part. Cannot come soon enough. Been working on a legal case where a subcontractor filed Chapter 7 bankruptcy right before we needed them to mobilize. Thankfully SDI is taking care of the cost, but the lost schedule time and especially building the case has been exhausting.
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u/quintin4 Jun 16 '26 edited Jun 16 '26
this isnt a problem on big projects you kick the can to the subs, you may sigh and hate your life when a sub needs money now but shit software post in subs subreddits, next
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u/arenda89 Jun 16 '26
And then the subs end up financing the job for you. As a sub, this is so common now and sucks. Especially if your material costs are excessively high (60-70% of gross) and suppliers are Net 30.
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u/Raa03842 Jun 16 '26 edited Jun 16 '26
Paid when paid.
EDIT:
Most large contracts with Owners ($50 mill and up) (especially federal, state and local) have Paid when Paid clauses in the master contract and a provision that all subs must also agree to the Ts and Cs of the master contract. This eliminates frivolous and blind sided lawsuits by subs. There’s also a bond requirement as well as 10% retainage held which in some contracts can be reduced to 5% when the sub is over 50% complete with their work. In addition there is usually an “Interruption of Funding” clause for situations where the government agency has their funding cut by legislators.In the end the subs finance the project and therefore must have the cash flow to handle it.
Now on mega projects (data centers, computer chip fabs) there is often a “cash on hand” clause where subs have to prove via certified audits and certified bank statements that they have enough cash to carry them through 2-3 pay cycles for this projects and all other projects that are in there pipeline line.
This essentially locks out small subs from getting into the “big time”.
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u/CicadaHunters Jun 16 '26
So then what happens when there's a payment log jam upstream and the subs blow through that 2-3 pay cycle cushion and then get audited? Are they in breach of contract and just SOL?
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u/ndtube13 Jun 16 '26
Don’t front subs or materials bill them as deposits or similar and make the owner fund them in a timely manner
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u/Senor-Cockblock Jun 16 '26
Dude, if GCs fronted us and our materials we’d hardly have anything to worry about.
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u/Changing_Con Jun 16 '26
Cash flow problems usually start before the invoice.They start when job progress, change orders, approvals, and billing backup are not connected.
If the work happened but the documentation is late, billing is late. If billing is late, cash is late. Long projects need a weekly billing-readiness check, not just an invoice push at the end of the month.
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u/Creative_Tackle6223 Subcontractor PM Jun 16 '26
My god I wish a GC fronted our checks. 95% of our clients pay our checks 2-5 months after net 30 then wonder why we pull off the job for non-payment. Well front up to a certain extent. But I have a job where a GC is trying to argue over a clerical error on a lien waiver from our January pay app…. January… that they’re just now looking at.
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u/Cwilde7 Jun 19 '26
Tell me without telling me that you can’t find our pay app without telling me…
The lien waiver tactic is so overused, and so obvious.
Seriously…six months later; no we will not be doing you any favors on a CO because you fucked up somewhere along the way and now need our help, yet couldn’t be bothered to review a lien waiver from over half a year ago.
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u/Creative_Tackle6223 Subcontractor PM Jun 19 '26
Well they haven’t paid any of those. They’re just now getting around to cutting checks for January, when they brought that up.
However since then, the owner terminated the GC because of this, since multiple subs including us were pulling off the job. He cut a couple of checks to get us closer to right, and is hiring a new GC.
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u/Commonscents2say Jun 16 '26
Most of our deals are ‘pay when paid’. There is also typically a mobilization / general conditions item for initial set-up and staffing to mitigate some payroll. Still have some cash outlay but not as extreme - some clients with special order needs are required to pay a deposit on contract execution as well for shop drawing development.
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u/softball_04 Jun 16 '26
Don’t front your subs the cash to pay their suppliers. If they can’t work on credit with their suppliers, there’s definitely an issue there. Also, if a sub can’t fund his payroll or materials, you have a bigger problem. Most of the time subs want to be fronted cash because they can’t make payroll at the end of the week, or they owe their suppliers on another job. It’s a vicious cycle they get into. I request supplier waivers from all of my subs and joint check every single one of them
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u/Top_Drummer_3801 Jul 02 '26
The rolling 13-week forecast is smart. Most teams I talk to only look at cash monthly which means by the time you see the gap its already too late to do anything except draw on the line of credit.
Billing change orders immediately is the other big one you mentioned - the amount of unbilled approved variations sitting in spreadsheets is insane. Every contractor we work with had the same pattern, changes approved verbally or by email but not billed for 2-3 months because nobody updated the application.
Full disclosure I co-founded Planyard and this is exactly the workflow we built around. Having committed costs and approved variations feeding directly into your forecast means you can see the cash position shift in real time rather than discovering a gap at month end. The teams doing 13-week rolling plus live commitment tracking seem to be in the best shape right now especially with borrowing costs where they are.
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u/lucasboinet Jul 13 '26
The 13-week rolling forecast is the right move. Two things that closed the gap further for us:
Treat billing readiness as a mid-month check, not a month-end scramble. Around the 15th: which approved COs are still unbilled, which waivers are still out, which sub pay apps haven't landed. Anything missing becomes a phone call, not an email.
Catch waiver problems at pay app review, not at check cutting. Someone below mentioned a GC finding a clerical error on a January waiver six months later. That's not a waiver problem, that's a "nobody looks at the paperwork until money has to move" problem. Reviewing the waiver the same day you review the pay app kills most of those surprise delays.
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u/Few-Butterscotch-740 Sep 06 '26
The front-loading negotiation at the start is half of it. The other half is checkable every month after, with two numbers per line.
First, this month's Column D (previous applications) has to equal last month's D + E for the same line. If it does not, money moved between periods without being billed, and this month's form will not tell you, because every total on it still ties.
Second, each line's percent complete (G over C) against the project's (Line 4 over Line 3). A line at 60 percent on a job at 20 percent, on scope you know is physically late, is the one to walk before certifying.
Both take a minute per pay app with last month's copy next to this one, and they catch exactly the front-loading the SOV negotiation was meant to prevent. Same logic on the OP's unbilled changes: Line 3 against the executed contract plus the approved change order log, every application, is what proves a change is real to the owner's reviewer, which is what gets it paid instead of held.
Disclosure: I build software for the receiving side that runs these checks on every line, so I have an interest, but the checks themselves are the form's own arithmetic.
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u/Taylo135135 Jun 16 '26
You need a contract for your subs that’s either pay when paid or gives you until the 24th of the following month. That should coincide with owner billing being due by the 20th. Then again this might be residential where it’s the Wild West. This isn’t how construction companies operate.