The Contractor's Guide to Cash Flow Management
Stop acting like a bank for your clients. Learn how to eliminate Net-30 traps, structure milestone billing, and use digital payments to optimize your cash flow.
The Profit vs. Cash Flow Trap
You can run a highly profitable contracting business and still go bankrupt if you run out of cash.
The most common trap in the trades is the “materials float.” You buy $10,000 worth of lumber, wire, and drywall on your company credit card. You spend two weeks paying your crew to install it. Then, you send an invoice with “Net 30” terms and wait another month for a check to arrive in the mail.
For six weeks, you have effectively acted as a zero-interest bank for your client, tying up capital you desperately need to take on the next job.
1. Eliminate Net-30 on Residential Jobs
“Net 30” is a corporate billing term that has somehow infected residential services. If you are doing a $3,000 landscaping job for a homeowner, there is no accounting department processing the invoice.
The Rule: Your invoices should say “Due Upon Receipt.” Train your customers from day one that payment is expected the moment the service is rendered.
2. Structure Milestone Billing
Never fund a large project out of your own pocket. If you are a general contractor doing a $50,000 remodel, your service agreement must include milestone payments that keep you cash-positive:
- 30% Deposit: Due upon signing to lock in the schedule and purchase raw materials.
- 30% Rough-In: Due when framing, electrical, and plumbing rough-ins pass inspection.
- 30% Finishes: Due when drywall, paint, and trim are complete.
- 10% Final Walkthrough: Due the day the punch list is signed off.
3. Remove the Friction from Paying
If a customer has to find their checkbook, locate an envelope, buy a stamp, and walk to the mailbox, they will procrastinate.
To speed up cash flow, you must make paying you the easiest part of their day. Job Pilot allows you to generate a professional invoice on the job site and text or email a secure payment link directly to the client. They can tap the link and pay with their credit card or Apple Pay in 30 seconds.
Yes, credit card processing fees exist, but paying a 2.9% fee to have the cash in your bank account tomorrow is infinitely cheaper than stalling your business growth while waiting 30 days for a check.