What is the cash flow gap for contractors?
The cash flow gap is the time between when you spend money on a job (materials, labor, fuel) and when you actually get paid. For most small contractors, this gap is 45-90 days. During that gap, you're financing your client's project with your own money — or worse, credit cards.
How much does late invoicing cost contractors?
The average small contractor loses $8,000-$15,000 per year to late invoicing alone. Every day you delay sending an invoice adds a day to your payment timeline. If you wait a week after completing work to invoice, that's a week of free financing you're giving your client.
What are typical payment terms in construction?
Residential contractors typically see Net 15-30 payment terms. Commercial contractors often face Net 30-60, and government/institutional work can stretch to Net 60-90. The actual payment often arrives 10-15 days after the due date.
How can contractors improve cash flow?
The fastest wins: (1) Invoice the same day you complete work. (2) Require deposits on materials. (3) Bill progress payments on longer jobs. (4) Follow up on overdue invoices immediately. (5) Use tools that automate invoicing from your daily work logs.
Why do contractors go bankrupt despite having lots of work?
Growth actually makes cash flow worse. More jobs mean more upfront costs (materials, labor) before payment arrives. A contractor doing $500K/year might have $100K-$200K constantly "floating." One slow-paying client can cascade into missed payroll, supplier credit cuts, and bankruptcy.