When you drive by a jobsite and see a sign that says, “Project Proudly Funded by XYZ Bank,” don’t take it at face value — in reality, many construction projects are funded by subcontractors.
While GCs manage the project and coordinate the workflow, it’s the subcontractors that provide the labor and materials — and carry much of the financial burden.
Skilled labor and materials cost money. Labor is typically paid weekly, and material suppliers may offer terms ranging from 30 to 60 days, but even extended terms can be of limited use. This is often because subcontractors need lien waivers to include with draw applications — and those waivers will require payment at some point, usually 60-75 days.
For example, imagine that the VP of Operations was able to negotiate 90-day terms for a project. Unfortunately, the invoice would still need to be paid within 60 days to obtain the unconditioned lien waiver.
The Subcontractor’s Financial Burden
Due to pay-when-paid or pay-if-paid clauses and wide variation in owner and GC payment practices, subcontractors typically wait 30-60 days to get paid — after submitting an invoice. Meanwhile, they’ve already covered more than 30 days of wages, benefits, and payroll taxes. In practice, this often means a cash cycle of 60-90 days, or longer.
That time gap is the hidden financing of the job — and it comes from the subcontractor’s bank account.
So how can subcontractors improve cash flow without just injecting more capital or relying on a large line of credit? Check out these practical, proven tips.
7 Cash Flow Tips
Tip 1: Plan Cash Flow Before You Sign the Contract
On larger jobs, create a high-level cash flow projection while negotiating the schedule of values. Use this data to support requests for payment acceleration, including:
- A startup deposit
- Stored materials billing
- Upfront payment for specialty materials or equipment
- Mobilization payments
- Reimbursement for preconstruction costs
These line items shift cash inflow forward and reduce strain early in the project.
Tip 2: Negotiate Retainage Reduction
If you have a solid history with a GC or owner, then use it. Subcontractors can often negotiate:
- Lower retainage percentages
- Partial retainage release upon substantial completion or occupancy
- Full waiver of retainage on trusted, repeat projects.
Highlight your history of warranty compliance and timely performance to support your case — especially if delays are not your fault.
Tip 3: Stay Connected to Receivables
Appoint an accounts receivable champion who:
- Knows billing terms and documentation requirements
- Ensure invoices are submitted correctly and on time
- Follows up before and near due dates
- Resolves payment issues before they become past due payments
Proactive communication is key to maintaining predictable cash inflows.
Tip 4: Strategically Manage Accounts Payable
While payroll and lodging often require prompt payment, there is usually more flexibility with materials and equipment rentals. Review your major outflows and negotiate longer terms where they make sense — without hurting supplier relationships or delaying lien waivers.
Avoid wasting time on 90-day terms you can’t use — focus on what improves cash flow.
Tip 5: Avoid Rework
Rework kills productivity, destroys margins, and delays billing. Invest in training, supervision, and quality control to do it right the first time
Tip 6: Prioritize Safety
Accidents slow projects and cost money — both directly (fines, insurance hikes, etc.) and indirectly (schedule delays). A strong safety culture protects your team and your cash flow.
Tip 7: Focus on Throughput, Not Just Activity
Delays anywhere in your processes, design, permitting, approvals, or site work may mean slower billing and later payments. Think like a manufacturer: the faster the job progresses, the faster you invoice and collect.
Conclusion
Cash flow management is the art of accelerating money in while managing money out.
Every project is different, but the fundamentals stay the same. The more intentional you are about billing, negotiations, and spending, the less financial pressure your company feels — no matter the project size.
Stay sharp and proactive — and may your next project fund you, not the other way around.