Profitable contractors go under every quarter. Not because the jobs lost money — because payroll runs weekly and pay applications land in 45 to 75 days. A rolling 13-week construction cash flow projection is the only tool that catches that mismatch early enough to do something about it. Built off your schedule of values and your actual collection history, it shows the gap eight weeks before your bank does.
This is not a spreadsheet you build once when the line of credit gets tight. It is a monthly process, at the project level, rolled up to the company level. Here is how to run it.
Profit and cash are different numbers, and the S-curve is why
Your work-in-progress schedule says the job earns 18% gross margin. True. It says nothing about when the money arrives.
Construction spend follows an S-curve. Mobilization and early material buys front-load cost. Labor peaks in the middle. Revenue recognition tracks percentage of completion, but collection tracks the pay app cycle — submit on the 25th, owner approves in 30, pays in another 30, and retainage sits at 5 to 10% until closeout. CFMA's step-by-step guide to cash flow management frames this plainly: the timing gap between outflow and inflow is the operating risk, not the margin.
Run the math on a $2M job at 18% margin. You spend roughly $1.64M over eight months. If your weighted collection lag is 62 days and you are holding 10% retainage, you are financing something close to $340K of that job out of your own working capital at peak. Two of those jobs starting in the same month is a credit event.
This is why the cash conversion cycle matters more in construction than in almost any other industry. Understand the definition before you model it — start with cash flow and working capital if the terms are fuzzy.
Build the projection at the project level first
Company-level forecasts are useless for decisions. They tell you that cash is tight. They do not tell you which job is causing it.
Start with each active project and one row per week for 13 weeks:
- Inflows. Take the schedule of values, map remaining billings to the months you expect to earn them, then shift each billing forward by your actual collection lag for that owner. Not the contract terms — the actual lag. Pull the last 12 months of invoices and calculate it.
- Retainage. Model it as a separate line with its own release date, usually 30 to 60 days past substantial completion. Most contractors bury retainage in the receivable and then wonder why the projection overstates cash by six figures.
- Outflows. Weekly labor and burden, material buyouts on their PO dates, subcontractor pay-when-paid terms, and equipment. Labor is the killer because it clears every Friday regardless of what the owner does.
- The job-level net. Weekly and cumulative.
Procore's guide to construction cash flow projection walks through the same structure and is worth reading alongside your own SOV. Pair it with sound job costing — a projection built on committed-cost data you do not trust is just a guess with decimals.
Roll it up, then add the company layer
Sum the project sheets. Then add the costs that no job carries: overhead, rent, insurance, debt service, owner distributions, tax payments, and the line of credit balance with its borrowing base.
That rollup is your company-level construction cash flow projection. It answers one question well: in which week does cash fall below your operating floor?
Set the floor deliberately. For most contractors doing $5M to $30M, one payroll cycle plus 15 days of overhead is a defensible minimum. Anything under that and you are one slow-paying owner away from a hard conversation.
CFMA's piece on the benefits of forecasting makes a point worth repeating to your PMs: the forecast is a management tool, not a compliance exercise. It changes which jobs you chase and when you mobilize.
Make it a monthly process, not a one-off spreadsheet
The reason most contractors have no working projection is not skill. It is cadence. The model gets built during a crisis, abandoned in month two, and rebuilt from scratch the next time the credit line maxes out.
Run this cycle instead, tied to your close:
- Day 3 after close. PMs update percent complete and remaining cost to complete on every active job.
- Day 5. Finance updates collection lags from actual receipts and re-dates the pay app schedule.
- Day 7. Rebuild the 13-week rollup. Compare week 1 through 4 of last month's forecast to what actually happened. Note the variance.
- Day 8. One-page summary to the owner: lowest projected cash week, the driver, and the three levers available.
That variance step is the one everyone skips and the one that makes the model credible. After three cycles, your collection lag assumptions stop being opinions. CFMA's financial management reference guide and the AICPA construction contractors audit and accounting guide both treat contract-level accounting discipline as the foundation for this. They are right — the projection is only as honest as the WIP behind it.
Your ledger has to support it too. Intuit's overview of construction accounting covers the job-level structure your chart of accounts needs before any of this rolls up cleanly.
Use the projection to make three decisions
A forecast that does not change behavior is a report. Here is what a good one drives.
Mobilization timing. If two jobs peak in the same six weeks, delay one start by three weeks or negotiate a larger deposit. The projection tells you the exact week the collision happens.
Billing discipline. Front-load the schedule of values where the owner will accept it. Getting general conditions and mobilization weighted into early line items pulls cash forward by 60 days at no margin cost. This is the single highest-return move in progress billing.
Which work to decline. A job at 22% margin with a 90-day-pay owner and 10% retainage can be worse for you than a 15% job that pays in 30. Run both through the model before you sign. Our scenario planner lets you test the timing assumptions side by side.
The takeaway
Eighty-two per cent of business failures are caused by cash flow mismanagement (NSBA). In construction, that number is a timing problem wearing a profitability costume.
Build the projection by project. Roll it to the company. Update it monthly against actuals. Then act on the week your cash dips, not the month your bank calls.
If you want the full framework, start at the construction finance hub, then work through cash gap forecasting, project profitability, and our construction cash flow guide.
