Forecasting Cash & Avoiding the Crunch
The contractors who survive cash crunches are the ones who saw them coming.
Build a cash forecast
Project, week by week or month by month: expected collections (by job) vs. expected outlays (labor, material, subs, overhead). Your WIP schedule feeds this.
Act early
- Keep a cash reserve.
- When the forecast shows a shortfall, act now — accelerate billing, draw on credit, or adjust spending — instead of panicking later.
Going Deeper (Intermediate)
The core tool is a 13-week rolling cash-flow forecast: week by week, project inflows (expected draws/collections) against outflows (payroll, AP, taxes, overhead). It shows shortfalls weeks before they hit, while you still have options.
Advanced / Pro-Level
Make the forecast real:
- Tie it to the WIP and project schedules — billings come from progress, so the schedule is the cash forecast.
- Run scenarios — what if the big draw slips two weeks, or you win two new jobs at once?
- Size your line of credit to the deepest projected trough, not the average.
- Pace growth to cash — turning down or sequencing work to match working capital is a sign of maturity, not weakness.
- Watch bank covenants (working-capital/ratio minimums) so growth doesn't trip your loan.
Practice Challenge
Your 13-week forecast shows week 7 going $80k negative when a $300k draw slips to week 9. What are two pre-emptive moves in week 1? (Answer: draw on/expand the line of credit to cover the trough, and accelerate inflows or defer outflows — push the billing/collection, negotiate supplier terms, or delay a discretionary purchase — before the shortfall arrives.)
In Practice
A contractor who forecasts cash weekly sees a shortfall coming in three weeks and arranges credit calmly. One who doesn't gets blindsided. Seeing it early is everything.
Common Mistakes to Avoid
- Not forecasting cash at all
- Keeping no reserve
- Reacting late instead of acting early
Takeaway: Forecast your cash weekly — seeing the crunch early is the difference between managing it and panicking.
Educational content — not legal, financial, or accounting advice. Run your numbers with your CPA.