Backlog isn’t cash waiting politely in a folder. It’s a promise to spend cash first: crews, materials, rentals, subcontractors, insurance, supervision, and whatever the drawings forgot to mention.
A job can be profitable, correctly bid, and fully awarded while its ramp turns your line of credit into the operating account.
Call the gap job float. It’s the period between the money you commit to perform the work and the money you actually collect under the prime contract. Retainage stretches it. Underbilling stretches it. An unsigned change stretches it with particular enthusiasm. Your job-cost report can be right and still be useless for Friday’s bank balance.
Four Ledgers
Keep four measures apart on every job:
- Backlog is awarded work still to perform. It shows production capacity committed, not cash available.
- Billings are amounts invoiced under the schedule of values. An invoice can be proper, disputed, overdue, or still sitting behind an approval gate.
- Estimated profit is expected value after estimated cost. It can fade as cost-to-complete changes, and it is not a deposit.
Collected cash is the fourth measure, and it’s the only one that pays the electrical subcontractor, the fuel card, or the payroll run.
Construction makes the separation unusually sharp. The cited industry DSO range is 60–90 days, driven by retainage and progress-billing structures rather than ordinary customer behavior. A full book of work can make liquidity worse before it makes it better. That’s overtrading in a hard hat. Each additional ramp adds payroll and committed purchases before the last job’s billings turn into cleared money.
A new mobilization payment may patch an old job’s closeout hole. The P&L calls that growth. Your bank calls it an interval.
The Float Schedule
Make one page for your three largest jobs. Start each page from collected cash, not contract value, and add only dates you can name from a document, an approval path, or a payment history.
The schedule isn’t a prettier work-in-progress report. It’s the list of cash commitments the job is asking you to finance.
| Job | Next pay application and expected collection | Sub commitments and other committed cash | Retainage upstream / downstream | Changes | What the job is funding now |
|---|---|---|---|---|---|
| Job A | Proper-request date; receipt, approval, and expected clearing date | Payroll, sub payment dates, material deposits, rentals, tax, and debt dates | Amount held by owner; amount held from subs; each expected release date | Signed price; unsigned scope; cost committed; notice date; authority | Peak gap between scheduled outflow and collected inflow |
| Job B | Schedule-of-values line; support required; collection date based on actual path | Named releases and committed purchase orders | Gross upstream and downstream balances, never netted by percentage | Probable recovery kept separate from executed modification | Whether a draw or surplus masks the operating position |
| Job C | Retainage and final-invoice gate separate from ordinary draw | Punch-list, closeout, and waiver-related commitments | Release trigger and remaining holdback | Work performed before approval shown as exposure | Date, depth, and expected recovery source of the trough |
The useful calculation is peak working capital: the largest projected excess of job cash outflows over collected inflows. It isn’t contract value. It isn’t the job’s estimated gross margin. It’s the highest point of cash you have to carry before the project funds itself.
Put unsigned changes in their own column. Don’t net them against forecast profit, and don’t put a verbal assurance into the collection date.
The economically useful view separates signed price, probable recovery, cost already committed, and cash collected. Those are four different states, because construction enjoys turning one problem into four boxes.
The Collection Clock
On U.S. federal fixed-price construction, a proper progress-payment request is generally due 14 calendar days after the designated billing office receives it, and an improper invoice has to be returned with reasons within 7 days.
The request has to connect completed, conforming work to the schedule of values, identify subcontractor amounts and prior payments, and carry the required certification.
That clock attaches to a proper request and receipt, not to the day your superintendent uploads a PDF.
The federal clock isn’t a private-job default either. On covered Canadian federal work, the cited proper-invoice clock is the 28th day after receipt, with a notice of non-payment by the 21st day, and covered subcontractors are paid by the 35th day after the owner received the invoice when the prime is paid. Contract class and jurisdiction come before any number. “Prompt pay” without a trigger is just optimism with a hard hat.
Retainage has its own gate. On current U.S. federal fixed-price work, it’s case-specific for unsatisfactory progress and can’t exceed 10% of the affected progress payment. It isn’t an automatic federal deduction.
Private work commonly uses 5% to 10%, but the rate, entitlement, and release condition come from your contract. Compare gross retention receivables with retainage payable by date. Matching percentages don’t make matching cash.
Change Work
Changed work isn’t a pricing conversation first. It’s an authority, notice, and entitlement problem first.
A field comment may produce real labor cost today without creating an approved receivable tomorrow. Production evidence — daily reports, photographs, labor records, equipment logs, supplier invoices, and schedule updates — protects the factual record. It doesn’t make the speaker authorized to spend the owner’s money.
For the cited federal Changes clause, an authorized contracting officer can direct an in-scope change, and the contractor generally asserts the right to adjustment within 30 days after a written change order or directed-change notice. For most constructive changes, costs incurred more than 20 days before notice are excluded.
Those dates are federal-clause facts, not a carry-over rule for private work. The practical control stays the same: record the authority, issue the notice, state the cost and time position, then decide whether continuing the work is a deliberate financing decision.
The federal prime also has to pay a subcontractor for satisfactory performance no later than 7 days after receiving the corresponding Government payment, with interest for late payment.
That’s why the upstream collection date and the downstream payment date belong on the same job page. You can’t safely forecast the owner draw as free cash when you already carry a dated flow-down obligation.
Where the Cash Sticks
Use the shape of the cash problem to find the broken stage. Cutting office overhead may be useful later. It doesn’t repair a missing notice date.
Backlog grows, estimated margins hold, and the line rises at every ramp → the job float is unfunded
Compare peak working-capital need with collected cash, committed sub payments, material deposits, retainage, and underbillings. You’re reading backlog as future cash instead of future funding need.
Labour and materials appear in cost-to-complete, but no change can enter the next pay application → the notice or authority gate is broken
Separate written notice, source of direction, signed modification, probable recovery, committed cost, and cash collected. A site instruction isn’t an executed entitlement.
Pay applications look current, but cash arrives after payroll and supplier releases → the collection clock is broken
Forecast the proper-request receipt, approval path, dispute status, and expected clearing date, not merely the billing date or the nominal term.
Upstream retainage grows while subcontractors need paying on ordinary job dates → retainage symmetry is broken
Track customer retention receivables and retainage payable separately by gross amount and release trigger. Don’t assume a holdback downstream finances a holdback upstream.
Closeout is complete in the field, but final cash doesn’t arrive → the closeout gates are being treated as one event
On the cited federal clause, final payment is due no later than 30 days after government acceptance of completed work. Retainage release, punch-list clearance, final invoicing, and lien-waiver collection can still be separate requirements.
Month-end cash looks fine, but you borrow in the middle of the month → the measurement point is broken
Record the daily or intraday liquidity trough. The relevant question is your lowest available balance before an obligation settles, not the balance after the late receipt repairs it.
The Thirteen Weeks
Put the job pages beneath a direct-method 13-week forecast, rebuilt weekly from reconciled bank cash.
The first column isn’t general-ledger cash. Outstanding checks, deposits in transit, processor holds, bank fees, and restricted balances can make it wrong before the first job is entered.
Keep recorded cash, bank cash, and available cash separate. A line you haven’t drawn is potential liquidity, not cash.
Then run the weekly loop:
- Replace the completed week with actual bank-categorized collections and disbursements.
- Classify each job miss as a timing, amount, or assumption error.
- Roll the remaining 12 weeks forward and append a new week 13.
Keep the original forecast, the latest estimate, and the actual side by side. Grade receipts and payments separately at 1 week, 4 weeks, and 13 weeks ahead. A small net miss can conceal a late owner draw and a delayed subcontractor payment that happened to cancel.
Financing sits below operating cash so you can see both the unfunded position and the funded one. Otherwise your line of credit becomes a very expensive formatting choice.
Backlog is capacity committed. Collected cash is liquidity earned. A signed change is a receivable. An unsigned change is an exposure.
Forecast the collection date. Fund the float before the ramp. Don’t spend a contract entitlement until the bank can see it.