Cash flow problems in contracting most commonly occur when:
Explanation
The gap is a timing gap: payroll, suppliers and subcontractors must be paid weeks before the owner pays the progress billing, and retention holds back part of it longer still, which is why a profitable job can still leave the bank empty. An overhead rate set too low destroys margin, but that is a pricing error and shows up as loss rather than as a cash gap. Finishing early accelerates billing and helps cash. And full depreciation is a book event with no cash effect at all.
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Related questions on this topic
- Which of the following is considered a FIXED cost for a contracting business?
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