Contractor Cash Flow: How to Stop Running Out of Money Between Jobs

A job can be profitable on paper and still leave you short on payday. Contractors pay for materials and crews up front and get paid later. That gap is cash flow, and it is the most common reason otherwise good trade businesses fail.

Why cash runs short

• Materials and payroll go out before the client pays
• Final payments and holdbacks are delayed
• Taxes (GST/HST/QST remittances, payroll deductions) arrive in lumps
• Seasonal slowdowns reduce income while fixed costs continue

1. Forecast 13 weeks ahead

A simple spreadsheet is enough: expected payments in, known bills out, week by week. It shows a shortfall weeks before it hurts.

2. Get paid sooner

Take deposits, bill in stages and invoice the same day. See how to get paid on time.

3. Set tax money aside

GST/HST and QST collected is not your money. Move it to a separate account when each payment arrives, along with an estimate for income tax and payroll remittances. Confirm filing frequency and deadlines with your accountant and the CRA or Revenu Québec.

4. Understand holdbacks

On many construction contracts a percentage is held back until a statutory period passes. Plan for that money to arrive late and check your province's rules.

5. Negotiate supplier terms

Net-30 terms on contractor accounts let you buy materials and get paid before the bill is due. Pay on time to keep the privilege.

6. Watch your quote validity and pricing

Underpriced jobs drain cash faster than anything else. See markup vs margin.

7. Build a buffer

Aim for one to three months of fixed costs in reserve, built gradually from a small percentage of every invoice.

8. Track jobs, not just the bank balance

Knowing which jobs are tying up cash helps you chase the right invoices: job cost tracking.

Keep invoicing automatic

Software that turns an accepted quote into a deposit request and invoice removes delays. See quoteai for general contractors.