THE 73-DAY CASH GAP. EVEN ON PROFITABLE JOBS.
The job is profitable. You aren't. Here is the arithmetic of the seventy three days in between, and the four things that shorten them.
For most electrical subcontractors there's a 60 to 90 day window between the day a dollar goes out on a job and the day that dollar comes back, and 73 days is the average. The days stack up in a fixed sequence: labor and material go out on day one, you bill the GC at the end of the month on day 30, the GC approves and bills the owner by day 45, the owner pays the GC by day 60, and the GC pays you under pay-when-paid terms on day 73, with 10 percent retainage sitting until closeout six to nine months later. On a $340,000 tenant buildout that's $90K to $130K of your own money funding the job before a dollar comes back. Electrical gets hit harder than most trades because gear carries 30 to 50 percent deposits, labor burden runs 35 to 45 percent, and pay-when-paid is standard in the subcontract. Four levers shorten the lag: bill before the GC's draw deadline, front-load the schedule of values, bill for stored material, and chase retainage the day substantial completion hits. The number that tells you whether you're winning is AR days, not margin.
Nothing in here is a paperwork problem or a bad GC. It's the structure of how electrical work is bought and paid for, and the only thing you control is how many of the seventy three days you're willing to fund yourself.
This post takes one number, seventy three days, and works out where it comes from. Read Electrical Subcontractor Cash Flow for the complete treatment, worked figures included.
WHY ELECTRICAL SUBS RUN OUT OF CASH ON PROFITABLE JOBS.
You win a $340,000 tenant buildout at a 22 percent gross margin, profitable on paper. Six weeks in, payroll's tight. Ten weeks in, you're floating $80K on a credit card, and the GC just emailed asking whether you'll have six guys on site Monday for rough-in.
The job is profitable. You aren't. That's the cash lag.
For most electrical subcontractors, there's a 60 to 90 day window between the day you spend a dollar on a job and the day that dollar comes back. Call it 73 days on average. Across a handful of simultaneous jobs, that lag is the single biggest reason profitable electrical subs go broke.
This breaks down where those 73 days come from, why electrical gets hit worse than other trades, and the four levers you can pull to shorten it.
WHAT THE CASH LAG IS FOR ELECTRICAL SUBCONTRACTORS.
The cash lag is the number of days between when you pay for labor, materials, and overhead on a job and when the money for that work hits your bank account. Gross margin tells you whether the job is profitable. The cash lag tells you whether you can survive long enough to collect it.
Here's a realistic breakdown on a $340K tenant buildout, and every step in it belongs to somebody else's calendar:
On a $340K job, that's $90K to $130K of outflow you're carrying before a single dollar comes back.
WHY ELECTRICAL IS WORSE THAN MOST TRADES.
You've been funding that job with your own money the entire time. Labor burden, material, van fuel, insurance, rent, and your project manager's salary, all of it, from day 1 to day 73. Three things make that worse for electrical subs than for a framer, a drywaller, or even most mechanical trades.
Material heavy with long lead times. Switchgear, transformers, panels, and specialty fixtures can require 30 percent to 50 percent deposits up front. That cash goes out before the job even starts, and you can't bill for stored material until it's on site, sometimes not until it's installed.
Labor burden runs 35 percent to 45 percent. Licensed journeymen, benefits, workers' comp, vehicles, tools, and truck stock stack up fast. Your labor cost is what's on the timecard times 1.4.
Pay-when-paid is standard. Almost every electrical subcontract has it, which means your AR days are tied to the GC's collection cycle rather than to your own effort. You can do everything right and still wait.
Stack those three together and the 73 day lag makes sense. Deposit terms and a pay-when-paid clause build the lag in before you bill anything.
THE FOUR LEVERS THAT CLOSE THE LAG.
There's no silver bullet, but there are four levers electrical subcontractors can pull. You don't need all four. Moving one by 10 days can keep you out of a line of credit.
Bill earlier in the month, not at the end. Most subs bill on the 25th or the 30th. If your GC cuts their draw on the 10th, you just lost 20 days because your invoice didn't make the draw. Ask your GC when their draw deadline is, then bill five days before it, and that alone can cut 15 to 25 days off your cash lag with no other change.
Front-load the schedule of values. If you're billing lump sum, weight your SOV toward mobilization, rough-in, and early material deliveries, and don't bury everything in finals and trim. You're not overbilling, you're matching the SOV to the cost curve. Most subs leave 5 percent to 10 percent of the job unbilled for months because their SOV is backloaded.
Bill for stored material. If the contract allows it, bill for material delivered to your yard or to a bonded warehouse. Electrical gear is a big chunk of the job, and getting paid for it 30 days earlier is real cash.
Chase retainage the day substantial completion hits. Retainage isn't a tip. It's your money, and most subs let it sit because they're already on the next job. Put a retainage log in front of someone whose job it's to chase it. If you're doing $4M in revenue, you've $200K to $400K in retainage floating at any given time, and that's the difference between a line of credit and a cushion.
MOST ELECTRICAL SUBS MISS THIS NUMBER.
The number that tells you whether you're winning or losing this game isn't margin. It's AR days, days sales outstanding, and most electrical subcontractors have never calculated it. Here's how to do it in 30 seconds: accounts receivable divided by trailing twelve month revenue, times 365, equals AR days.
If that number is above 60, you have a cash timing problem. Above 75, you're one slow-paying GC away from a missed payroll. Above 90, you're already borrowing to stay alive even if every job you have is profitable.
AR days is one of the four numbers every subcontractor should be watching monthly. The other three are overhead rate, break-even volume, and job gross margin. Together, those four tell you whether your business is healthy, which the balance of your checking account doesn't, because that's a lagging indicator at best.
THE REAL COST OF IGNORING THE LAG.
An electrical subcontractor doing $5M in revenue with 75 AR days is carrying a little over $1M in receivables at any given time. If a line of credit on that costs 9 percent, that's $90,000 a year in interest just to keep the business running. On a 10 percent net margin business, that's nearly a quarter of your annual profit disappearing into financing costs before you make a dime.
Shorten the lag by 15 days and you free up roughly $200K in working capital. That's a real truck, a real estimator hire, or a real buffer to sleep at night.
THE BOTTOM LINE.
Profit on the estimate doesn't keep the lights on. Timing does. If you're an electrical subcontractor and you've ever looked at a profitable job and wondered where the money went, the answer is almost always the 73 day cash lag, not margin, not cost overruns, and not the GC you're mad at.
THE SHORT LIST.
FREQUENTLY ASKED.
