CONSTRUCTION PAYROLL CYCLE CASH MANAGEMENT — WEEKLY PAYROLL, MONTHLY BILLING.
Payroll goes out every week. Billing arrives once a month — 30–45 days after submission. The gap between weekly payroll deployment and monthly cash collection is the structural cash flow challenge in construction. It is not a sign of a financially weak business. It is a feature of the business model that requires deliberate working capital management. The contractor who plans for it runs the business. The one who does not checks the bank balance every Thursday.
SPM models payroll by week in the 13-week cash forecast so the LOC draw decision happens at week one, not at hour 72 before payroll.
PAYROLL GOES OUT WEEKLY, CASH COMES IN MONTHLY — THE STRUCTURAL PROBLEM.
Payroll Is the Largest Weekly Outflow, Billing Is Monthly
For most commercial subcontractors, payroll is the largest single weekly cash outflow. Weekly payroll for a 20-person crew runs $30,000–$55,000 per week fully burdened. Over four weeks between billing cycles, $120,000–$220,000 in payroll goes out against zero new cash coming in from the work those same crews are performing. The monthly check covers it — but it covers it 30–45 days after the first payroll was issued. That 30–45 day float must be funded by working capital. It is not optional. It is structural.
How to Calculate Your Specific Payroll Cash Gap
The payroll cash gap is the number of payroll periods between the start of work and the first payment received from the first billing cycle. If the billing cut-off is the 25th, the first pay app is submitted the 25th, the GC approves in 10 days, and payment arrives 30 days after approval, the first check arrives approximately day 65 from project start. A 20-person crew at $45,000/week fully burdened has deployed $585,000 in payroll by day 65. The payroll cash gap — the working capital required to bridge from project start to first payment — is $585,000 minus any mobilization billing recovered in the first pay app.
What Reduces the Payroll Cash Gap
First: mobilization line in the SOV billed immediately upon project start — recovers 8–10% of contract value in the first billing cycle and directly offsets the payroll gap. Second: weekly payroll on Tuesday rather than Friday reduces the gap between payroll deployment and LOC availability by 3 days, which matters when timing is tight. Third: 13-week cash forecast that models payroll by week and billing by event — so the LOC draw is planned before the payroll, not after.
HOW TO STOP PAYROLL FROM BEING A WEEKLY SOURCE OF FINANCIAL STRESS.
The owner relief: The owner who checks the bank balance every Thursday afternoon before Friday payroll is managing a payroll system, not a business. The 13-week cash forecast converts Thursday afternoon anxiety into a Monday morning planning exercise. The forecast shows 8 weeks in advance whether payroll will be funded or whether a LOC draw is needed. The owner makes the decision at week one, not at hour 72.
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