CONSTRUCTION PAYROLL CYCLE CASH MANAGEMENT WEEKLY PAYROLL, MONTHLY BILLING.
Payroll goes out every week. Billing comes in once a month, 30 to 45 days after submission. The distance between weekly payroll deployment and monthly cash collection is the structural cash flow challenge in construction. Every contractor on weekly payroll and monthly billing carries it, so the question is whether the working capital is sized for the whole float. The contractor who plans for it runs the business, and the one who doesn't checks the bank balance every Thursday.
This is the one cash problem in construction that can't be removed, only funded and planned. Twenty people at $45,000 a week burns $585,000 before the first check reaches the bank on a normal 65 day cycle, and no amount of collections discipline changes that first cycle. What changes is whether the owner knows in advance. A mobilization line billed in the first pay app recovers 8 to 10 percent of contract value against it, and a 13 week forecast turns Thursday afternoon anxiety into a Monday decision with the draw already lined up.
WHAT IT MEANS.
Payroll float is the number of payroll periods between the start of work and the first payment received from the first billing cycle, and the working capital it takes to cover them.
PAYROLL GOES OUT WEEKLY, CASH COMES IN MONTHLY.
Payroll is the largest weekly outflow and 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 to $55,000 per week fully burdened, so over four weeks between billing cycles $120,000 to $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, and it covers it 30 to 45 days after the first payroll was issued, which means that float has to be funded by working capital.
Nobody has calculated the number
The payroll float is the number of payroll periods between the start of work and the first payment received from the first billing cycle. If the billing cutoff is the 25th, the first pay app is submitted the 25th, the GC approves in 10 days, and payment comes 30 days after approval, the first check reaches the bank around day 65 from project start. A 20 person crew at $45,000 per week fully burdened has deployed $585,000 in payroll by day 65, and the working capital required to bridge from project start to first payment is that $585,000 less any mobilization billing recovered in the first pay app.
The owner manages it by checking the balance on Thursday
The owner who checks the bank balance every Thursday afternoon before Friday payroll is managing a payroll system rather than a business. The decision is being made at hour 72 with no options left except a draw or a phone call. A 13 week cash forecast puts the same decision at week one, when there are still options on the table.
WHAT IT LOOKS LIKE IN DOLLARS.
Weekly payroll for a 20 person crew runs $30,000 to $55,000 fully burdened. Over the four weeks between billing cycles, that's $120,000 to $220,000 out the door against no new cash from the work those crews performed. The monthly check covers it 30 to 45 days after the first payroll was issued.
Billing cutoff on the 25th, pay app submitted the 25th, GC approval in 10 days, and payment 30 days after approval. The first check reaches the bank around day 65 from project start. A 20 person crew at $45,000 per week fully burdened has deployed $585,000 in payroll by then.
The payroll float requirement is weekly payroll times weeks to first payment. A 15 person crew at $35,000 per week with a 6 week distance to first payment requires $210,000 in payroll float. That's the working capital floor just to fund the crew through the first billing cycle.
WHAT REDUCES THE FLOAT.
A mobilization line of 8 to 10 percent of contract value gets billed as soon as equipment is on site, which recovers cash in the first billing cycle and directly offsets the payroll float. This single change covers most of the first month payroll shortfall on every new project. It gets negotiated into the SOV rather than asked for later.
Moving weekly payroll to Tuesday rather than Friday reduces the distance between payroll deployment and line of credit availability by 3 days. Three days sounds small and it's the whole margin in a tight week. It costs nothing to change.
Not payroll as an average monthly cost. Weekly payroll for each of the next 13 weeks, compared to projected cash receipts for that week. Weeks where receipts don't cover payroll are draw weeks, and the draw gets planned before the week starts rather than on payroll day.
When a large payment is expected, the follow up happens early. A $90,000 payment expected on the 15th that comes in on the 14th funds the 15th payroll, and the same payment on the 16th requires a one day draw. The collections call on the 10th is the difference between those two outcomes.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
