Your accountant says you made money. Your bank account disagrees. This is not bad luck — it is a structural problem that has a structural fix.
Your bookkeeper uses accrual accounting — revenue is recorded when earned, not when collected. The job you billed in February shows as revenue even if the GC has not paid yet. The profit is on the books. The cash is not in the account. Those are two different things, and most contractors run their business off the P&L instead of the cash position.
Accrual accounting records revenue when earned, not when collected. A job billed in February shows as revenue even if the GC pays in May. The profit is real. The cash just has not arrived yet — and most contractors never see that distinction in how their books are presented.
Commercial subcontracting has the worst cash timing of any business model. Mobilize in month one, submit Pay App 1 in month two, get approved in month three, get paid in month four. Meanwhile payroll runs every two weeks from day one. The gap is structural.
You've billed the work. The GC owes the money. You haven't collected it because you don't want to rock the relationship. The average SPM client at intake has $80,000–$300,000 in AR over 45 days with zero follow-up.
If your overhead rate in bids is 7% and your actual overhead is 14%, every job you win is underpriced by the difference. You're funding that gap from what you thought was profit — silently, every month.
Retainage at 10% on a $2M job is $200,000 you can't touch for 12–18 months. It shows on your balance sheet as a receivable. When it's counted alongside collectible AR, your real cash position looks better than it is.
Most GCs have a billing cut-off — typically the 25th of the month. Miss it by one day and you wait 30 more days. On a $400K/month job, one late pay app is $400K delayed by 30 days.
Every new job requires upfront cash before the first payment. Double revenue and you've doubled the simultaneous cash gaps you're funding. The faster you grow, the larger the gap — unless the billing system scales with it.
Pull every open invoice over 30 days. Call on every one of them. Most contractors collect $50,000–$200,000 in the first 30 days — money that was always there, just not being pursued. This single step usually covers SPM's fee for the first six months.
Calculate actual overhead — every fixed cost that runs regardless of job volume. Divide by billable revenue. If it is different from what is in your bids, every future job gets repriced. This one correction is worth 3–8% of gross margin per job.
Map every GC's pay app cut-off date. Build a billing calendar. Never miss a cut-off again. On a $5M annual revenue business, one missed cut-off per month on one job is $400K+ in 30-day payment delays per year.
Retainage is not collectible cash. It needs its own bucket. Once it is separated, your real cash position — and your real problem — becomes visible.
Map every cash outflow and expected inflow for 13 weeks. Now you can see a cash gap 8 weeks before it hits — and do something about it before it becomes an emergency or an MCA.
This contractor's P&L showed consistent profitability for 11 years. The owner had never had a year in the red. But cash was always tight. He was using a $200K line of credit as a regular operating tool — not an emergency one. He couldn't explain why.
Collected in AR in the first 7 days of engagement. The money was already earned — invoices sitting 45–90 days with no follow-up. That cash paid off the line of credit completely.
The overhead rate in bids was 5%. Actual overhead was 12%. Every job had been underpriced by 7 points for years. Correcting the overhead rate in the bid model changed the margin on every future job.
In profit sharing distributed to the team within 12 months. The cash was always there. It just needed to be structured correctly to show up.
A free call with Josh takes 30 minutes. Bring your last P&L and current bank balance. The gap between those two numbers is where we start.
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