GEAR BUYOUT HAPPENS BEFORE BILLING CAN CATCH UP.
Electrical contractors have to lock in switchgear and transformer pricing months before installation — but the billing event doesn't come until the equipment is set and inspected. The cash outflow happens in month two. The billing recovery happens in month seven or eight. If your LOC isn't sized around that specific gap, and if stored materials billing isn't built into the SOV from the start, you're funding a $200K–$800K material hole out of operating cash on every major job.
This isn't a cash flow problem in the traditional sense. It's a timing problem with a structural fix. The gear has to be bought early — lead times are 20 to 52 weeks on medium-voltage switchgear. The question is whether the financial structure around the buyout is built before the PO goes out, or whether you're figuring it out six months later when the bill comes due and the billing hasn't caught up yet.
WHY MATERIAL BUYOUT BREAKS ELECTRICAL CASH FLOW.
Commercial electrical work is material-heavy in a way that most trades aren't. Switchgear, transformers, and distribution equipment on a commercial new construction job can represent 30% to 50% of the total project cost. And unlike concrete or lumber, this equipment has to be ordered months before it's needed on site.
The lead time problem is real. Medium-voltage switchgear currently runs 20 to 52 weeks from order to delivery. Transformers run 16 to 40 weeks. If the project is starting in six months, the gear order goes in today — before contract execution is complete, before the first billing event, and often before the job has generated any receivable at all.
Locking in price is a legitimate business decision. Copper and steel prices move. If you wait until installation is 30 days out to order conduit and wire, you might be buying at a price that's 15% higher than what you bid. So contractors buy early. The problem is that buying early creates a cash outflow that has no corresponding billing event for months.
The fix isn't to stop buying early. The fix is to build the financial structure around early buyout: stored materials billing in the SOV, LOC sizing that accounts for the material float, and a cash flow forecast that shows exactly when the outflow hits and when the billing recovery arrives.
THE MECHANISMS SPECIFIC TO ELECTRICAL BUYOUT.
SWITCHGEAR DEPOSITS REQUIRED MONTHS BEFORE INSTALLATION BILLING
A 2,000A switchboard on a commercial project might cost $180,000 to $400,000. The manufacturer requires a 30% to 50% deposit at order — $54,000 to $200,000 — with the balance due on delivery, 20 to 52 weeks later. The installation billing event — the SOV milestone that covers the switchgear cost — doesn't come until the gear is set, landed, energized, and inspected. That's 4 to 6 months after the deposit. On a $3M electrical contract with $900K in switchgear, you can have $270K to $450K in deposits outstanding for months before any billing recovery. If that's not in the cash flow forecast and sized into the LOC, it shows up as a mysterious cash drain that looks like a profitability problem when it's really a timing structure problem.
PRICE-LOCK BUYOUT CREATES INVENTORY FLOAT WITH NO BILLING VEHICLE
Conduit, wire, and raceway material for a large commercial job can run $200,000 to $600,000. If prices are rising and the project is 8 months long, a smart PM buys early to lock in the bid price. The material sits in the warehouse or on site in a laydown yard. No billing event is triggered by the purchase — billing events are triggered by installed work. The contractor has paid for the material. The GC hasn't been billed for it. Until the material is installed, it's pure cash outflow. Stored materials billing — a specific SOV line structure that allows billing for delivered-but-not-installed material — is the fix. But it has to be negotiated into the SOV before contract execution. After the fact, getting a GC to approve stored materials billing is a fight that often goes nowhere.
LOC SIZED TO REVENUE, NOT TO MATERIAL FLOAT
Most electrical contractors size their line of credit based on a general sense of revenue and overhead needs. The LOC isn't modeled against the actual peak cash deficit — the specific week when switchgear deposits, conduit buyout, and payroll all overlap before any major billing event has cleared. On a $5M electrical backlog with 40% material content and early buyout timing, the peak cash deficit can be $600,000 to $900,000 — at a specific point in time, on a specific combination of jobs. If the LOC is sized at $400,000 based on revenue, the gap gets funded by delaying payments to suppliers, missing discounts, or both. CFOS builds the 13-week and 24-month forecast around actual buyout timing so the LOC gets sized before it's needed, not after the deficit appears.
WHAT OWNERS BLAME VS WHAT'S ACTUALLY HAPPENING.
"We have a cash flow problem."
This is the right observation but the wrong diagnosis. The cash flow problem is a symptom of a buyout timing structure that doesn't have corresponding billing vehicles or LOC capacity built around it. Fix the structure — stored materials SOV lines, LOC sizing, buyout timing in the forecast — and the "cash flow problem" disappears.
"We need to stop buying material early."
No. That's how you turn a timing problem into a margin problem. Price escalation on copper, steel conduit, and wire is real. Early buyout protects the bid price. The fix is to build a billing structure around early buyout, not to stop doing it.
"Our GC won't approve stored materials billing."
Some won't. But most will if it's in the contract from the start. Asking for stored materials billing after the SOV is executed is a negotiation you'll lose 80% of the time. Asking for it at contract execution, with the right documentation requirements, gets approved far more often than people assume.
THE SPECIFIC INTERVENTIONS.
WHAT HAPPENS WHEN NOTHING CHANGES.
Switchgear Deposits Kill the LOC
A single large job with $300K in switchgear deposits can consume an entire line of credit — leaving nothing for the next job's mobilization, payroll gaps, or material deposits. Two overlapping jobs with major gear orders and the LOC is gone before work starts.
Early Buyout Becomes Debt
Contractors who buy material early without stored materials billing and LOC structure end up paying suppliers on credit card or extending payables beyond terms. Early buyout turns from a smart price-lock decision into a debt spiral if the billing structure isn't there to recover it.
Price Protection Gets Abandoned
When early buyout consistently creates cash problems, PMs stop doing it. They buy closer to installation and absorb escalation. A job bid at $12/LF for wire that's now $14/LF is a 16% material cost increase on a line item that might be $300K of a $2M job. That's $48K gone on one material category alone.
FLAT MONTHLY FEE. NO SURPRISES.
Two tiers based on trailing 12-month revenue. No hourly billing. No payroll. No add-ons. Everything included in the flat monthly fee.
| Revenue | Core Financial | Executive Financial |
|---|---|---|
| Under $1M | $1,900/mo | $2,900/mo |
| $1M–$3M | $2,600/mo | $3,600/mo |
| $4M–$6M | $3,800/mo | $5,500/mo |
| $7M–$9M | $5,100/mo | $6,900/mo |
| $10M–$12M | $6,100/mo | $8,500/mo |
| $13M+ | Quoted | Quoted |
FREQUENTLY ASKED.
Master electrician and former PM. Managed 150+ commercial projects and $300M+ in volume including data centers and hospitals. Josh has sat on both sides of the switchgear deposit conversation — as the electrical PM ordering the gear and as the CFO structuring the billing around it.