STRUCTURAL STEEL FABRICATION DEPOSITS AND CASH FLOW: LEAD TIMES, DEPOSITS, AND BILLING MILESTONES.
Structural steel procurement creates a cash problem that doesn't exist in other trades: a 25 to 50 percent fabrication deposit goes out at order placement, and billing recovery doesn't begin for 12 to 20 weeks. On a $400,000 steel package, that's $140,000 deployed today against billing that doesn't start for four months. The contractor who models that distance before placing the order funds it from a planned LOC draw. The one who doesn't find out about it when the deposit clears and the cash position drops without warning.
Every trade has a procurement problem. Steel has a bigger one, because the money goes out before the steel exists. A pipe order gets delivered in two weeks and installed the same month, so the cash comes back on the next pay app. Steel gets ordered in March, fabricated through May, set in June, and billed in July. Four months of the contractor's own money sits in a fabricator's shop, and nothing on the income statement says so, because a deposit is a balance sheet event. The forecast is the only place it's visible before it hurts.
WHAT IT MEANS.
A steel fabrication deposit is the 25 to 50 percent of the fabrication contract a fabricator requires at order placement, months before the steel is delivered, installed, or billable.
The deposit is a prepayment, so it never touches the income statement in the month that hurts. A contractor scanning the P&L for the reason cash got tight won't find the reason there. It shows in the bank balance and on the balance sheet, which is why steel procurement has to be a forecast line rather than a monthly surprise.
WHERE THE MONEY GOES AND WHEN IT COMES BACK.
The deposit gets paid before the steel exists
Structural steel fabricators require deposits, typically 25 to 50 percent of the fabrication contract, at order placement. Lead times for structural steel fabrication run 8 to 20 weeks depending on complexity and shop backlog. A contractor who orders $400,000 in structural steel with a 35 percent deposit requirement deploys $140,000 in cash at order placement, and the steel isn't delivered for 12 weeks, not installed for 14 to 16 weeks, and not billed until after installation. That $140,000 waits 16 to 20 weeks before billing recovery begins, and it has to be in the cash forecast before the order gets placed.
The SOV bills completion, not procurement
A standard schedule of values bills against installation completion, so nothing in it pays the contractor back for money already committed to fabrication. There's no stored materials line to bill fabricated steel sitting in the shop, and no mobilization line carrying procurement cost. Both of those are negotiable at contract execution and neither one gets added afterward. A contractor who signs the GC's standard SOV has agreed to fund the deposit out of pocket for the full lead time.
Lead time risk when the schedule moves
When the steel is ordered and the project schedule then changes, because the owner pushes the start date or other trades aren't ready or a permit is late, the steel still gets fabricated on schedule while the project doesn't. The fabricator may charge storage fees. The billing milestone that was supposed to cover the deposit gets pushed out with the schedule. The contractor has paid for steel that can't be billed because the installation milestone hasn't been reached, and the way out is written notice to the GC requesting storage cost reimbursement and schedule impact.
WHAT IT LOOKS LIKE IN DOLLARS.
A $400,000 structural steel package with a 35 percent deposit puts $140,000 out the door at order placement. The steel is delivered around week 12, installed by week 14 to 16, and billed after that. The $140,000 waits 16 to 20 weeks before billing recovery begins. That's one package on one job, and nothing in the monthly financials flags it, because the money moved from cash into a prepayment rather than into cost.
A structural steel subcontractor consistently carrying $200,000 to $400,000 in steel deposit exposure needs a line of credit sized to cover that exposure plus operating costs. The LOC that suits a concrete or civil contractor at the same revenue isn't enough for a steel contractor, because the deposit structure of steel procurement is different. The exposure figure, not the revenue figure, is what the LOC request gets built from.
FOUR ACTIONS BEFORE THE ORDER IS PLACED.
The deposit amount, the date it goes out, and the date billing recovery starts all go in as forecast lines. If the draw that results exceeds current LOC availability, that gets resolved before the order goes in rather than after the check clears. This is the whole difference between a planned draw and an emergency one.
The provision goes into the subcontract before work starts, because it doesn't get added later. A stored materials line converts the deposit from unfunded to funded by creating a billing event at the point the deposit goes out. Not every GC contract allows it, and it's worth asking for on any large steel procurement.
Even without stored materials language, a mobilization line at 10 to 15 percent of contract value recovers procurement deposit cost in the first billing cycle. That line gets negotiated at signing, alongside the rest of the schedule of values. It's the fallback when stored materials billing is off the table.
When the fabrication lead time and the project schedule begin to diverge, the GC gets written notice and a request for either an expedite or a storage cost recovery plan. Written notice in week two costs nothing to send. The same claim raised at closeout is a fight the contractor usually loses.
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.
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