Cash flow management and forecasting field guide for plumbing contractors

What cash flow management is

Cash flow management is timing the money coming in against the money going out so the account never hits zero on a day you owe somebody. That is the whole job. Cash in is collections, deposits, and progress payments. Cash out is payroll, the supply house, overhead, taxes, and debt. Management is making sure the in lands before, or at least alongside, the out, week after week, so payroll clears every time without a phone call to the bank.

It is a separate skill from making money. You can run a healthy margin on every job and still miss a payroll, because profit and cash are not the same thing and they do not move on the same clock. The work being good does not put money in the account on the day payroll runs. The timing does.

More plumbing shops go under from cash than from anything they did with a wrench. The work was fine. The money came in slower than it went out, the reserve was thin or missing, and one slow month or one big job that paid late emptied the account. This guide is about the timing: the forecast that shows the crunch early, the reserve that absorbs it, the line of credit that bridges it, and the levers you pull when it tightens anyway. The accounts receivable and collections guide covers getting paid; the flat-rate pricing guide covers building a price that has margin to begin with. This one is about keeping cash in the account between those two.

Why cash is the number that decides whether you survive

Profit is an opinion. Cash is a fact. Profit is what your accounting method says you earned after revenue and cost get matched up, and that figure depends on when you booked the job, how you counted work in progress, and what got expensed versus capitalized. Two honest accountants can hand you two different profit numbers for the same year. The bank balance does not have an opinion. There is a number in the account, and either it covers Friday or it does not.

Payroll must clear. That is the hard constraint everything else bends around. The crew gets paid every week or two and the date does not move. The supply house wants its money in 30 days and puts you on credit hold if you stretch it past their patience. The truck note, the insurance, the rent, the withholding deposits all hit on a schedule you do not control. Meanwhile a big chunk of what you earned is parked in invoices that are 30, 60, 90 days out. Profitable and broke at the same time is not a contradiction. It is Tuesday.

Growth makes it sharper, not softer. A bigger month means more labor and more material going out before the matching cash comes in, so the better you sell the more cash you need on hand to carry the gap. That is the part that catches good operators off guard, and it gets its own section below. The short version: watch cash harder than you watch profit, because cash is the one that actually ends the company.

Cash vs profit, and why they drift apart

Profit lives on the profit-and-loss statement. Cash lives in the bank. The gap between them is where contractors get blindsided, because the P&L can look great in a month the account is bleeding out, and the reasons are specific, not mysterious.

Four things open the gap. Timing: you booked the revenue when you finished the job, but the customer pays 45 days later, so the profit shows up six weeks before the cash. Accounts receivable: every unpaid invoice is profit you earned and cash you do not have, money you are lending the customer at zero percent whether you meant to or not. Work in progress: on project work you pay labor and material as you go but bill on a schedule, so cost can run ahead of billing and tie up cash inside a job that is not finished. Debt: a loan payment is cash out that is mostly principal, which barely touches the P&L but empties the account just the same.

That is how a year closes with a solid profit and a scary December. The earnings were real. They were sitting in receivables, in unbilled work in progress, and in the principal you paid down, none of which is spendable. When the P&L and the bank disagree, the bank is the one telling the truth about whether you can make payroll. Read both, and trust the bank on the question that matters this week.

What is a 13-week cash flow forecast?

A 13-week cash flow forecast is a week-by-week projection of cash in against cash out for the next quarter, with a running bank balance at the bottom of each column. It is the single most useful cash tool a contractor can run, because it shows the crunch before it arrives, while you still have weeks to do something about it instead of finding out the morning payroll bounces.

Thirteen weeks is the standard window for a reason. It is roughly a quarter, which is long enough to see a slow stretch or a big payable forming and short enough that the numbers are real rather than wishful. You list expected cash in by week, expected cash out by week, net the two, and carry the balance forward week to week. The week any balance goes negative is the week you fix now, by pulling cash forward, pushing a payable back, or tapping the line of credit you set up earlier.

Build it on real timing, not invoice dates. If a customer or a general contractor takes 45 days to pay, the cash goes in the week it actually lands, not the week you billed. Put payroll in every week with the burden on top, since it is usually the biggest and most rigid outflow. Make it a rolling forecast: every week you drop the week that passed, add a new week 13 out, and update the numbers against what actually happened. Set the whole thing up with your bookkeeper or accountant so the categories match your books, then keep it yourself, weekly. A 13-week forecast nobody updates is just a screenshot of last month.

Field example: a four-week slice of the forecast

Here is the front of a 13-week forecast for a shop that runs about 40,000 dollars a week through the account, shown as the first four weeks so the mechanics are clear. Cash in is collections landing that week based on real payment timing. Cash out is payroll plus burden, the supply house, overhead, and any debt due that week. Net is in minus out. Ending balance carries forward.

Read down the ending-balance row and the problem jumps out. The shop starts with 35,000 dollars. Week 1 is fine. Week 2 a big material order and full payroll land in the same week, and the balance drops to 6,500. Week 3 a customer who was supposed to pay slips, the balance goes to negative 11,000, and that is the week payroll does not clear. You are seeing it on day one of the quarter, not the morning of the bounce. With three weeks of warning you call the slow customer, you ask the supplier for an extra 15 days on that order, or you draw 15,000 on the line of credit and repay it in week 5 when the receivable lands. None of those moves is available the morning the account is already empty.

The numbers are illustrative, not a benchmark for your shop. The point is the shape: the forecast turns a surprise into a problem you handle on a calm Monday.

Cash in: collections, deposits, and progress bills

Cash in is every dollar landing in the account, and for a contractor it comes from three places. Collections on completed work, which is the money customers owe you for jobs already done. Deposits taken up front before you buy material. And progress billings on project work, where you bill and collect in stages as the job moves instead of waiting for one check at the end.

Forecast each of these on when the money actually arrives, not when you earned it. A service ticket paid at the door is cash this week. An invoice on Net 30 to a builder who really pays in 50 is cash seven weeks out, so that is where it goes on the forecast. A deposit is cash the week the customer signs, which is exactly why deposits matter to cash flow: they put money in before the material bill goes out. Progress draws land when the general contractor approves and pays the pay application, which is its own lag you should know from history for each customer.

The lever on the cash-in side is speed. Every day you shave off the gap between finishing the work and collecting the money is a day of cash you pulled forward, and it is the cheapest cash you will ever raise because it is already yours. The accounts receivable and collections guide covers the full system for shrinking that gap. The next section here is the short list of what moves the needle most.

Levers to speed cash in

Pulling cash forward is the first thing to reach for when the forecast tightens, because it costs nothing and the money is already owed to you. Four levers do most of the work.

Invoice fast. Send the invoice the day the work is done, from the field where you can. A ticket that sits in a truck for a week is a week of float you added for free, before the customer has done anything wrong. Collect at the door. On service and repair, take the card while you are standing in the kitchen and the customer is happy the drain runs. Money collected at completion never becomes a receivable, never ages, never needs a reminder. Take deposits. On any job big enough that the material bill would hurt to float, get money up front so you are not buying the customer's fixtures with your cash. Bill progress. On project work, bill the milestones as you hit them instead of waiting for one payment at the end, so cash flows in alongside the cost going out.

This is where a field tool pays for itself on the cash side. With FieldOS the tech invoices from the job and runs the card before the van leaves, so the work and the money close in the same minute, and the deposit or the progress draw goes out the day it is due instead of whenever the office catches up. The faster that whole path runs, the more weeks of cash you pull forward on the forecast. The collections guide has the deposit structures and the reminder sequences in full; the point for cash flow is that speed on this side is the lever you pull first because it is free.

Cash out: payroll, suppliers, overhead, and debt

Cash out is every dollar leaving the account, and it splits into four streams that behave very differently when you need to manage timing. Payroll, the supply house, overhead, and debt.

Payroll is the biggest and the most rigid. It runs on a fixed date, it carries burden on top of the wage, taxes, workers comp, insurance, and benefits, that pushes the real number well above the paychecks, and it does not wait. Treat it as fixed on the forecast and build everything else around clearing it. Suppliers are the most flexible, because they sell on terms, which gives you a window to time the payment. Overhead is the steady drip, rent, insurance, software, phone, fuel, the office, mostly predictable and mostly fixed in the short run. Debt is the quiet one: a loan payment is cash out that is largely principal, so it empties the account far more than it dents the P&L.

Managing cash out is mostly about timing the flexible streams against the rigid ones. You cannot move payroll, so you move the material buy and the supplier payment to land in a different week. That is the next section: using the terms you already have instead of paying everything the day the bill shows up.

Levers to slow cash out without burning anybody

The other side of timing is holding your own money as long as the terms honestly allow, without stiffing the people you depend on. Done right, this is using the credit your suppliers already extend you. Done wrong, it is the credit hold that shuts down your next job.

Use the supplier terms you have. If the supply house sells Net 30, Net 30 is yours to use; paying on day 5 out of habit hands them a free 25-day loan of your cash for nothing. But read the discount. A common term is 2/10 net 30, meaning you take 2 percent off if you pay within 10 days, or pay the full amount at 30. That 2 percent for paying 20 days early works out to roughly a 37 percent annualized return, which beats almost any cost of borrowing, so when you have the cash, taking the discount is one of the best uses of it. When cash is tight, you let the discount go and take the full 30 days, and that is a fair trade you decide deliberately, not by accident.

Time the big buys. Order the material for a large job to land close to when you need it and close to a week the forecast can absorb, not three weeks early into a tight stretch. And do not prepay. Paying a bill before it is due, or prepaying for material you will not use for a month, is giving away your timing for no return. Hold the cash until the terms say to release it. The exception is the early-pay discount above, which pays you to move. Everything else waits for the due date.

The cash reserve

A cash reserve is money you keep in the account on purpose, sized in weeks of payroll and overhead, so a slow month or a late check does not turn into a missed payroll. It is the difference between a bad week being an annoyance and a bad week being a crisis. The reserve absorbs the timing gaps the forecast warns you about.

Size it in weeks, because that is how the obligations come at you. A common target operators work toward is enough cash to cover several weeks of payroll plus fixed overhead with zero collections coming in, often framed as somewhere around 8 to 12 weeks of operating cost for a contractor exposed to lumpy, slow-paying work. The right number for your shop depends on how steady your collections are and how seasonal the work is, so set the target with your accountant against your own history rather than a generic figure. A shop collecting at the door every day needs a thinner reserve than one carrying Net 30 commercial work and retainage.

Build it from the good months, not from hope. When cash is strong, sweep a set percentage into a separate reserve account so it is not sitting in the operating balance where it gets spent. Keeping it in its own account matters, because money you can see in checking is money that quietly funds a truck you did not plan to buy. The reserve is the first thing that lets you sleep through a slow February, and it is the thing most shops skip until the February that teaches them why.

When should you set up a line of credit?

Set up a business line of credit before you need it, while the books look good and you are not desperate, because that is the only time the bank wants to lend. The shop that walks in needing money this week to make payroll is the shop the bank is most reluctant to fund. Apply when the financials are strong and the answer is easy, then let it sit unused until the day the forecast shows a gap.

A line of credit is a revolving facility: you draw what you need, pay interest on what you drew, and repay it as cash comes in, then it is available again. The right job for it is bridging a timing gap, not funding a loss. You draw to cover payroll in a week a big receivable lands late, then repay the draw when that receivable comes in a week or two later. That is a healthy use. Drawing every month and never paying it back down is a different signal entirely: that is the line funding losses, which means the problem is not timing, it is the business, and more borrowing buries it deeper.

Watch the difference between bridging and funding. A line that zeroes out regularly is doing its job. A line that only climbs is a warning your margin or your collections are broken, and that is a conversation with your accountant, not a bigger limit. Talk to your lender about sizing the line to your weekly burn and your collection cycle, and get it in place this quarter, not the quarter you need it.

Growth burns cash

Growth burns cash, and this is the trap that takes down good shops in their best year. More jobs mean more labor and more material going out before the matching cash comes in, so every dollar of new revenue needs working capital behind it to carry the gap between spending and collecting. You can grow yourself straight into a cash crisis while every job on the board is profitable.

The math is blunt. If your money cycle runs about 60 days, the time from spending on a job to collecting for it, then growing from 3 million to 5 million in annual revenue adds roughly 333,000 dollars of receivables and work in progress you now have to fund out of your own cash or a credit line. The faster you grow, the bigger that number, and it shows up before the extra profit does. The big remodel that doubled your month also doubled the cash you have floating on the street waiting to come home.

So fund the growth before you take it on. Before you say yes to the job that jumps you a tier, run it through the forecast: the payroll it adds, the material it needs up front, the weeks until it pays, and whether the reserve plus the line of credit can carry that gap. Growth is good when it is funded and dangerous when it is not, and the only way to know which one you have is to put the new work on the 13-week forecast before you commit to it. Plenty of shops have grown into the ground. The ones that do not are the ones that funded the gap first.

Work in progress, over-billing, and the schedule of values

On project work, work in progress is the cost you have put into a job that you have not billed yet, and it ties up cash inside the job. The cash question on every project is whether you are billing ahead of your cost or behind it. Bill ahead and the job funds itself as it runs. Bill behind, called underbilling, and you are financing the customer's project out of your own account until you catch up.

The lever here is the schedule of values, the breakdown of the contract into line items you bill against as you complete them. Where the contract and the work honestly allow, front-load the schedule so the early line items, mobilization, rough-in, the work you do first, carry a fair share of the value. That pulls cash in early in the job when your costs are highest, instead of leaving the money stacked in the final line items you cannot bill until the end. This is normal practice and most owners and their reviewers expect some of it. Push it too far past the actual work in place and you cross into overbilling that a sharp project manager or auditor will catch and claw back, and on a job that later goes sideways an aggressive front-load can leave you having billed money you have not earned. Keep it defensible: each draw tied to work actually in place.

Track billings against cost on every project, monthly at least, and know whether each job is overbilled or underbilled. The underbilled job is quietly lending the customer your cash, and a pile of underbilled work is a cash problem hiding inside a profitable backlog. Set the schedule of values up with your accountant or project manager so it is both cash-smart and defensible.

Seasonal cash: save in the busy months for the slow ones

Most plumbing shops have a season. The busy stretch throws off more cash than the lean stretch, and the mistake is spending the busy-month cash as if every month looks like that. The slow month is coming, the fixed costs do not slow down with it, and the shop that did not save through the peak meets winter with an empty account and a full payroll.

Plan the year, not the month. Use the 13-week forecast plus a rough annual view to see where the lean weeks fall, then build the reserve through the strong season specifically to carry the weak one. If summer service work pays for the slow weeks after the holidays, then summer is when you sweep cash into the reserve, not when you upgrade every truck. The reserve target and the seasonal swing are the same conversation: how many weeks of operating cost do you need banked to get from the last good month to the next one.

Smoothing the revenue itself helps as much as saving against the dip. Recurring service agreements and maintenance plans bring in cash during the slow months when one-off calls dry up, which is part of why they are worth selling beyond the work they book. The flat-rate pricing guide covers building those plans into the price book. On the cash side, the value is steadier inflow across the year, which makes every other number in this guide easier to manage.

Owner draws: pay yourself without stripping the cash

You have to pay yourself, and you also cannot pull so much out that the business cannot cover its own obligations. Stripping the cash, taking a big draw the week before payroll because the balance looked healthy, is how an owner causes the exact crisis this guide is about. The balance looked healthy because the payroll and the supplier run had not hit yet.

Pay yourself on a plan, not on impulse. Set a regular owner's compensation, a number the forecast can cover every period the way it covers payroll, and take additional profit distributions only from cash that is genuinely surplus after the reserve is funded and the upcoming obligations on the forecast are covered. The discipline is to fund the obligations and the reserve first, then pay the surplus, rather than paying yourself first and hoping what is left covers the bills.

And keep your own pay separate from the tax money sitting in the account, which is the subject of the next section. Cash in the account is not all yours to draw against, because a chunk of it belongs to other people before it ever belonged to you. The owner who learns that the hard way usually learns it from the tax agency.

Set aside the tax money, because it is not yours

The payroll taxes you withhold and the sales tax you collect are not your money. You are holding them for the government, and spending them to cover a slow week is borrowing from the one lender that does not negotiate. The penalties and interest are steep, the trust-fund portion of payroll tax can reach the owner personally, and an agency that decides you used withheld money for operating cash can make life very difficult. Treat that cash as already gone the moment it lands.

Set it aside as you go. The clean method is a separate tax account that money moves into every time you run payroll and every time you collect sales tax, so the operating balance never shows tax money you might mistake for working capital. When the deposit or the filing is due, the cash is already sitting there and the payment is a non-event. The shop that keeps tax money mixed into checking is the shop that finds out at filing time it spent money it never had.

Income tax is the related trap. Set aside an estimated share of profit through the year so the quarterly estimates and the year-end bill do not land on an account that already spent the money. How much to reserve for income tax depends on your entity and your situation, so set the percentage with your accountant and move it to the tax account on the same schedule as everything else. The rule across all of it is the same: the tax money is not yours, so do not let it sit where it can be spent.

What do you do when cash gets tight?

When the forecast shows a week going negative, you work the levers in order, hardest-working and cheapest first, and you start while you still have weeks of runway rather than the morning the account is empty. There is a sequence, and following it beats panicking.

First, collect the AR. The fastest cash you can raise is money already owed to you, so call the oldest and largest balances, offer to take a card right now, and chase the receivable that is supposed to land that week. The collections guide has the full process for this. Second, stretch the payables fairly. Use the full term you have with suppliers, let the early-pay discount go this once if you must, and where you have a real relationship, call ahead and ask for a few extra days rather than just paying late and earning a credit hold. Third, tap the line of credit you set up earlier, drawing enough to bridge the gap and planning the repayment for the week the receivable comes in. Fourth, cut the discretionary spend, the non-essential purchases, the upgrade that can wait, the draw you do not have to take this period.

Do them in that order because the cost rises as you go down the list. Collecting your own money is free. Using supplier terms is nearly free. The line of credit costs interest. Cutting spend costs nothing in dollars but it cannot raise cash you have already committed. If you are at the bottom of the list every month, the problem is not a timing gap, it is the business, and that is a conversation with your accountant about pricing, margin, and collections, not another draw on the line.

Update the forecast every week

A cash forecast is only worth anything if it is current, so update it weekly and compare what actually happened against what you projected. The forecast you built three months ago and never touched is telling you about a world that no longer exists. The discipline is the weekly cycle: drop the week that passed, add a new week at the far end, and reset every number against reality.

The most useful thing in the update is the actual-versus-forecast read. The customer you put in week three paid in week five, so now you see how your timing assumptions are running and you correct them. The job that cost more than planned shows up as a bigger outflow than you forecast, and you catch the margin slip early. Over a few cycles you learn your own collection timing well enough that the forecast gets genuinely accurate, which is when it starts catching crunches a month out instead of a week out.

What makes the weekly update fast is the numbers being current to begin with. When invoices, payments, and job costs flow out of one system in real time, the cash-in side of the forecast is reading actual collections and actual receivable timing instead of you re-keying it from three places. Running the field work through FieldOS, where the visit, the invoice, and the payment live together, means the data feeding the forecast is the data from the jobs, not a stale export. The forecast is still your job to read and decide on. The tool just keeps the inputs honest so the weekly update takes minutes instead of an afternoon.

You cannot forecast on stale books

Clean, current books are the floor under everything in this guide, because a forecast is only as good as the numbers it starts from. If the bookkeeping is six weeks behind, you do not actually know your cash position today, let alone your position in week nine, and every figure on the forecast is a guess stacked on a guess. Real-time books are not an accounting nicety here. They are what makes cash management possible at all.

The slow leak is re-entry. When the field invoice gets re-keyed into the accounting software, and the payment gets entered somewhere else, and the job cost lands in a third place whenever someone catches up, the books are always behind and always a little wrong, and the AR aging you would read to forecast collections is a snapshot from whenever the bookkeeper last reconciled. You cannot manage cash weekly off books that close monthly.

The fix is one record from job to cash. When FieldOS captures the visit, builds the invoice off the price, takes the payment at the door, and feeds that straight through to the books, your cash position and your receivable timing are current on any morning you look, which is exactly what the weekly forecast update needs. Confirm how it lines up with your accounting setup with your bookkeeper, but the goal is the same either way: books current enough that the forecast is reading today's reality, not last month's.

The cash metrics to watch

You run cash management off a small set of numbers, watched on a regular cadence, so a slide shows up while it is still fixable. Four carry most of the weight, and each one catches a different failure before it reaches the bank balance.

Cash on hand in weeks is the reserve question: how many weeks of payroll and fixed overhead could you cover with no money coming in. It is the readout on whether the reserve is real. Days sales outstanding, or DSO, is the average days it takes to collect after you bill, and a rising DSO means collections are slipping even when revenue looks fine. The collections guide covers DSO in full. The current ratio is current assets over current liabilities, a quick read on whether you can cover near-term obligations; above 1 to 1 means you can on paper, though it does not tell you about timing the way the forecast does. Burn rate is how fast the account is dropping in a stretch with more going out than coming in, and against your reserve it tells you your runway, how many weeks until zero if nothing changes.

Read them together and on a schedule. No single one is the whole picture, and the point is not a perfect score on any of them. It is catching the trend early, while a slipping DSO or a shrinking cash-on-hand is a phone call and not a missed payroll. Set the targets with your accountant against your own history and your own work mix.

Commercial retainage drags your cash

On commercial and builder work, retainage is the percentage held back from every progress payment until the whole project closes out, commonly 5 to 10 percent. It is your money, earned and unpaid, sitting in someone else's account for months after your work is done and tested. On a thin-margin job the retainage can be the entire profit, parked and waiting, and across a busy commercial shop the outstanding retainage can tie up a meaningful slice of a year's revenue at any given time, the exact share depending on your retainage rate and how long projects hold it before release.

On the forecast, that means retainage is cash you do not get to count until closeout, often far out past the rest of the job's money. Do not forecast it as if it pays with the regular draws, because it does not. Track it as its own line in your receivables so it does not vanish, chase the release as actively as any other past-due balance, and on the cash side, build the reserve to carry the gap that withheld retainage creates while you wait. The collections guide covers the retainage and commercial-terms wrinkles in full. For cash flow, the one thing to remember is that retainage is real money you cannot spend yet, so plan the timing around getting it without it.

The failures that empty the account

The same handful of mistakes show up in nearly every cash-strapped shop, and none of them are about the quality of the plumbing. They are all about the timing of the money.

Confusing profit with cash, and spending against a P&L that says you earned money the bank does not have yet. Running with no forecast, so the tight payroll week is a surprise instead of something you saw three weeks out. Keeping no reserve, so a single slow month or one late check empties the account with nothing behind it. Setting up the line of credit only when you are already desperate, which is exactly when the bank does not want to lend. Growing broke, taking on the bigger backlog without funding the working capital it needs, so a great year ends in a cash crisis. And spending the payroll tax and sales tax money, the cash that was never yours, to cover an operating gap, which trades a short squeeze for a problem with the one creditor that does not negotiate. Each one is fixable, and each one has emptied somebody's account this month.

The cash levers, and what each one does

When cash tightens, you reach for levers, and it helps to know what each one actually does to the timing before you pull it. The table below is the working set, what it moves, and the note that keeps you from using it wrong.

Cash flow checklist

Common mistakes

• Confusing profit with cash and spending against a P&L the bank account cannot back.
• Running with no cash forecast, so the tight payroll week is a surprise instead of seen weeks out.
• Keeping no reserve, so one slow month or one late check empties the account.
• Setting up the line of credit only when desperate, which is when the bank is least willing to lend.
• Growing broke: taking the bigger backlog without funding the working capital the growth needs.
• Spending the payroll tax and sales tax money to cover an operating gap.
• Prepaying bills or buying material weeks early and giving away timing for no return.
• Drawing owner pay off a balance that looks healthy only because payroll has not hit yet.

Standards, references, and where to get the rules right

Cash flow management is standard financial practice, not a code, so the references are the accepted tools and the people who should set your specifics. The rolling 13-week cash forecast and the cash reserve are common practice for businesses with lumpy, slow-paying revenue, and construction is known for running tighter cash and higher DSO than most industries because of milestone billing, long terms, retainage, and the gap between paying for work and collecting for it. Set your forecast categories, your reserve target, and your metric targets with your bookkeeper or accountant against your own books and your own history, not a generic benchmark.

On financing, a business line of credit set up before you need it is the standard tool for bridging timing gaps, and the rule that holds across lenders is to use it to bridge, not to fund losses. Size it to your weekly burn and your collection cycle with your lender, and apply while the financials are strong. On taxes, the payroll taxes you withhold and the sales tax you collect are held in trust and are not operating capital; the penalties for spending them are severe and can reach the owner personally, so set the set-aside method and the income-tax reserve percentage with your accountant and move the money to a separate account on a schedule.

Across all of it the through-line is the same and it is worth repeating: cash is a fact and profit is an opinion, so run the 13-week forecast and watch cash harder than profit, and set up the reserve and the line of credit before you need them, not the week you do. For the specifics, your accountant owns the books, the metrics, and the tax handling, and your lender owns the line of credit terms. Confirm any number here against your own situation before you rely on it.

Terms and definitions

Cash management carries its own vocabulary, and the same idea shows up under a few names across your accounting software, a forecast, and a loan agreement. These are the terms used in this guide.

Cash flow

The money actually moving in and out of the account, distinct from profit on the P&L

13-week cash forecast

A rolling week-by-week projection of cash in against cash out for the next quarter

Working capital

The cash and near-cash needed to fund the gap between spending on work and collecting for it

Cash reserve

Money held on purpose, sized in weeks of payroll and overhead, to absorb slow stretches

Line of credit

A revolving facility you draw on and repay, used to bridge timing gaps, not fund losses

Burn rate

How fast cash drops in a period; against the reserve it gives your runway in weeks

Work in progress (WIP)

Cost put into a job that is not billed yet; underbilling ties up your cash inside the job

2/10 net 30

A supplier term: 2 percent off for paying in 10 days, or the full amount due at 30

Retainage

A percentage held back from progress payments until closeout, often 5 to 10 percent

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