Cash flow management is a critical tool for any business. But it’s especially important for construction companies, which operate in a notoriously slow-paying industry. Read on for some useful tips that may help your business find a cash flow foothold in today’s uncertain economy.

Scene on the ground

In some ways, the landscape looks promising. As of this writing, interest rates appear likely to hold steady or decline slightly. Meanwhile, data center, warehouse and public sector projects are raising demand in some areas. In addition, the One Big Beautiful Bill Act (OBBBA), enacted last year, includes several tax provisions favorable to construction companies that began taking effect in 2026.

On the downside, the OBBBA also removed several incentives associated with sustainable construction projects. Meanwhile, tariff-related uncertainties continue to disrupt certain critical supply chains, and ongoing immigration operations continue to affect the construction labor market. Additionally, inflation remains a factor limiting demand in some sectors.

Such countervailing forces make proactive cash flow management vital. Without it, you can run into serious problems when, as so often happens in construction, bills come due before you’ve received the associated project revenues.

3 ways to break free

If your company has encountered cash flow blockages over the past year or so, you’re not alone. Here are three tried-and-true ways to potentially break free:

1. Choose jobs and negotiate contracts strategically.

Before bidding on a major project, confirm the owner’s ability to pay by running a credit check and reviewing the person or entity’s track record of timely payments on past jobs. This may not be feasible for every project, but it’s a practice worth considering for higher-risk work.

As for the contract, don’t settle for boilerplate language. Try to negotiate cash-flow-friendly terms. For instance, ask whether the owner will waive retainage if you provide a retention bond or a letter of credit. An owner who insists on some retainage might at least be open to a progressive arrangement that phases out as more work is completed. Also, try to secure an upfront payment to cover costs you’ll incur before breaking ground. And seek to include contractual penalties for late payments.

2. Bill better.

It’s easy to complain about owners dragging their feet, but payment delays aren’t always entirely their fault. Some contractors contribute to the problem by billing inconsistently. Be sure you’re using a formal schedule and sticking to the prescribed dates. Doing so helps “train” project owners to expect an invoice on a set date and to pay promptly. The schedule, and your contract, should include an escalation process for past-due payments, along with a reminder sent shortly before the due date.

Payment delays may also occur when invoices are confusing or incomplete. If you use a template, review and revise it regularly to ensure you’re billing clearly and completely. Leverage technology as feasible. For instance, many enterprise resource planning systems allow you to run “cash flow by job” reports to support strong billing. Alternatively, a simple spreadsheet may be helpful.

3. Take advantage of financing (within reason).

Incurring debt carries risks. But financing allows you to spread payments over time, which is usually better for cash flow than paying in full, unless you receive a significant discount for doing so. And remember, you can finance many more expenses than just materials, supplies and equipment; insurance is just one example.

Changes to the business interest expense deduction in the OBBBA make financing even more appealing. Starting with the 2025 tax year, amortization and depreciation are added back when calculating adjusted taxable income (ATI) for the 30% ATI limit on the deduction. As a result, you may be able to deduct more business interest than you have in recent years.

Strong grasp

You can’t control macroeconomic conditions. Having a strong grasp of cash flow management, however, can grant you some peace of mind as you grapple with the construction industry’s many challenges. For guidance along the way, work closely with your financial advisor.

 Follow the numbers: Cash flow metrics

When it comes to cash flow management, top-performing construction companies follow the numbers. That is, they track key financial metrics to catch potential issues before major problems develop. The good news is you may already be calculating some of these measures if your surety requires it. And if you’re not, now’s a good time to start. Here are three to consider:

1. Current ratio. It measures your construction business’s ability to meet short-term obligations by dividing current assets by current liabilities. A ratio at or below 1 suggests a company may struggle to cover short-term obligations without adequate cash flow. According to the Construction Financial Management Association’s (CFMA’s) 2025 Financial Benchmarker report, the 2024 industry benchmark for current ratio was 1.7.
2. Days in accounts receivable (or days sales outstanding). This equals the average time between issuing an invoice and receiving payment. A number over 30 days could indicate an impending cash shortage. The 2024 industry benchmark was a whopping 55.2 days, according to the CFMA report.
3. Days of cash. Calculating this metric shows how many days you can operate without bringing in additional revenue. A company with 20 or fewer days of cash is generally considered at risk. The 2024 industry benchmark was only 27 days, per the CFMA report.

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