The short version
Every contractor should keep a rolling 90-day cash view. It does not need to be complicated. It needs to show expected cash coming in, expected cash going out, and the timing gaps between the two.
Why 90 days works
A 90-day window is long enough to see trouble coming and short enough to be realistic. A one-year forecast is useful for planning, but it can become guesswork. A weekly bank balance is useful for survival, but it may be too late. Ninety days gives the owner a practical operating view.
For contractors, cash pressure usually comes from timing. Receivables are delayed. Draws are not approved. Holdbacks are not released. Materials need to be purchased before the next billing. Payroll and remittances do not care that the customer is still processing paperwork.
What should be included
The cash view should include expected customer collections, deposits, progress draws, holdback releases, supplier payments, subcontractor payments, payroll, source deductions, HST, equipment loans, rent, insurance, credit card payments, owner draws, and tax installments.
It should also separate confirmed cash from hopeful cash. A signed payment certificate due next week is not the same as a customer who 'usually pays around then.' Optimism is great for sales. It is terrible for cash forecasting.
How to use it
Update the forecast weekly. Start with the current bank balance. Add expected inflows. Subtract expected outflows. Show the projected ending cash position by week. Highlight weeks where cash drops below a comfort level.
Then make decisions early. Push collections. Adjust supplier payment timing. Delay non-essential spending. Review whether new jobs require deposits. Talk to the bank before the line of credit is already maxed. The 90-day view does not solve every problem, but it keeps problems from hiding.
Where contractors get tripped up
The biggest mistake is using profit as a cash forecast. Profit does not show when cash will arrive. The second biggest mistake is ignoring taxes and remittances. HST and payroll source deductions should never be treated as available working capital. They are more like guest money: it is in your house, but it is not yours.
Another mistake is leaving holdbacks in the same bucket as normal receivables. Holdbacks need their own timing estimate because they behave differently.
Practical takeaway
A contractor does not need a perfect forecast. A contractor needs a forecast good enough to show when cash gets tight, why it gets tight, and what can be done before it becomes urgent.
How Seeds can help
Seeds can help you build a 90-day cash view that connects your jobs, receivables, holdbacks, payroll, HST, and supplier payments.
General information disclaimer: This article is general information only. It should not be relied on as tax, legal, assurance, or investment advice for a specific situation.
Seeds CPA
