Free tool

Construction Cash Flow Calculator

Profitable jobs fail. Not often for lack of margin — usually because the money arrives after the payroll it was meant to cover. This models the two things that cause it: retainage withheld against work you have already done, and the lag between billing and being paid. The number to watch is not the total, it is the lowest balance.

Lowest cash balance

-$70,000.00

Previous payments exceed what has been earned — this period bills nothing and the difference is owed back.

Monthly outflow: $95,000.00
Total cash in: $450,000.00
Total cash out: $570,000.00
Net cash flow: -$120,000.00
Ending balance: -$70,000.00
Retainage cash gap: $60,000.00

Month	Earned	Retainage	Cash in	Cash out	Net	Balance
1	$100,000.00	$10,000.00	$0.00	$95,000.00	-$95,000.00	-$45,000.00
2	$100,000.00	$10,000.00	$90,000.00	$95,000.00	-$5,000.00	-$50,000.00
3	$100,000.00	$10,000.00	$90,000.00	$95,000.00	-$5,000.00	-$55,000.00
4	$100,000.00	$10,000.00	$90,000.00	$95,000.00	-$5,000.00	-$60,000.00
5	$100,000.00	$10,000.00	$90,000.00	$95,000.00	-$5,000.00	-$65,000.00
6	$100,000.00	$10,000.00	$90,000.00	$95,000.00	-$5,000.00	-$70,000.00

The lowest balance is the number that matters. A job can be profitable across its life and still run out of money in the middle — that is what the balance column is for.

How the calculation works

Earned: Contract ÷ Project months; Allocated in cents; the final month carries any remainder.
Retainage: Earned × Retainage %
Billed: Earned − Retainage
Cash in: Billed from (month − payment delay); Nothing arrives during the delay.
Cash out: Payroll + Materials + Subcontractors + Equipment + Overhead
Net: Cash in − Cash out
Balance: Previous balance + Net; Opening at your starting cash.
Retainage cash gap: Total retainage withheld; Earned, uncollectable, still funding payroll.

Worked example

Contract amount: $600,000.00
Total cost over 6 months: $570,000.00
Profit on paper: $30,000.00
Starting cash: $50,000.00
Retainage at 10%: $60,000.00
Payment delay: 1 month
Total cash in: $450,000.00
Total cash out: $570,000.00
Ending balance: −$70,000.00
Lowest balance: −$70,000.00

A $30,000 profit and the account is $70,000 down at completion. Sixty thousand is retainage on work already performed, and the final month's billing has not been collected yet because of the one-month lag. Nothing here is a loss — every dollar is recoverable — but you have to fund it for months, and that funding is what a line of credit is actually for.

How to use it

01Enter the contract amount and how many months the project runs. Earnings are spread evenly across them.
02Set retainage to your contract rate — this is the money that is earned but will not arrive until release.
03Set the payment delay to how long after billing you are genuinely paid. Net 30 is one month; net 60 in practice is often two.
04Enter your monthly costs by category. These are what leaves the account whether or not a payment has arrived.
05Find the lowest balance and the month it happens. That is the working capital the job actually requires.

Common mistakes

Planning against profit rather than cash

A job can be profitable across its life and insolvent in the middle of it. Profit is measured at the end; payroll is due on Friday. The lowest balance is the number that decides whether you get to the end.

Treating retainage as available money

It is earned revenue you cannot spend. Across several jobs at 10% it becomes a substantial permanent balance financing someone else's project, and it does not pay a supplier.

Using contract terms instead of actual payment behaviour

Net 30 means what the contract says. Model what the owner actually does — if payments consistently land at 45 or 60 days, forecasting on 30 puts the shortfall in a month you were not watching.

Forgetting the final billing arrives after completion

With any payment lag, the last month's work is collected after the job ends, while the costs were paid during it. The balance at completion is almost always worse than the balance at profit.

Questions

What is construction cash flow?

The timing of money in and out of a project, as distinct from its profitability. Cash flow determines whether you can pay this month's costs; profit only tells you how the job ends.

How does retainage affect cash flow?

It withholds a percentage of everything you earn until release, so a share of completed work sits uncollected for months. At 10% on a $600,000 contract that is $60,000 you have earned, cannot spend, and must still fund labour and materials against.

What is the lowest cash balance and why does it matter?

The deepest point the account reaches during the project. It is the working capital the job requires — if you cannot cover it from reserves or a facility, the job cannot be delivered regardless of its margin.

Why is the ending balance negative on a profitable job?

Because retainage has not been released and the final billing has not been collected. Both are recoverable; both arrive after the costs were paid.

How do I improve project cash flow?

Bill promptly and accurately, negotiate retainage reduction at a completion threshold where the contract allows it, weight the schedule of values to reflect early work honestly, and match subcontractor payment terms to when you are actually paid.