Cash Flow Forecasting Basics for Florida Contractors

Most contractors check two things: the bank balance and the profit and loss statement. Neither one tells you what next month looks like. A slow-paying general contractor, a large material order, and retainage that has not been released can put a profitable business in a cash squeeze — and the P&L will still show a profit the whole way down.

Cash flow forecasting closes that gap. It is not complicated software or a financial model. It is a short, regularly updated list of what is coming in and what is going out, far enough ahead that you still have options when a shortfall appears.

Profit Is Not Cash, and the P&L Leaves Cash Out

Profit is what your books report after revenue and expenses are recorded. Cash flow is the actual movement of money through your bank account. The two diverge for two separate reasons, and it is worth keeping them apart.

The first is timing. You pay labor and materials well before the corresponding progress payment lands, and a slice of every payment is held back as retainage until the job is substantially complete. Your choice of accounting method changes how sharply this shows up in your reports, but it does not make the timing gap disappear.

The second reason is more often overlooked: large cash movements never appear on a P&L at all, under either method. None of these are expenses:

• Loan and equipment financing principal (only the interest hits the P&L)
• Equipment and vehicle purchases (capitalized, then depreciated over years)
• Owner draws and distributions
• Estimated income tax payments on pass-through profit

A contractor can post a strong month, make a truck payment, take a draw, and send in a quarterly estimated tax payment — and end the month with less cash than they started, with nothing in the P&L to explain it. A forecast is the only report that captures all four.

Build a 13-Week Rolling Forecast

Thirteen weeks is the practical horizon: one quarter, long enough to see a retainage release or a seasonal slowdown coming, short enough that you can still estimate each week honestly. Roll it forward one week at a time so you always have a full quarter of visibility. A spreadsheet is enough. The goal is visibility, not precision.

1. Start With Cash on Hand

Open with today's actual bank balance, not the balance in your books. Subtract anything already committed — outstanding checks, a scheduled payroll run, an ACH that has not cleared.

2. List Expected Cash In, by the Week You Expect It

Include progress payments, final billings, scheduled retainage releases, and any other deposits. Place each one in the week you realistically expect the money to arrive, not the week it is contractually due. Those are different weeks, and treating them as the same is the single most common reason a forecast stops being useful.

Separate committed from hoped-for: signed work with a clear billing schedule belongs in the forecast, work still being negotiated belongs in a note beneath it.

3. List Expected Cash Out

• Payroll and payroll taxes
• Subcontractor payments
• Material and supplier bills
• Insurance, rent, and regular overhead
• Loan and equipment payments — the full payment, principal included
• Estimated tax payments
• Equipment purchases and other one-time costs

4. Calculate the Weekly Position

Starting cash, plus expected inflows, minus expected outflows, equals projected ending cash. That figure becomes the next week's starting cash. Read down the column and find the first week that goes negative or drops under your comfort threshold — that week is the whole point of the exercise.

What Florida Law Fixes, and What the Contract Decides

Two of your forecast's biggest variables — how much gets held back, and when it has to be paid — are partly set by statute and partly by the contract you signed. Knowing which is which tells you where a forecast assumption is firm and where it is a guess.

On public construction work, Florida caps retainage: a public entity may withhold no more than 5 percent of each progress payment (Fla. Stat. §255.078(1)). That cap does not apply when the contract identifies a total cost of construction services of $200,000 or less (§255.078(6)), and it yields to conflicting federal requirements on federally funded projects (§255.078(5)).

On private work there is no statutory cap — the percentage and the release conditions are whatever the contract says, which is why the retainage line in your forecast has to be read off each contract individually. Florida does set a payment deadline: under Fla. Stat. §713.346(2), undisputed obligations for labor, services, or materials that go unpaid for 30 days trigger the statute's remedies. Note how that clock starts — 30 days after payment became due, or 30 days after the payer received payment, whichever occurs last. On a job where your general contractor is waiting to be paid, forecast from the later date.

For the mechanics of tracking these balances job by job, see retainage and progress payments. For projecting where an active job will land before it closes, see in-progress job costing.

Practical Tips That Keep a Forecast Useful

• Update it on a fixed day. A forecast reflecting three-week-old information is worse than none, because you will trust it. Pick a day and keep it.
• Compare forecast to actual. Each week, put last week's projection next to what really happened. Your estimates get better fast, and you learn which customers pay when they say they will.
• Track retainage separately. Held retainage is not ordinary accounts receivable and should never sit in the same bucket. It has its own release date.
• Set a floor, not a zero. Decide the minimum balance you need to operate — payroll plus a cushion — and treat any week that dips below it as a shortfall, even if it stays positive.
• Keep it on one page. A simple forecast you actually maintain beats a detailed model you abandon in March.

How Forecasting Changes Decisions

Seeing a shortfall six weeks out and seeing it six days out are different situations. With six weeks, you can accelerate a progress billing, push a non-essential purchase into the following month, ask about releasing retainage on a completed phase, arrange a line of credit before you need to draw on it, or re-sequence work. With six days, you are choosing which bill to pay late.

The forecast does not create cash. It converts a cash problem into a scheduling decision, made early, on your terms.

Start With Visibility

You do not need a perfect forecast to benefit from one. Even a rough weekly view of cash in and cash out, kept current, gives you earlier warning and better options than a bank balance ever will.

If you would like help building a practical cash flow forecast for your contracting business, contact KDM Accounting Services. We will help you set up a simple system you can maintain yourself.