For many small builders, remodelers, and contractors, success isn’t solely about landing jobs. It’s about managing the lag between ordering materials, sending customer invoices, and receiving payments. That’s where working capital makes or breaks the business.
Working capital—the cash you available to cover short-term expenses—keeps the lights on, the trucks fueled, and your crew paid. In today’s economy, with high interest rates and rising costs, managing working capital isn’t just smart—it’s essential. When you fail to monitor cash flow closely, even profitable jobs drain resources and hinder growth.
According to a Built study published in Morningstar, in May 2025, 70% of contractors report that payment delays are the top threat to their business, surpassing concerns about labor shortages, tariffs or inflation. Delays result in hidden construction costs, project cancellations and various other expenses.
In this blog, let’s explore why working capital is crucial, its daily impact on your business, and what can be done to strengthen it.
The Real Impact of Working Capital on Small Builders
When you have a healthy cushion of working capital, everything flows more smoothly. You can say ‘yes’ to the next job with confidence, order materials in bulk to save money, and avoid juggling multiple debts to meet payroll.
When working capital runs thin, as a small builder, you face real consequences, even if the business looks profitable on paper.
And yet, appearances can be deceiving. As Dave Yoho, a respected voice in the remodeling industry, explains: “Many companies appear to operate at a profitable level yet have not increased their level of working capital to accommodate growth.”
Some potential consequences are:
- Project Delays: If you can’t pay suppliers on time, materials don’t arrive, and deadlines slip. According to a Built study, more than a third of small builders have experienced project delays or cancellations due to financing issues.
- Lost Opportunities: You might have to turn down a profitable job simply because you can’t find the upfront costs that get a job started.
- Strained Relationships: Late payments can harm relationships with your subcontractors, suppliers and crew.
- Mental Load: Financial uncertainty is stressful, and you’ll likely spend more time chasing payments than managing your projects.
Consider ways to enhance your working capital to operate your business more efficiently during economic uncertainty. This approach will help you maintain liquidity while also seeking growth opportunities
Cash flow is the No. 1 challenge facing subcontractors—bigger than profit."
Common Challenges in Managing Working Capital
Even for experienced builders, managing working capital isn’t always straightforward. A few recurring challenges can quietly drain cash flow and catch small teams off guard.
- Delayed Payments
Delayed payments are one of the biggest threats to small builders. Of the 70% of contractors who face payment delays, 10% last over 30 days or more past their invoice date; that lag creates a cash gap, forcing builders to dip into reserves, use credit, or delay paying their vendors.
- Inventory Management
Buying in bulk can save money, but overstocking ties up cash you may need elsewhere. On the other hand, under-ordering can stall projects and erode client trust.
Finding the balance is tricky, especially when suppliers are dealing with their delays. Use software to closely track usage and utilize job management tools to prevent overordering while maintaining sufficient material on hand to remain efficient.
- Project Overruns
Unexpected site conditions, change orders, subcontractor delays, and project overruns are common, and they’re expensive.
Even if the job is profitable overall, unbudgeted costs in the early phases can quickly erode working capital. Without a buffer, you may need to slow down work, push out payments, or borrow to get across the finish line. And when one job gets out of sync, it often throws off your next one, too.
The Importance of Cash Flow Planning
Cash flow planning provides small builders a way to get ahead. It involves forecasting how much cash is coming in and going out over a specified period for your business, such as week by week, month by month, or project by project. For small builders, it can mean the difference between avoiding last-minute scrambles, strategically timing payments, and being prepared to make informed decisions on new work.
“A lack of cash flow can create immense problems,” noted Yoho.
Cash flow is to finances what a schedule is to job site harmony. Instead of waiting until money gets tight, you’re proactively planning and making necessary adjustments before cash flow becomes a crunch.
Tools such as Buildxact simplify the process by giving builders a clear, real-time view of where the money’s going—and what’s coming in by connecting project activity and invoices to popular accounting software like Xero or
Strategies for Managing Working Capital
A recent study by Built, cited in Construction Dive, reveals that 65% of subcontractors are more concerned about cash flow than profit. If you’re a small builder, this hits home. Here are steps you can take to regain control:
- Forecast with Precision — Utilize job management software, such as Buildxact, to outline upcoming expenses and expected income. Taking a forward-looking perspective allows you to prepare for potential shortfalls before they occur.
- Invoice Promptly and Follow Up — Don’t hesitate to send that invoice. Buildxact will trigger reminders, automate emails, and keep the money flowing.
- Negotiate Supplier Terms — You might be able to secure 30- or 60-day payment terms from suppliers. This extra breathing room can make a significant difference.
- Cut What You Don’t Need — Regularly review subscriptions, tool leases, and job site rentals. Eliminate what isn’t adding value.
With a few smart moves, you can begin planning for growth instead of merely reacting to cash flow problems.
Building a Solid Financial Foundation
Working capital isn’t just an accounting metric—it’s what gives small builders like you room to breathe, grow, and weather the unexpected. When it’s managed well, you can take on new jobs with confidence, pay your team on time, and invest in the future of your business without losing sleep over cash flow gaps.
However, when it’s tight—or worse, ignored—it adds stress to every decision you make, both on and off the jobsite.
The good news? Builders don’t have to go it alone. With thoughtful planning, the right tools, and a proactive mindset, managing working capital becomes part of building a more resilient business.
Start with visibility. Use software like Buildxact to track job costs, invoice faster, and get a real-time handle on your cash position.
Focus on flow. It’s not just about making a profit—it’s about getting paid on time and knowing where your money is going.
In today’s economy, working capital is more than a number. It’s your margin of safety—and your springboard to growth.
Learn More with Buildxact
Understanding Working Capital
Working capital is the cash available to keep your business running day to day. It’s what’s left when you subtract what you owe (like supplier invoices and payroll) from what you own (like cash in the bank and unpaid customer invoices).
Working Capital = Current Assets – Current Liabilities
For builders and remodelers, it’s the buffer that pays your crew, orders materials and keeps you on track between jobs. Because you often pay upfront for labor and supplies, managing working capital effectively is critical, especially since customer invoice and payment come long after incurring projecet expenses.
Example:
Say you’re working on a kitchen renovation. You order $15,000 in cabinets, pay subcontractors weekly, and don’t see a cent from the homeowner until the job is 80% complete. If you don’t have enough working capital to float those upfront costs, the project could stall despite the overall profit you estimated.
When working capital is strong, you’ve got options and peace of mind. When it’s tight, one delayed payment can throw your whole schedule—and stress level—off balance.
