How Do Duncan, OK Contractors Cover Crews and Materials Before a Job Pays?

On a service or specialty job the money moves in the wrong order. The crew is paid every second Friday from the first week, the supply house wants its account settled on its own terms, and the customer pays when the work is finished or when a draw is signed off. The contractor carries the difference, and a larger job means a larger difference.

An invented case, for illustration only: a crew payroll of $11,200 every two weeks, $18,400 of materials bought in week one, and a customer who pays 45 days after the start. Between the start and that payment sit 3 or 4 paydays in this example, which one depends on the calendar, so $52,000 to $63,200 leaves the account before any contract money arrives.

Small crews carry that gap with little cushion. County Business Patterns counted 84 construction establishments in Stephens County, OK for 2023, and 46 of the 84 (54.8%) had fewer than five employees. Specialty trade contractors (NAICS 238) made up 67 of the county's construction establishments that year, with $27.3 million in annual payroll, a figure for all 67 together and not for any single contractor.

Payroll and materials behave differently, so they can be funded differently. Payroll is a known amount on known dates, which suits working capital: one sum, repaid on a fixed schedule, sized to cover the paydays between the start of the job and the customer's payment. Taking more than the gap needs only adds interest.

Materials come in bursts, so a line of credit fits them better. The contractor draws to pay the supply house, the balance grows only by what was drawn, and the draw comes back down when the job pays. Interest runs on the balance outstanding, day by day.

Back to the invented case: in this example the $18,400 materials draw at 13.5% a year, carried for the 45 days until the customer pays, costs $306.25 in interest on a 365-day year, and the payment from the job clears the draw. The rate and the day count are made up; a funding partner sets the real terms in any offer.

Retainage stretches the gap past the end of the job. Under a retainage clause the customer holds back a share of each payment until the work is accepted. Invented figures again: on a $76,000 contract with 10% retainage, $7,600 stays with the customer after the last progress bill is paid, in this example until final acceptance.

Slow payers do the same thing without a clause. A receivables aging report, the list of open invoices sorted by how long each has been outstanding, shows which customers pay on terms and which run late. Following up on each late invoice with a statement and a call, and billing the day a phase is done rather than at month end, shortens the gap before any funding is involved.

When the gap is still there, the retainage and the late invoices belong in the forecast at the dates they are likely to be paid, not the dates on the contract. The construction page covers the trades and county figures behind these jobs, and the blog has a 13-week cash forecast worked with invented figures.

A funding partner reviewing a contractor's request can ask for papers that show both the work and the cash:

• A job list: each open contract with its value, percent complete, amount billed and amount still to bill.
• The signed contracts or purchase orders behind the largest jobs, including any retainage clause.
• The receivables aging report and the payables owed to supply houses.
• Recent business bank statements, showing payroll runs and customer deposits.
• Business tax returns for the last two years and this year's profit and loss to date.
• A list of current loans, leases and equipment payments.

None of that goes on the request form, which takes contact details and a few ranges; the papers come up after a call to (580) 205-7694 or during a partner's own review.