How do contractors usually manage cash flow throughout a project?

Contractors typically manage cash flow throughout a project by utilizing progress billing and retaining earnings. Progress billing allows contractors to invoice clients based on the work completed at various stages of the project, rather than waiting until the entire project is finished. This helps to ensure a steady stream of revenue that aligns more closely with the expenditures of the project.

Retaining earnings also plays a critical role in cash flow management. This involves holding back a certain percentage of payment until specific project milestones are met or until the project is completed. This practice not only provides a safety net for the contractor in case of unforeseen costs but also incentivizes the completion of the project to the client's satisfaction.

Overall, employing these strategies is essential for maintaining liquidity, ensuring that contractors can pay their suppliers, cover labor costs, and manage operational expenses effectively throughout the lifecycle of the project.