Your Busiest Month Might Be the One That Breaks You
Your Busiest Month Might Be the One That Breaks You
Spring 2008, Smith Mechanical had six trucks on the road and twelve guys on payroll. The phone rang every day. I was turning down work.
Then October.
Two builder accounts gone in the same week. Receivables that had been stretching — 45 days, 60, 90 — suddenly looked like money I'd never see. Payroll due Thursday. Materials account running hot all summer because we were busy and I hadn't been watching it. The busy season didn't cause what happened next. But it built every bit of the exposure that made it fatal.
The dangerous months aren't the slow ones. The dangerous months are the ones where you're too heads-down to look up.
The Gap Between Revenue and Cash Is Where Shops Die
When work picks up, you buy more materials — upfront, on credit, on your supplier account. You run more payroll. Truck costs go up. All of that money leaves the account in real time, weekly, sometimes daily. The invoices you're generating go out net-30. They get paid net-45, or net-60, or next Friday, or whenever the GC feels like cutting checks.
Revenue goes up. Cash goes down. If you're only watching the schedule, you'll miss it entirely.
I watched this happen to shops I respected in 2008. Good contractors. Guys who'd been in business fifteen years. They weren't bad operators — they were undercapitalized, and the busy season of 2007 and early 2008 made it worse, not better. Every new job was a new cash obligation before it was a new dollar collected.
The schedule being full is not the same as the account being full. When it's busiest is exactly when you need to run the 90-day number — and exactly when nobody does.
The 90-day rule: add up your weekly nut — payroll, truck notes, insurance, rent, whatever you can't stop paying no matter what. Multiply by thirteen. That's what you need in cash to survive ninety days with zero new revenue. When it's slow, every shop owner knows this number because they're scared. When it's busy, nobody runs it.
More Jobs Means More Money Going Out Before Any Comes In
When I went from two trucks to four, I added two payrolls, two sets of van stock, two insurance lines, two fuel costs — before either truck generated a dollar of collected revenue. Not billed. Collected. Then four to six. Same math again.
Each truck I added, the obligation started the first week. The money from that truck showed up six weeks later, maybe. Eight weeks if the GC was slow. I was carrying that gap on whatever cash I had in reserve.
If the reserve is there, you survive it. If it isn't, you don't.
In fall 2008, my builder receivables stretched from 45 days to 110. Not because those builders were broke — not yet. They stretched because the GCs were managing their own cash on the backs of their subs. The draws were funded. The money just wasn't making it to me, because I was at the end of the payment chain and nobody was in a hurry.
I kept working. The gap kept widening. I was too busy to stop and do the math.
The Owner Is the Last One to See It Coming
The business-coaching version of this story blames the owner for being disorganized or undisciplined. That's horseshit.
The busy season buries small shops because being in the field all day is incompatible with watching your cash position. You can be in a crawlspace in Shrewsbury or you can be looking at your AR aging. You cannot do both.
In a small shop — three trucks, five trucks — the owner is usually the best tech on the crew. When it gets busy, he's the first one with his head down. The back office runs on autopilot. The bookkeeper, if there is one, handles payables and payroll and sends invoices. Nobody pulls the aging report every Friday. Nobody calls on the 46-day invoices before they hit 60.
The death of the working foreman is what makes this worse. When you don't have a guy who can run three guys and still get dirty without you being there, you can never step back. You're always the most essential person on the job — which means you're always the last person to see what's happening in the books. I wrote about this for a regional trade rag back in 2014 and I'm still mad it isn't a bigger conversation.
I measured success in trucks for a long time. Six trucks, twelve guys — that felt like winning. What it actually meant in October 2008: six payrolls, six insurance lines, six truck notes, and a cash reserve I'd been spending down all summer buying materials for a busy season I'd convinced myself was proof the business was healthy.
It wasn't proof of anything except exposure.
The Invoice You Don't Chase Is a Loan You Didn't Agree To
In 2011, Whitman Builders out of Marlborough owed me $61,000 across four jobs. I'd been hearing "next Friday" for four months. He wasn't broke yet. He was paying the guys who pushed hardest — which wasn't me, because I kept working and kept waiting and kept telling myself that cutting off a customer at 40 percent of my revenue would hurt more than waiting.
Whitman paid me 38 cents on the dollar in the bankruptcy.
The busy period before that bankruptcy was when I was most exposed. More open jobs, more of my guys' hours on his sites, more invoices outstanding. And because things were busy, I had the least time to stop and look at what I was actually doing. Every week I kept working was another week of my cash, my materials, my guys' time sitting unsecured on his jobs with nothing backing it.
The GC who pays in 60-plus days is using your labor as a free credit line. The contract says 30. The relationship says don't be difficult. The bank account says you're losing.
What I tell guys now: send a written demand the moment anything hits 45 days without a payment. Certified mail, return receipt. List the invoices, the amounts, the dates. Give a deadline — seven days. Then file the lien. Then stop working.
In Massachusetts, the mechanics lien clock has its own rules and I missed it on one job with Whitman because I was too buried to calendar it. Every state is different — know your window before you need it, because a busy stretch is exactly when the deadline passes without you noticing. The phone is ringing, you're pulling permits in three towns, and the clock runs out while you're on a roof in Northborough.
File it or lose it. That's the whole rule.
Busy Is Not the Same as Solvent
The coaching-class pitch says the answer to cash problems is to grow faster. Book more revenue. Scale the team. If you're struggling with cash flow when business is good, the instinct is to think you need more business.
Wrong. It kills shops.
If collections are lagging and your materials account is climbing, more jobs make the gap wider. You're buying your way into a bigger problem. Every new job is new materials on credit, new payroll, new exposure — with the same slow customer on the same slow schedule. More volume through a broken collection process doesn't fix anything. It accelerates the damage.
The shops that died in 2008 weren't bad shops. Undercapitalized shops. And the busy years before 2008 didn't fix that — they hid it, right up until they didn't.
One more thing worth saying: if you're running a flat-rate pricing book you bought on subscription, you don't actually know your cost of doing business. You don't know if the margin on a full month is real or fictional. You can be booked solid from now through September and underwater on every job, and the schedule won't tell you. You can be completely booked and quietly going broke. I've watched it happen. The owner finds out on payroll Friday.
What You Do Monday Morning
Before you book anything new this week, do two things.
Run the 90-day number. Open a spreadsheet — payroll, truck notes, insurance, rent, supplier minimums, everything you can't stop paying. Add it up. Multiply by thirteen. Write that number down. Now look at what's actually in your operating account this morning. Not what's booked. Not what's invoiced. What's in the account. If those two numbers aren't close, the schedule is lying to you. Run this every Monday before you call anyone back.
Pull your AR aging before you look at the dispatch board. Every Friday, aging report before schedule. Anything past 45 days gets a call — not an email — that afternoon. No new work on that customer's schedule until there's a payment in hand or a written commitment with a specific date. This came directly from watching my own receivables stretch to 110 days in 2008 while I told myself things were fine because the phone was ringing.
They were not fine. The aging report would have told me in twenty minutes.
Set a hard cap on any single customer's outstanding balance. Pick a number you could absorb if it went to zero. For me, late in my career, it was roughly one week's payroll. When a customer hit that number in open invoices, nothing new went on their schedule until something cleared. You'll lose a relationship or two with slow-paying GCs. That's a fine trade.
The work will be there next week. Look at the money first.
FAQ
If I'm fully booked three months out, why do I need to worry about cash?
Three months of work means three months of payroll, materials, fuel, and overhead going out before those jobs invoice — and then another 30 to 60 days before any of it comes back. A full schedule tells you where your guys will be. It says nothing about what your account looks like in six weeks when three jobs hit the net-30 window and two of those customers pay slow. Run the 90-day number and see if the math holds.
How do I know if a cash dip is normal or dangerous?
A normal dip is traceable. You bought a van, hired a guy, had a slow collections week — and you can name the specific invoice that lands Thursday and fixes it. A dangerous dip is when you can't point to the thing that fixes it. You're hoping the next job pays fast. You're floating on your line of credit and making minimum payments. If you've drawn on your operating line more than twice in the last quarter and paid it to zero zero times, that's not a dip. That's a pattern. Get the AR aging in front of you.
My biggest customer pays slow but I can't lose the account. What do I do?
Do the math first. Add up everything that customer owes you, how long they take to pay on average, and the faster-paying jobs you've passed up to keep their schedule clear. Compare that to what you'd need to replace the revenue. Most guys who run this exercise find the account is worth less than it feels, because slow payment is a cost they've never actually priced. Give them written terms. Enforce them. If they won't agree to that, they're telling you something.
When should I come off the tools and watch the books full-time?
When your absence from the books is costing more than your presence on a job. Most owners hit that somewhere around four or five trucks, but it's not really about the truck count. The real question is: who pulls the AR aging on Friday when you're in a crawlspace? If the answer is nobody, something has to change — either you come off the tools, or you hire someone whose job is watching the money.
Is 90 days in reserve actually realistic for a shop with four trucks?
Yes. Most shops don't have it. Both are true. I didn't have 90 days in October 2008, which is part of why it hit me as hard as it did. Build toward it. Thirty days, get to 45. Forty-five, get to 60. A busy shop has more exposure — more materials on credit, more payroll in motion — not less. The reserve is what keeps one bad month from becoming a shutdown.
What can I watch without hiring a bookkeeper?
Days outstanding on your open invoices — if the average is climbing week over week, something's wrong. Your operating line balance — if it's going up during a busy stretch instead of down, your collections aren't keeping pace with your costs. Your supplier account aging — if you're stretching your own payments to cover payroll, you're already in the gap. Open the accounts. Look at the numbers. That's the whole job.
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