Key takeaways
- Cash on a construction project follows the billing schedule, not the work, so the schedule is negotiated before the first shovel.
- A progress claim is a document the client's team can approve quickly, which means it matches their format and their cut-off.
- Holdbacks are governed by BC lien legislation and are confirmed with your lawyer, and they must be forecast as cash you will not see for a while.
- Unbilled work is cash you have spent and not asked for, so measure it on every project every month.
Construction companies in BC rarely fail because they cannot build. They fail because they finance their clients' projects without meaning to. Labour and materials go in daily, and the money comes back only when a progress claim is submitted, approved, certified and paid. Every week of delay in that chain is funded by the contractor's cash and operating line.
This guide covers the financial mechanics of project billing. The legal requirements around holdbacks, liens and contract terms are confirmed with your lawyer, and we work alongside them.
Negotiate the billing schedule with the contract
The time to fix cash flow on a project is before signing. Agree a deposit or mobilisation payment where the market allows. Agree billing milestones that are frequent and tied to measurable progress, or a monthly progress claim cut-off. Agree the approval period and the payment period in days, and who certifies progress. Agree how materials delivered to site but not yet installed are billed, since they are often a large early outlay.
Estimate the project's cash curve before you sign: costs by week against billings by week under the proposed schedule. If the curve shows you funding most of the project for months, the price or the schedule needs to change.
Build progress claims the client can approve
A progress claim that bounces costs a full billing cycle. Use the client's or consultant's format if they have one. Show the schedule of values by line, the percentage complete this period and to date, the amount previously billed, the amount this claim, holdback retained and the net due. Attach the backup they expect: photographs, delivery slips, subcontractor claims, approved change orders.
Submit on the cut-off date, not after it. Follow up with the certifier within days. Track every claim from submission to certification to payment, and raise any delay with the client immediately rather than at the next claim.
Treat holdback as its own asset
Holdback retained under BC lien legislation is money you have earned and will not receive until the release conditions are met, often well after substantial completion. Record it separately from ordinary receivables on the balance sheet so you can see how much is tied up across all projects, forecast its release dates project by project, and chase the paperwork that triggers release. The rules and timing are confirmed with your lawyer, and your CPA will advise how holdback is treated in your statements.
The same discipline applies to holdback you retain from subcontractors. Record it separately, release it when your own obligations are met and the conditions are satisfied, and make sure the cash forecast shows both the holdback you are owed and the holdback you owe. Contractors who track only one side of this are regularly surprised by a large release they have to fund in a month when their own release has not yet arrived.
Price and bill change orders as you go
Unpriced, unapproved changes are the most common reason a profitable estimate becomes an unprofitable project. Set a rule that no changed work starts without a written change order with a price, or at least a written instruction and an agreed pricing basis. Bill approved change orders in the next progress claim, not at the end. Keep a change order log per project and review it weekly with the project manager.
Measure unbilled work and margin by project monthly
At each month end, for every active project, compare cost incurred to date and the estimated cost to complete against the contract value and the amount billed. The difference between what you have earned by progress and what you have billed is either unbilled revenue, which is cash you have not asked for, or overbilling, which is cash you will have to work off. Both matter. Your CPA will set how revenue is recognised in the statements, and the monthly project review should use the same method.
The same review gives you projected margin by project and shows early which projects are drifting from estimate.
Habits of contractors with healthy cash
- A billing schedule negotiated before the contract is signed
- Progress claims submitted on the cut-off date in the client's format
- A holdback schedule with forecast release dates
- Change orders priced, approved and billed within the cycle
- A monthly project review of cost to date, cost to complete, billed and unbilled
- A 13-week cash forecast built from the project billing schedules