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Cash flow is a perpetual struggle for subcontractors, with . Most wait an average of 90 days. These long payment cycles make it difficult to get ahead, and to fund operations. 

This has long been the nature of the business, but additional external factors now pose a significant risk to subcontractors� ability to build healthy financial outlooks. in the first quarter of 2025. Higher interest rates are impacting demand for new construction projects. And the ongoing shortage of skilled labor is leading to higher wages and project constraints.

Essentially, profit margins are being squeezed from all sides—and subs need to build cash flow resilience to weather the storm.

9 Strategies for Subcontractors to Maintain Financial Stability

While there’s not much you can do about tariffs and rising interest rates, there are some actions you can take to reduce project-related financial risks and build long-term financial health.

1. Mitigate financial risk in construction contracts.

Construction contracts can be laden with clauses that pose unfair risk to subcontractors. It’s critical that you thoroughly review all contracts for potential risks, including:

• Pay-if-paid clauses: Avoid these at all costs. Pay-if-paid clauses mean GCs don’t have to pay you if they don’t get paid.
• No-lien clauses: This is another must-redline clause. They require you to waive your right to file a lien before the project starts, essentially giving you no protection if the GC fails to pay you.
• Warranties: Ensure the timelines for materials and services warranties are reasonable.
• Liquidated damages: Don’t accept responsibility for liquidated damages resulting from delays you didn’t cause.
• Termination clauses: Request that termination for convenience clauses cover you for materials purchased, not just work completed or materials used.â€�
• Force majeure: Tariffs can be considered force majeure. Request specific language about tariffs to be added to contracts, granting you time extensions and/or additional compensation. 

2. Get serious about your approach to credit.

As a subcontractor, you extend credit to every GC and owner you work with. You’d be wise not to do this blindly.

Develop and implement a credit policy that defines the basics of your credit terms, including credit limits, payment terms, early payment incentives, late payment fees, collection processes, etc.

Before extending credit to any new company, conduct a credit check—it’s a simple step that can save you major headaches down the road. And when possible, prioritize working with GCs who have the best payment track records. Here are the top 50 fastest-paying general contractors in commercial construction.

3. Diversify your project portfolios.

You know what they say. Never put all your eggs in one basket. The same holds true for your projects. While it’s important to pursue the right projects that are in line with your core competencies, you also need to diversify across project types, clients, and industries.

If you only work with one or two GCs who happen to fold, or focus on a single industry that takes a major downturn, it can have disastrous consequences for your business. 

Consider structuring your client mix strategically: balance quick-pay maintenance work that provides immediate cash flow with reliable mid-sized projects offering predictable payment cycles, as well as selective larger projects that may deliver higher margins despite longer payment terms. This tiered approach ensures steady cash flow from faster-paying work to cover the working capital demands of your bigger projects.

4. Track essential metrics.

Tracking the right metrics will help you keep an eye on financial health. Based on our work with hundreds of subcontractors, these are that should be on every subcontractor’s radar:

• Net profit margin
• Net cash flow
• Working capital
• Days sales outstanding (DSO)
• Cost variance

(For an even more comprehensive list of key financial metrics for subcontractors, check out this free guide.)

Review these metrics monthly at a minimum. Some finance teams set up real-time dashboards to monitor these metrics weekly or even daily. Know your baseline for each so you can identify early signs of falling off track and adjust your course accordingly.

5. Build your cash reserves.

Cash reserves are the equivalent of savings accounts for businesses. They can help you bridge the gap when payments are delayed, projects get cancelled, or business is slow. Having three to six months of operating expenses in reserves should be your goal. 

If you’re accustomed to all the dollars flowing out as soon as payments come in, it can take a change in mindset and process to start building reserves. But committing to setting aside a small percentage of every project payment will quickly add up. A line of credit can be a viable supplementary option in the meantime.

6. Implement robust cash flow forecasting.

Forecasting cash flow gives you a snapshot of your company’s liquidity and financial performance in the near- and longer-term future. This process considers variables like payment terms, project timelines, and historical patterns to accurately predict incoming and outgoing payments.

If you’re new to cash flow forecasting, this article covers a basic cash forecasting process you can use to get started. 

7. Get proactive about collections and A/R escalations.

Just because it takes subs an average of 90 days to get paid, doesn’t mean you should sit around waiting for payment. The longer it takes, the less that money is worth and the less likely you’ll receive it.

Develop proactive collection and A/R escalation processes to communicate with GCs frequently about coming due and past due invoices. The most effective plans consist of:

• An immediate response to past due payments
• A regular follow-up cadence
• Designated roles and responsibilities

For subs who need to step up their collections game, here’s a crash course in proven collections strategies to drive faster payments. 

8. Streamline financial reporting. 

Effective cash flow management requires clear visibility into your financial position. This is where streamlined financial reporting becomes essential.

Adopt integrated financial tools that provide key reports that monitor your cash flow health:

• Billing Report: Shows the operational status of billing for each job.
• A/R Aging Report: Improves cross-team collections efficacy.
• Billing Forecasts: Looks at expected monthly billing and aggregate backlog.
• Cash Flow Forecast: Gets a direct line of sight into when you’re getting paid.

Our recent Data to Dollars webinar covers these A/R reporting strategies in-depth. Watch it on-demand here.

9. Leverage software built to improve your cash flow.

Since most cash flow issues are tied to delayed payment cycles, fixing your billing processes can go a long way toward building cash flow resilience.

Siteline’s billing software for trade contractors addresses many of the day-to-day challenges that can slow your cash flow down. It includes custom pay app submission, collections management, change order tracking, A/R reporting, and more.

Subcontractors use Siteline to reduce invoice aging by 30% and achieve 6x faster billing workflows. If you’re ready for more control over and visibility into your cash flow, request a demo today.