5 Cash-Flow Clauses Every Builder Should Understand

Cash flow (not revenue) is what keeps a construction business running. And while most builders focus on estimating, scheduling, and execution, one of the biggest drivers of cash flow is often overlooked: the contract.

Your contract sets the rules for when cash comes in, how predictable it is, and how much risk you carry. Additionally, it helps build a relationship with the client by setting expectations clearly and upfront to avoid any disputes along the way. These five clauses have an outsized impact on cash flow and should be clearly defined in every agreement.

1. Payment Timing & Billing Schedule

Controls when cash actually hits your bank account

Contracts should clearly outline when invoices are issued and when payment is due, whether that’s based on time, milestones, or percent complete.

Clear billing schedules help ensure cash inflows align with payroll, materials, and subcontractor payments.

2. Deposits & Mobilization Payments

Funds the front end of the job

Upfront deposits or mobilization payments provide working capital before costs ramp up. This clause is critical for covering early labor, materials, permits, and pre-construction work.

Even modest deposits significantly reduce early-stage cash strain.

3. Retainage Percentage & Release Timing

Prevents cash from getting trapped at the end

If retainage is required, the contract should define:

• The percentage withheld

• When retainage is released

• What constitutes project completion!! - a small punch-list shouldn’t be cause to hold back full retainage

Ambiguous retainage language is a common cause of delayed final payments.

4. Change Order Approval & Payment

Protects cash and margins from scope creep

Change orders should require written approval and clearly state how and when they are billed. Without this clause, builders often perform extra work without timely (or any) payment. It is also important to reference if there is any markup / builder’s fee to be expected on change orders.

Cash flow suffers when changes aren’t priced and approved in advance, and can ultimately dig into the profitability of the project as well.

5. Payment Terms & Remedies for Non-Payment

Sets expectations and improves collection behavior

Contracts should specify:

• Net payment terms (Net 10, Net 15, Net 30)

• Acceptable payment methods (having a method to accept electronic payment with the invoice can have a huge impact on collection)

• Late fees or interest

• The right to suspend work for non-payment

These terms aren’t about being aggressive, they’re about setting professional expectations that improve cash predictability.

P.S. - you don’t even have to enforce all of these rules from the contract but having them in place will give you leverage if the project ever runs into issues.

Cash-flow issues are rarely caused by a lack of work. More often, they stem from when and how builders get paid.

Well-written cash-flow clauses:

• Improve liquidity

• Reduce stress

• Support sustainable growth

Your contract should be working for your cash flow, not against it.