How the float works
You pay for the work as it happens. Your customer pays for it later. The float is everything you carry in between, and it is the reason a profitable company can still run short of cash.
Costs go out
Payroll on schedule. Fuel at the pump. Materials on delivery.
Cash comes in
When the customer approves the invoice and its payment run clears.
Where the float comes from
Three things set the size of your float: how much you spend each week to do the work, how many days pass before each invoice is paid, and how much of each invoice is held back. Multiply weekly cost by weeks waiting, add anything held in retainage, and you have a rough picture of the cash tied up in work you have already done.
The float is not a sign of a bad business. It is the normal shape of any business that invoices after delivery. It becomes a problem when it grows faster than the cash on hand, which is exactly what happens when things go well.
Why growth makes it worse
A new truck, a bigger job or a second federal contract adds its costs on day one and its payments weeks later. The company is more profitable on paper and shorter on cash at the same time. Owners who plan only for the truck payment or the job margin, and not for the weeks in between, are the ones who end up stretching payroll or paying suppliers late during their best quarter.
How it looks in each trade
- Trucking. Fuel is paid at the pump and drivers are paid this week. The load pays when the broker gets around to it. Every truck you add widens that gap. Read the fleets page.
- Construction and trade contractors. Payroll, materials and equipment go out as the work happens. The pay application comes in a month or more later, and retainage holds back a slice of every one until the job closes out. Read the contractors page.
- Government contractors. Federal work is steady and the customer always pays. It just pays on its own clock, and if you are a subcontractor you are waiting on the prime as well. Read the government work page.
Ways owners shrink it
- Invoice the day the work is done, with complete paperwork. Most late payments start as an invoice that was missing something and went to the back of the line.
- Negotiate the terms before you take the work. Payment days, retainage, mobilization and change-order handling are all easier to settle before you sign.
- Push costs later where you can. Supplier terms, fuel cards billed in arrears and staged deliveries all move part of the float to someone else.
- Know your worst week in advance. A simple 13-week view of cash in and cash out shows the low point before it arrives, which is the only time you can do anything about it.
Ways owners fund it
When shrinking the float is not enough, owners fund it. The common tools are a bank line of credit, invoice factoring, quick-pay programs offered by customers or brokers, equipment financing for the asset itself, and short-term working capital sized off revenue. Each has a cost and a set of conditions. The useful questions are the same for all of them: what does it cost in total over the time you will actually use it, what are you committing to, and does the work still make money after that cost.
The Float covers these tools as they come up in the news and in our guides, as general information. We do not quote rates or terms, and we are not your adviser. How The Float is paid for is written down plainly on the about page.
What The Float does about it
Every Tuesday we send one short letter: the news that is moving your costs or your payment timing, a note for each of the three industries, and one tool or habit you can use that week. If you want to know roughly where your business stands with funders, the two-minute check gives a plain range, as an estimate and never an offer.