THE PROBLEM · FIXED BY STEP 07

You float the switchgear for a year before you bill it

Switchgear and transformers are quoted in weeks that turn into quarters. You buy early to protect the schedule and fund it on your own money.

DIRECT ANSWER

Long lead equipment forces a choice with no good answer. Release the order early and you fund the deposit and progress payments, sometimes the whole unit, well before there's a pay application it can go on. Wait for the schedule to firm up and the lead time pushes your energization date, which is the one date the GC will hold you to. Either way the exposure is on your balance sheet, and stored-material billing only helps if the contract allows it and the owner honours it.

WHAT TO DO

Three moves, in order

STEP 01
List every long lead item by job with its order date and payment terms alongside the date it has to be on site, so the float becomes a dated number you can plan against.
STEP 02
Check whether each contract allows billing for stored materials, and get that clause in before award, because once you've paid the supplier you're negotiating from behind.
STEP 03
Put deposits and progress payments into the cash forecast on the dates they clear the bank, since the month the gear reaches the site is a different month entirely.
QUESTIONS

What owners ask

How do electrical contractors handle long lead time gear cash flow?

Switchgear and transformers are quoted in weeks that turn into quarters. You buy early to protect the schedule and fund it on your own money. Long lead equipment forces a choice with no good answer. Release the order early and you fund the deposit and progress payments, sometimes the whole unit, well before there's a pay application it can go on. Wait for the schedule to firm up and the lead time pushes your energization date, which is the one date the GC will hold you to. Either way the exposure is on your balance sheet, and stored-material billing only helps if the contract allows it and the owner honours it.

Which part of the system fixes this?

The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It's drawn from chapter 7 of CONTROL: The Construction Financial Operating System.

Does this only happen in electrical?

Effectively yes, and that's why it has its own page. Electrical belongs to electrical and technology and runs 9% net profit at $1M–$5M. The mechanism behind this problem has no real analog in the other 47 trades, so the general advice doesn't fit it.

Where do I start?

List every long lead item by job with its order date and payment terms alongside the date it has to be on site, so the float becomes a dated number you can plan against.

Can I fix this without touching anything else?

You can try, and it doesn't hold. Step 07 depends on step 03, overhead calculation and step 04, estimating system and step 05, software and bookkeeping alignment and step 06, project management. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.

AUTHOR
Josh Luebker
JOSH LUEBKER
MASTER ELECTRICIAN · 150+ PROJECTS · $2.1B+ MANAGED

Wrote CONTROL, the 8 step system behind these figures. More about the author.

8 Steps 60 Days

CONTROL is the full system, written for commercial subcontractors from under $1M to $100M. It's out now. 8 steps, 6 working templates, and the order they install in. $9.99 ebook, $24.99 paperback.