Why Electrical Contractors Run Out of Cash
Electrical contractors run out of cash from switchgear deposits and the delay between rough-in and trim-out billing. A $2.3M electrical contractor recovered $365K in aging AR, cut overhead from 26% to 13%, and paid off its line of credit in 30 days once its estimates lined up with its actual job costs.
Electrical contractors run into cash problems from three stacked issues: material buyout that ties up cash weeks before the first pay application, switchgear deposits that lock in capital on long-lead equipment, and a billing structure that doesn't separate rough-in from trim-out. Prevailing wage jobs add a fourth layer, since the overhead and burden calculation gets more complex and more contractors get it wrong.
Josh Luebker managed electrical crews on commercial jobs where switchgear deposits sat on the books for months before the gear ever showed up on site. The cash was gone long before the pay application caught up to it.
The rough-in to trim-out cash hole is the period between when an electrical contractor bills for rough-in work and when trim-out work closes out the job, during which labor and material costs keep going out while collections lag behind.
AR recovered by a $2.3M electrical contractor after fixing estimating alignment
Overhead rate correction on the same contractor, once real costs were calculated
Time to pay off the line of credit once billing matched actual job costs
Chapter 1 (Job Cost Structure) separates material, labor, and equipment costs so a switchgear deposit stops hiding inside a generic materials line. Chapter 4 (Estimating Alignment) is what fixed the $365K AR problem: once the estimate categories matched the job cost categories, the contractor could see variance immediately instead of finding out at closeout. Chapter 3 (Overhead Calculation) is what caught the 26% real overhead rate that had been bid at a much lower number for years.
Why do electrical contractors run out of cash even when they're busy?
How do I fix the rough-in to trim-out cash hole?
What's a normal overhead rate for an electrical subcontractor?
What does it cost to fix this?
Who handles this if I don't want to do it myself?
This page covers Chapters 1, 3, and 4 of CONTROL as they apply to electrical work specifically. If you want the full system built and run for you instead of building it yourself, SPM The Construction CFO maintains a dedicated Electrical Operating System page at constructioncfo.net with the complete service breakdown for electrical subcontractors.