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Rapid growth can leave a construction company short of cash, management capacity, and site oversight even while its revenue and backlog rise. The risk is not growth itself: problems emerge when a contractor takes on work faster than it can fund, staff, schedule, control, and supervise it.
Why can a growing construction company still run short of cash?
Because the company often has to pay for a project before it receives the corresponding customer payment. Wages, materials, subcontractors, equipment, mobilization, and overhead may fall due weeks or months before a progress claim is approved and paid. A contractor can therefore be busy and profitable on paper yet lack cash for the next payroll or supplier invoice.
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That timing gap can widen as a company takes on more concurrent projects. Each job may require spending before collection; several jobs in that phase at once create a larger aggregate working-capital requirement. More sales do not automatically solve the problem if the business must finance the work that generates those sales.
Progress payments help, but milestones may not match the timing of costs. Retention, delayed approvals, disputes, or late payment can also leave money tied up after the contractor has incurred expenses. The UK government’s construction supply-chain analysis discusses payment arrangements, retention, liquidity, and capacity constraints; evidence to the Australian Parliament’s construction-industry insolvency inquiry describes how contractors may effectively finance work between progress-payment milestones.
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The International Labour Organization puts the principle plainly: “Sound financial management is essential for the health of the company.” Its contractor-development guidance explains that firms should estimate working-capital needs because expenses and receipts are separated by a time lag. That estimate needs to reflect the workload the company is actually planning to deliver, not just its annual sales target. See the ILO contractor-development guidance.
Two historical figures help illustrate why liquidity deserves attention, but they are not universal benchmarks. BDO Australia reported median working capital of 3.5% of revenue among surveyed participants in FY22, compared with 5.8% in its 2019 comparison. BDO interpreted the lower FY22 figure as suggesting more construction companies might be struggling to shore up cash and other working-capital accounts. These are survey findings for their stated dates and scope—not a current statistic, a recommended minimum, or a threshold that determines whether an individual contractor is safe. Read the BDO Australia 2022 Construction Report in that context.
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How does taking on more projects lead to delays?
Every additional project adds work that must be planned, coordinated, monitored, and corrected when conditions change. A contractor needs enough people with the right authority and information to manage schedules, costs, contracts, subcontractors, and site decisions across the portfolio. If that management capacity does not grow with the workload, coordination gaps can turn into missed handoffs, unresolved decisions, or delays.
The pressure is not just on the project manager. Estimators and commercial staff need to keep commitments, costs, and changes visible; supervisors need to coordinate work on site; and leaders need to spot conflicts between jobs before they become urgent. When the same experienced people are stretched across more work, routine decisions can wait, problems can surface later, and one project’s demands can pull attention away from another.
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Growth also changes how a company is managed. Guidance in Schleifer’s Manual of Construction Business Practices describes growth-stage pressure on cash, delegation, decentralization, and existing systems. This is a management explanation, not a measured estimate of how often growth causes delays: the practical point is that informal processes that worked at a smaller scale may become insufficient as more decisions and projects compete for attention.
Workload planning should therefore ask whether the company has the resources to deliver the work, not simply whether it can win it. The ILO guidance explicitly links annual workload planning to available resources and planned company growth. A backlog is a commitment to execute, not proof that execution capacity is already in place.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchA 2022 study of Saudi government building projects identified poor site management and supervision, contractor financial difficulty, and late progress payments among reported delay risks. Those findings are specific to the study’s context; they should not be treated as a universal ranking or proof that rapid growth is the cause of any particular delay. They do show how financial pressure and site-management capacity can sit alongside planning and manpower issues in project delivery. See the study in Buildings.
Why can quality slip when the company is busier?
Quality depends on having enough time and capable people to define expectations, inspect work, document issues, and resolve defects before work proceeds or is concealed. As project volume rises, the number of places that require oversight rises too. If supervision and quality processes remain sized for a smaller operation, checks may be delayed, inconsistent, or missed.
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This is a capacity problem, not an automatic consequence of growth. A larger workload can be delivered consistently when the company has adequate supervisors, clear responsibilities, workable schedules, and reliable ways to track quality and corrective work. But when managers are covering too many jobs, or when teams cannot see current requirements and decisions, small problems are more likely to escape attention until they are harder to address.
Project-management and control capabilities need to scale alongside volume. PwC Strategy&’s construction capabilities report identifies project management and control as important capabilities for project success. The implication for a growing contractor is practical: do not treat quality as a final inspection function alone. It has to be supported by planning, cost and schedule visibility, contract administration, and active supervision while work is underway. See PwC Strategy&’s construction capabilities report.
When quality concerns appear, distinguish between a one-off defect and a pattern that points to overstretched oversight. Ask whether inspections are being completed at the intended stage, whether corrective actions have an owner and due date, and whether supervisors can access current drawings, specifications, and approved changes. These checks help management identify where the process is breaking down without assuming that every defect has the same cause.
What should a contractor check before accepting more work?
Compare the proposed workload with both delivery capacity and cash timing. The decision is not just whether a new contract has an attractive price; it is whether the company can fund and manage the work at the points when resources are needed.
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- Match workload to people. List the projects that will overlap and the project managers, supervisors, and commercial or administrative staff each will need. Ask whether qualified people have enough time and decision-making authority to cover the planned work, including normal coordination and issue resolution.
- Check delivery controls. Confirm that schedules, job costs, contract obligations, and quality checks will remain visible while work is in progress. If information is scattered or updates arrive too late for managers to act, adding another project can make the visibility problem worse.
- Forecast the cash gap. Map expected outflows—such as payroll, materials, subcontractors, equipment, mobilization, and overhead—against the timing of claims and collections. Include the possibility that a claim, approval, or payment arrives later than planned. A rising sales forecast is not a substitute for a forecast of cash available when bills fall due.
- Review payment administration. Check that progress claims and variations are submitted promptly, supported by the required records, and followed through to resolution. Payment terms and milestone timing can determine how much of the work the contractor has to finance itself.
- Allow for the transition cost. Consider what additional management, supervision, planning, or control capability the new workload requires and when that capacity must be available. Compare that cost with the consequences of schedule disruption, poorly controlled work, or cash pressure. The sources do not establish one universal growth threshold or a single causal effect that applies to every firm.
These questions are an operational planning framework, not a substitute for a company-specific financial or delivery review. The right answer depends on the contractor’s payment arrangements, project mix, resources, and ability to manage work as it overlaps.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How should growth and cash flow be managed together?
Use workload and cash forecasts as connected planning tools. The workload plan should show what the company intends to execute and which resources are assigned; the cash forecast should show when the related costs and expected receipts are likely to occur. If a project increases the workload before it produces collections, that gap should be visible before the commitment is made.
Keep job costs and commitments current enough to inform decisions while work is underway. A project’s expected margin answers a different question from its cash position: margin concerns the financial result of the work, while cash timing concerns whether money is available at the dates payments are due. A favorable projected result cannot itself pay an invoice that falls due before collection.
Make responsibility for claims, variations, approvals, and follow-up explicit. Those tasks are part of protecting the cash timetable, not merely paperwork after the work is done. At the same time, keep project schedules, cost control, contract administration, and quality oversight visible to the people responsible for delivery. The construction capability guidance from PwC and the workload and working-capital guidance from the ILO point to the same management principle: scale the planning and control capability along with the volume of work.
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Finally, revisit the plan as conditions change. A delayed payment, altered milestone, or unexpected resource constraint can change the cash and capacity picture. If the forecast no longer matches the work in progress, management needs to identify the gap early enough to decide what can be rescheduled, funded, delegated, or escalated. Growth is more manageable when the company sees those pressures before they become a crisis.
Frequently Asked Questions
What does retention mean in a construction contract?
Retention is money withheld from a payment that would otherwise be due, commonly until a specified contractual condition is met. Because it delays access to part of the earned amount, it can affect the timing of cash available to pay project costs.
Can a contractor be profitable but unable to pay bills?
Yes. Profit reflects the expected or recorded result of work, while a bill has a due date; if project costs fall due before customer payments arrive, cash can be tight even when the job is expected to make money.
Are BDO’s 3.5% and 5.8% working-capital figures targets for builders?
No. They are historical median figures for surveyed participants in BDO Australia’s FY22 report and 2019 comparison, not recommended minimums or current figures for every contractor. A firm’s appropriate liquidity depends on its own workload, payment terms, and costs.
