Cash Flow Management for Growing Roofing Companies
A $6M roofing company with $400K profit can go bankrupt. Profit doesn’t pay bills. Cash pays bills. The difference between the two kills otherwise healthy businesses every year.
Cash flow management separates roofing companies that survive and grow from those that stumble from crisis to crisis. Here’s what I’ve seen: the companies that master cash flow operate with confidence. The others operate with constant anxiety.
The Cash Flow Reality in Roofing
Roofing creates uniquely challenging cash flow dynamics. Several factors combine to create volatility:
Payment timing mismatch. You buy materials before jobs start. You pay crews weekly or biweekly. Customers pay 30-60 days after completion. The gap between cash out and cash in can span 60-90 days.
Seasonal swings. Most markets experience significant seasonal variation. Winter months produce 30-50% less revenue than summer peaks. Fixed costs don’t adjust accordingly.
Weather unpredictability. A rainy month or harsh winter eliminates working days, reducing revenue while most costs continue.
Project lumps. Revenue arrives in chunks as projects complete. One delayed project can cascade into cash shortfalls.
Growth amplifies problems. Growing companies need more materials, more crews, more equipment. Each growth step requires cash outlay before revenue follows.
Understanding these dynamics is the first step to managing them.
The Cash Conversion Cycle
The cash conversion cycle measures how long cash stays tied up in operations before returning as collected revenue.
Cash Conversion Cycle = Days Inventory + Days Receivables - Days Payables
For a typical roofing company:
- Days Inventory: 15-30 days (materials purchased ahead)
- Days Receivables: 30-45 days (time to collect after invoicing)
- Days Payables: 15-30 days (time before you pay suppliers)
Net cycle: 30-45 days
This means cash invested in a job takes 30-45 days to return to your bank account. If you’re doing $500K monthly, you need $500K-$750K constantly tied up in operations. Growth to $750K monthly requires another $250K-$375K in working capital.
Most roofing companies don’t plan for this. They wonder why growth creates cash pressure.
The 4 Cash Flow Levers
Four levers control cash flow. Pulling each lever improves your position.
Lever 1: Accelerate Receivables
Getting paid faster is the highest-impact cash flow improvement.
Invoice immediately. Send invoices the day work completes. Every day of delay is a day without your money.
Make payment easy. Accept credit cards, ACH, and online payments. Reduce friction between customer decision to pay and payment arrival.
Follow up consistently. Have a systematic process for following up on unpaid invoices. Day 3, day 7, day 14, day 21. Don’t let invoices age.
Collect deposits. Require deposits on all jobs. 25-50% deposits significantly improve cash position on jobs.
Progress billing. On larger projects, bill at milestones rather than completion. Materials delivered, rough complete, final inspection, each stage triggers a payment.
Incentivize early payment. Offer 2% discount for payment within 10 days. The cost is worth the cash acceleration for most companies.
Moving from 45-day average collection to 30-day average on $500K monthly revenue frees up $250K in working capital. That’s real money.
Lever 2: Slow Payables Strategically
Paying slower keeps cash in your account longer. But this lever requires care.
Negotiate terms. Major suppliers often extend 30-60 day terms for established accounts. Ask. The worst they say is no.
Use the full term. If you have 30-day terms, pay on day 28. Not day 15. Not day 35. Use the term without damaging relationships.
Prioritize strategically. Pay suppliers who affect your operations first. Pay those who merely send reminder notices last.
Avoid early payment without benefit. Some companies pay early out of habit. Unless there’s a discount for early payment, hold cash until terms require payment.
Don’t stretch beyond terms. Late payments damage supplier relationships and credit standing. The goal is using terms efficiently, not abusing them.
Moving from average 15-day payment to 30-day payment on $300K monthly expenses keeps an extra $150K in your account.
Lever 3: Manage Inventory
Materials sitting on trucks and in warehouses represent tied-up cash.
Just-in-time delivery. Order materials for delivery close to job start rather than stockpiling. Coordinate with suppliers for reliable short-notice delivery.
Track inventory accurately. Know what you have. Over-ordering because you don’t know existing inventory wastes cash.
Return excess promptly. Materials left over from jobs should return to suppliers or warehouse immediately, not sit on trucks.
Negotiate consignment. Some suppliers provide materials on consignment, not charging until used. This shifts inventory cost to them.
Avoid speculation. Buying extra materials because you think prices will rise ties up cash with uncertain payoff.
Reducing average inventory from 30 days to 15 days on $200K monthly material spend frees $100K in working capital.
Lever 4: Control Fixed Costs
Fixed costs consume cash regardless of revenue. Minimizing fixed commitments preserves cash flexibility.
Lease vs. buy equipment. Leasing reduces upfront cash outlay. The total cost may be higher, but preserving cash during growth often justifies it.
Variable labor when possible. Subcontractors and flexible arrangements reduce fixed labor commitments during slow periods.
Right-size facilities. Don’t rent more space than you need. Unused space burns cash monthly.
Review subscriptions and recurring costs. Monthly charges accumulate. Review and cancel unused services regularly.
Renegotiate during renewals. Insurance, leases, and contracts often have negotiating room at renewal time.
The Cash Flow Forecast
Managing cash flow requires visibility into the future. You can’t react fast enough to cash crises. You must anticipate them.
A basic cash flow forecast projects:
- Starting cash balance
- Expected cash inflows (collections)
- Expected cash outflows (payroll, materials, overhead)
- Ending cash balance
Create this forecast weekly for the next 8-12 weeks. Update it every week as actuals replace projections.
The forecast reveals problems before they become crises. If week 6 shows negative cash, you have 5 weeks to solve it. Options exist: accelerate collections, delay purchases, arrange credit line draw, reduce expenses.
Without the forecast, you discover the problem when checks bounce.
The Cash Reserve Target
Every roofing company needs cash reserves. The question is how much.
Minimum reserve: 1 month of fixed costs. This covers basic operations during a zero-revenue month.
Comfortable reserve: 2-3 months of fixed costs. This provides buffer for extended slow periods and unexpected expenses.
Optimal reserve: 3-6 months of fixed costs plus growth capital. This enables opportunistic decisions without cash pressure.
At $5M revenue with $150K monthly fixed costs, target reserves of $300K-$900K depending on your risk tolerance and growth plans.
Building reserves requires discipline. Set aside a percentage of each job’s gross profit before it enters general operations. 10% of gross profit accumulated over time builds substantial reserves.
Financing Cash Flow Gaps
Even well-managed companies experience cash gaps. Having financing options available prevents gaps from becoming crises.
Line of credit. The most flexible option. Draw when needed, pay back when cash arrives. Interest only on amount drawn. Establish the line before you need it. Banks don’t lend to desperate businesses.
Equipment financing. For vehicle and equipment purchases, financing preserves operating cash for other needs.
Invoice factoring. Sell receivables to a factor for immediate cash at a discount. Expensive but useful for temporary crunches.
Credit cards. Useful for small expenses and short-term gaps. Expensive for larger or longer needs.
SBA loans. For growth capital needs, SBA loans offer favorable terms. Long application process, so plan ahead.
The key: arrange financing before you need it. Apply for a line of credit when business is strong. You’ll get better terms and guaranteed availability.
Growth Cash Flow Planning
Growth intensifies cash flow challenges. Each new crew requires equipment, materials float, and payroll before revenue arrives.
Before pursuing growth, calculate the cash required:
- Equipment for new crew: $50-100K
- Materials float for increased volume: varies
- Payroll float for new employees: 4-6 weeks of wages
- Marketing for increased lead flow: varies
- Working capital buffer: 20% of above
A roofing company expanding from $5M to $7M might need $200-400K in additional working capital. That’s on top of existing operations.
Plan the financing before starting the growth. Options:
- Retained earnings accumulated over time
- Owner injection from personal resources
- Bank financing arranged in advance
- Investor capital (rarely appropriate for this size)
Growth without cash planning creates crises that set companies back years.
Cash Flow Warning Signs
Watch for these warning signs of developing cash problems:
- Increasing days receivable
- More customer disputes about invoices
- Suppliers asking for faster payment
- Line of credit staying drawn
- Delayed payroll (even by a day)
- Bounced checks or missed payments
- Owner injecting personal funds repeatedly
- Avoiding financial reports
Any of these signals requires immediate investigation. Cash problems compound quickly. Early intervention prevents catastrophe.
Start Here
Cash flow mastery starts with visibility.
Start Here:
- Calculate your current cash conversion cycle. Days inventory + days receivables - days payables.
- Create an 8-week cash flow forecast. Start simple. Refine over time.
- Identify your biggest cash flow lever. Which of the 4 levers could you pull most effectively?
Cash flow is the lifeblood of your roofing company. Profit matters for the long term. Cash matters for survival. The companies that master both build lasting value.
Your financial stress level directly correlates to your cash flow management skill. Invest in building this capability. The returns include financial stability and peace of mind.
This article is for educational purposes only and does not constitute financial advice. Consult with qualified financial and legal professionals before making business decisions.