Contractors can go broke on profitable projects. And it's not because they underquoted or managed the job badly. It's just that they didn't understand the timing of their revenue and expenses I had my eyes opened by the first project I worked on with a subcontractor It was a $10 million contract with a 15% profit margin. There were 10% bank guarantees and 30-day end-of-month payment terms. When you factored in the pricing schedule, the upfront purchase of materials, and the amount of money we had to put up for the bank guarantees, we were down almost 25% of the contract value While the project was profitable, we had a negative cash position of $2.5 million by the time you factored in these upfront expenses Cash flow management is all about understanding the timing of when we're getting paid and when we're incurring our expenses Here is my best attempt to explain it

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