Float Analysis Case Study: Tracing Cash from Pay App to Sub Payment

The Scenario

Ridgeline Commercial Contractors is a 45-person general contractor working a $4.2 million tenant improvement project for a private owner. The prime contract requires Ridgeline to submit pay applications by the 25th of each month. The owner's contract allows 30 days to review and approve, and another 10 days to fund. Ridgeline's subcontract with its drywall sub, Atlas Interiors, is pay-when-paid, with payment due 10 days after Ridgeline receives funds from the owner.

This is a typical mid-market setup. Nothing unusual, nothing aggressive. Yet when Ridgeline's controller maps out the actual float on a single billing cycle, the numbers are eye-opening.

Step 1: Submission Day - Month 4 Pay Application

On September 25th, Ridgeline submits Pay Application No. 4 in the AIA G702/G703 format. The pay app covers $380,000 of work completed through September 24th. That total includes $210,000 of labor and materials Ridgeline has already paid out of pocket, and $140,000 owed to Atlas Interiors for drywall rough-in work completed and billed to Ridgeline on September 18th.

Ridgeline funded the Atlas invoice on September 22nd to keep the sub on schedule. That was the right call operationally. It was also the moment Ridgeline's cash left the building.

Step 2: The Approval Clock Starts

Under the prime contract, the owner has 30 days to issue a certificate of payment after receiving a pay application. The architect reviews the G702 cover sheet and the G703 continuation sheet line by line. On this project the architect's office is slow. They issue the architect's certificate on October 18th, 23 days after submission.

The owner then has 10 calendar days to fund. The payment wire hits Ridgeline's account on October 28th. From submission to receipt: 33 days.

But Ridgeline paid Atlas on September 22nd, three days before the pay app was even submitted. The real float from when cash left Ridgeline's account to when it came back: 36 days.

Step 3: Sub Payment - The Downstream Float

Ridgeline's subcontract with Atlas reads: "Payment to subcontractor shall be made within 10 days of receipt of payment from owner." Ridgeline receives funds October 28th. Atlas gets paid November 7th. That is 46 days after Atlas completed and billed the work.

From Atlas's perspective, they mobilized, purchased drywall board and metal framing, paid their own crew for two weeks, and waited 46 days to be made whole. On a $140,000 invoice, carrying that receivable for 46 days at even a modest line-of-credit rate of 8% annually costs Atlas roughly $1,370 in financing. Small on its own. Multiply it across four active jobs and it becomes a real margin hit.

This is what the float chain looks like in a single cycle:

Step 4: Where the Float Actually Hides

Most GC owners know there is a lag between billing and payment. Fewer have mapped exactly where the days pile up. In this scenario, the float breaks down into three distinct segments.

Segment 1: Pre-Submission Float

Ridgeline paid Atlas three days before submitting the pay app. That is not required by the subcontract. It was a relationship decision. Legitimate, but it adds three days to Ridgeline's exposure that could have been avoided by aligning sub payment timing more closely with the billing cycle end date rather than paying the moment an invoice arrives.

Segment 2: Architect Review Float

The 23-day architect review is within the contract allowance but not the norm. When the architect takes 28 or 30 days, the owner's 10-day funding window does not start until later, pushing total receipt to 38 to 40 days post-submission. Tracking architect review time across billing cycles tells you whether slow approvals are a pattern or a one-off. If it is a pattern, it is a conversation to have with the project architect at the next OAC meeting, backed by dates.

Segment 3: Owner Funding Float

The owner in this scenario funded in 10 days, exactly at the contract limit. Some owners fund in 5. Others push to 14 or 15 and assume GCs will not push back. Knowing your average funding time gives you data to reference when an owner is chronically late. You are not guessing, you are citing a 6-cycle average.

What This Means for Ridgeline's Working Capital

Ridgeline has four active projects with similar billing structures. If each project carries an average outstanding receivable of $350,000 during the approval window, and the average float is 35 days, Ridgeline is financing approximately $1.4 million in receivables at any given time. At a 7% annual line-of-credit rate, that is about $9,400 per month in carrying cost, or roughly $113,000 over a year.

That is not a rounding error. It is real money that shows up as thin margins at year-end without a clear cause.

Practical Steps to Compress the Float

Float cannot be eliminated, but it can be managed. Here is what Ridgeline's controller put in place after running this analysis.

The Bigger Picture

Float analysis is not an abstract accounting exercise. For a GC running $8 million to $15 million in annual revenue, a 5-day reduction in average pay app float across all active projects can free up $50,000 to $100,000 in working capital. That is capacity to take on an additional project, reduce line-of-credit draws, or simply sleep better at month-end.

The Ridgeline scenario is common because the float problem is invisible until someone maps it. Most GCs know when they submit and when they get paid. Few track the full chain from cost incurred to sub paid and measure it consistently.

When you have that data, you stop reacting to cash crunches and start anticipating them.

Cash flow visibility starts with clean billing and cost data. EZBilling gives you both in one system built for construction.