The contract for every job you take on should include a payment schedule; that is, a net amount or percentage of the total price that you receive as a draw in advance, or upon billing for each milestone of the job’s progress, such as slab, rough, trim, etc.

On larger jobs, this is known as an "AIA–Schedule of Values" (SOV). It basically provides terms for billing and payment based on the percentage of work completed and is usually broken down into individual job segments. You may be under contract to complete the service, feeders to units, parking lot lighting, and so forth, and each segment has its own value and you are permitted to bill for the percentage of completion of each segment based on the agreed to payment schedule. This is particularly advantageous on larger, drawn out jobs, as it helps you maintain liquidity and serves to keep you out of the finance business!

If you estimate by computer, you should know more accurately the cost for each increment of job progress, so you’re aware of what your draw should be. With manual estimating, you probably may have a set formula, perhaps 50 percent for slab, 30 percent for rough, and 20 percent for trim. Be cautious under this arrangement since the draws you get for the early stages may be more than your actual costs, resulting in later stages being under-billed in relation to incurred cost.

While it is great to receive all of your money up front, your billings should closely agree with the actual current cost. You don’t know if you’re making money when current period billings do not reflect current period cost. Your (apparently healthy) bank balance may cause you to overspend, resulting in cash-flow shortages during the latter stages of the job.

Be sure that your draws are billed correctly so that your expenses do not exceed your income in any billing period. Keep track of how much you’re billing in advance. You can control cash flow by manipulating the material order schedules. On larger jobs that require a substantial amount of bank financing, the developer or general contractor is on a draw schedule regarding their loans as well. In this situation there is usually one or more lending officials experienced in construction that will inspect the amount of work completed and need to approve all draw requests. This can at times, become a point of contention so it's wise to not be 100% dependent on a particular draw.