Profitable on Paper, Broke in Reality: Why $3M–$8M HVAC Shops Run Out of Cash

I hear it every week from HVAC owners doing $3M–$8M: "My accountant says I'm making money, but I don't feel like I'm making money."

The P&L shows a healthy profit. The tax bill confirms it. But the bank account? Tight. Payroll's covered, but barely. The line of credit gets tapped more than you'd like. You're supposed to be successful, but you feel like you're running on fumes.

This is what I call the bid vs bank gap. You bid profitable work, but the cash doesn't show up in your bank the way the numbers say it should.

Here's why it happens—and why it hits HVAC contractors particularly hard.

The HVAC Cash Flow Problem: Service vs. Install Timing

HVAC has a split personality when it comes to cash.

Service work pays fast. Tech runs a call, collects payment same day or within a week. Cash in quick.

Install work pays slow. Especially new construction and commercial. You're buying equipment, paying crews, running jobs—sometimes for weeks or months before the final payment hits. Even residential installs with financing often take 30-60 days to fund.

Meanwhile, your obligations don't wait:

• Payroll hits every two weeks, no matter what
• Parts suppliers want payment in 30 days
• Equipment distributors want their money when you pick up the unit
• Rent, insurance, truck payments—all on a fixed schedule

So you're funding jobs with today's cash while waiting for tomorrow's payments. That's the squeeze.

Seasonality Makes It Worse

HVAC is a seasonal business, which adds another layer of complexity.

Summer and winter are peak. Spring and fall are shoulder seasons. Every HVAC owner knows this.

But here's what trips people up: your expenses don't follow the same curve as your revenue.

You've got year-round overhead—rent, insurance, admin staff, truck payments. In shoulder seasons, revenue dips but those costs stay flat. You need the summer and winter profits to carry you through spring and fall.

If you're spending summer profits as fast as they come in, you'll hit October wondering where the cushion went.

"Revenue is lumpy. Expenses are steady. That mismatch is where cash disappears."

A Real Example: $4M Shop, Nice P&L, Constant Squeeze

Let me show you how this plays out. Here's a typical $4M HVAC shop:

• Revenue: $4,000,000
• Net profit (P&L): $320,000 (8%)
• Owner thinks: "I should have $320K more in the bank."

But here's what the P&L doesn't show:

• AR sitting at 45+ days: $280,000 (install payments, financing not yet funded, slow-paying commercial customers)
• WIP/unbilled work: $85,000 (jobs done but not invoiced yet)
• Debt payments (principal): $60,000/year (doesn't hit P&L, but hits cash)
• Equipment/vehicle purchases: $45,000 (expensed or depreciated, but cash went out the door)

Add it up: That $320K in "profit" has $470K of claims against it. The cash isn't there because it's trapped in receivables, work-in-progress, and debt service.

Why Your P&L Lies (In HVAC Terms)

The P&L is an accounting document, not a cash document. It counts revenue when you earn it, not when you collect it. It counts expenses when you incur them, not when you pay them.

For HVAC, this creates specific blind spots:

• Install revenue recognition: A $25K install shows as revenue when you complete the job, but the customer's financing might not fund for 45 days.
• Warranty reserves: You're on the hook for callbacks, but that cost isn't fully reflected until they happen.
• Maintenance agreement timing: You collect annual payments upfront but owe service throughout the year.
• Loan principal: Paying down debt is real cash outflow, but it doesn't show on the P&L as an expense.

The P&L isn't lying exactly—it's just answering a different question than "where's my cash?"

The Fix: A 13-Week Cash View

You can't manage what you can't see. The fix starts with visibility.

I build a 13-week rolling cash forecast for every HVAC client. It's exactly what it sounds like: a week-by-week view of cash in and cash out for the next 90 days.

For HVAC, that means:

• Cash in: Service collections (immediate), install deposits, progress payments, financing fundings, maintenance agreement payments
• Cash out: Payroll, parts, equipment purchases, rent, trucks, insurance, loan payments, owner draws, quarterly taxes

When you lay this out week by week, you see the pinch points coming. You know in Week 3 that Week 8 is going to be tight because quarterly taxes hit and that big install payment probably won't land until Week 10.

That's power. That's how you stop being "surprised" by cash crunches.

What You Can Do Today

If you're an HVAC owner in the $3M–$8M range feeling this squeeze, here's where to start:

1. Check your AR aging right now. How much is over 30 days? Over 60? That's cash you've earned but don't have.
2. Look at your install vs. service split. Are installs dragging down your cash cycle? Are you billing progress payments or waiting until completion?
3. Calculate your real cash runway. If revenue stopped today, how many weeks could you cover payroll and fixed costs?
4. Build a simple 13-week forecast. Even a rough one will show you things you're not seeing today.

The Bottom Line

Being profitable on paper but broke in reality isn't a character flaw. It's a cash flow structure problem—and HVAC's mix of fast-paying service and slow-paying installs makes it especially common.

The fix isn't working harder. It's seeing clearly where the gap between bid and bank actually is—and then closing it.