Most contractors believe "change orders are where we make our money." The logic seems sound you're already mobilized on site with crews ready to work, and you get to mark up the additional scope. What could go wrong? Everything, it turns out. The line item price you charge for a change order rarely captures the true cost of executing that change. Hidden beneath are disruption costs, coordination overhead, schedule impacts, productivity losses, and a dozen other expenses that

Your surety agent just asked for your "liquidity ratios," and you froze. You know you have a balance sheet. You think your numbers look fine. But quick ratio? Current ratio? Which one matters, and what do these numbers actually mean for your bonding capacity? Here's what just happened: Your surety is trying to answer one critical question "If this contractor's projects all go sideways tomorrow, can they cover their bills without liquidating equipment or begging for emergency

Picture this: You just completed a $150,000 commercial renovation. Your crew worked 800 hours, you came in on schedule, and the client is thrilled. But when you run your job costing report, the numbers tell a different story, your estimated profit of $22,500 (15%) has shrunk to just $4,800 (3.2%). What happened? The culprit is often hiding in plain sight: inaccurate labor burden calculations . While you carefully tracked material costs and equipment rentals, your labor esti

Three weeks into a project, the owner requests a design modification. Your crew is already on-site, materials are ordered, and the schedule is locked in. You verbally agree to make the change to keep the project moving, figuring you'll sort out the paperwork later. Fast forward to billing time, and suddenly there's a dispute about what was agreed to, how much it should cost, and whether you're even entitled to payment for the extra work. This scenario plays out on constructio

You just wrapped up a profitable quarter. Your jobs are on schedule. Your clients are happy. Then your surety agent calls with news that makes your stomach drop: "We're reducing your bonding capacity by 40%." You pull up your WIP report, scanning the numbers. Revenue looks solid. Costs are under control. Profit margins are healthy. So what's the problem? Here's what most contractors don't realize: your surety isn't just reading your WIP report, they're interrogating it.  And

It's 3 PM on a Thursday when your project manager walks into your office with the month-end cost report. The commercial project you thought was tracking nicely? It's actually $47,000 over budget. Your stomach drops. The worst part? Most of those overruns happened three weeks ago. If you'd known then, you could have done something about it. Now? The damage is done, and you're left trying to salvage whatever profit margin remains. This scenario plays out in construction compan

Imagine bidding on a project, confident in your numbers, only to watch your profit evaporate as unforeseen expenses pile up. This scenario plays out more often than you might think in construction. Inaccurate job costing represents more than a minor hiccup, this silent profit killer can cripple even the most seasoned contractors. Getting job costing right goes beyond crunching numbers; understanding every dollar spent and earned on a project makes all the difference. When tho

You just won a $2M federal construction project with an 18% profit margin around $360K. Six months in, you're barely breaking even. By close, you've lost $150K. What happened? Prevailing wage requirements. And you didn't account for the real costs. Contractors see the higher wage rates and adjust their labor costs, assuming they're covered. But prevailing wage requirements multiply your costs through fringe benefits, payroll taxes, insurance premiums, and administrative overh

You're profitable on paper, but your bank account says otherwise, sound familiar? If you're a construction owner, general contractor, or subcontractor, you've probably experienced this frustrating disconnect. You look at your QuickBooks income statement, see a healthy profit margin, and wonder why you're still struggling to make payroll or cover material costs. The problem isn't your business, it's how your financial reports are set up. Standard QuickBooks income statements a

Last quarter, a Phoenix GC completed a $1.8M renovation with 8.5% gross margin all direct costs controlled, client paid in full. Three months later: $68,000 loss. The culprit? Overhead spiked 340% during mobilization and closeout while everyone focused on "visible" costs. The PM burned 140 hours post-revenue managing punch lists. Retention sat uncollected for 73 days while overhead kept running. Overhead costs are construction's silent profit killers.  Most contractors track

A contractor called us last month about a confusing problem. His WIP report showed his commercial renovation at 22% profit $74,000 in the green. But he'd maxed out his credit line and couldn't pay his concrete supplier. We found $68,000 in July costs that wouldn't hit his books until September. His plumber had worked three weeks but hadn't invoiced. Materials sat in "uninvoiced receipts" because his supplier batched invoices monthly. His WIP showed profit that didn't exist.

As a construction owner, you know the grind: you win the bid, you put in the work, and you see healthy profit margins. But have you ever felt like you’re constantly chasing money? You’re profitable on paper, yet your bank account is perpetually running on fumes. This is the Construction Cash Flow Trap , and it has sunk more profitable companies than market crashes have. The Balance Sheet is your business’s X-ray. It reveals where cash is getting trapped and where dangerous fi

Picture this: You've just completed a $500,000 construction project. The work is done, your crew has moved on, but you've only received $450,000. Where's the other $50,000? It's sitting in retention and if you're not tracking it properly, you might never see it. For construction owners, general contractors, and subcontractors working with AIA contracts, retention isn't just a line item on payment applications. It's working capital that's temporarily out of reach, and in today

If your bonding agent has recently requested updated Work-in-Progress (WIP) reports, you may be feeling the pressure. It’s understandable to be concerned about how these reports could impact your bonding capacity, especially if you’re unsure about exactly what the underwriters are looking for. For small and mid-sized contractors (SMEs), your bonding capacity  is essential. It's the difference between competing for multi-million dollar projects or staying in the smaller league

As a construction business owner, you constantly navigate a brutal paradox: you need consistent cash flow to keep the lights on, but pushing clients aggressively for payment risks jeopardizing future relationships. This reality makes managing Days Sales Outstanding (DSO) the average number of days it takes to collect your invoices one of the most stressful parts of running your business. The real opportunity lies in strengthening your internal accounting system to produce a

“Last year was our best on record yet I’m not sleeping any better.” You’re bidding more, winning more, and keeping crews fully utilized. Revenue is up year over year, but when you review the numbers, profit margin has slipped again. The explanation is familiar: overhead increased . What that doesn’t tell you is what to address  or how to correct it . In reality, you’re focused on managing projects, coordinating subs, and serving clients. Meanwhile, cash is leaking in places

The cash flow issues you experience after a seemingly "profitable" project are usually due to one critical mistake: incorrect pricing. The core problem is the Margin vs. Markup Trap . Many contractors confuse these two terms, leading to under pricing, especially in failing to recover vital overhead expenses . This guide clarifies the difference, defines your true overhead cost, and provides a professional, formulaic approach to ensure all costs are accurately included in you

For general contractors, managing subcontractor payments effectively is essential for maintaining healthy cash flow and strong project relationships. When you're working under AIA prime contracts while managing multiple subcontractors under AIA A401 agreements, having clear payment systems becomes critical for project success. This guide walks you through practical accounting approaches for managing subcontractor payments under AIA contracts , helping you build efficient pro