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

Your profit and loss statement shows a healthy profit for the year. But when it's time to make payroll or pay your suppliers, the cash isn't there. Sound familiar? This disconnect between profit and cash flow frustrates contractors every day. You're profitable on paper, but constantly stressed about money. The problem isn't your job costing or your estimating. The problem is you're not using your balance sheet to manage your business. Most contractors focus intensely on job c

In the highly competitive construction industry, bidding accurately is crucial for maintaining profitability. Many contractors win projects only to realize later that labor costs  have wiped out their expected profits. The cause is simple but devastating: bidding based on gross wages instead of the True Cost of Labor . If your estimates rely solely on wages, you’re underpricing each project by 20%–35% , a silent profit leak that worsens with every payroll run. That hidden cos

Accurately tracking Work in Progress (WIP)  is crucial for financial transparency and effective project management on the construction income statement. WIP reflects the value of projects currently underway, including costs incurred and revenue earned to date. Properly managing WIP is the only way to accurately assess profitability, predict cash flow, and make informed decisions on bids and resource allocation. Construction projects often span months or years. This requires c

Cash Flow  is the lifeblood of any construction business. Even the most profitable projects can face crippling financial constraints if cash is not properly managed. The biggest challenge often isn’t generating revenue but keeping working capital flowing. Long payment cycles from clients, coupled with inefficient internal processes, can quickly choke your liquidity and stall growth. But what if we told you that Accounts Payable (Construction AP) the routine task of paying bi

For contractors, managing insurance costs is essential to maintaining profitability. Insurance premiums General Liability (GL), Workers' Compensation (WC), and Commercial Auto are some of the largest overhead costs on a construction project. If these costs are mismanaged or inaccurately allocated, they can silently erode project margins, disrupt cash flow, and affect competitive bidding. The key to success is integrating these expenses into your job costing system . By stra

Days Sales Outstanding (DSO)  is a critical financial metric that measures how long it takes a construction company to collect payment after completing a job. High DSO means your money is stuck in receivables, which significantly impacts cash flow, a vital resource in the construction industry where every project needs consistent capital to stay on track. Reducing DSO is more than an accounting goal, it's essential for business success. By using specialized technology and ou

In the construction industry, success is often measured solely by the Profit and Loss (P&L)  statement. However, while the P&L offers a snapshot of profitability, it doesn’t tell the full story. Construction firms operate in a complex environment where cash flow, debt management, and operational efficiency are key to long-term sustainability. Without proper attention to Financial Ratios, contractors risk remaining unaware of deep-seated financial issues that could jeopardize

In the construction industry, managing project costs isn’t just about tracking materials and labor, it’s about maintaining visibility....

In the construction industry, managing insurance costs  is a critical yet often complex task for contractors. Insurance expenses can...

O verhead costs represent the indirect expenses required to run a business but are not directly tied to the physical construction process. These costs include office rent, administrative salaries, utilities, insurance, equipment maintenance, and more. Efficient management of these costs is crucial for maintaining profitability, but it is equally important to ensure that cost-cutting does not compromise the quality of construction projects. This article will explore how optim