Why Your Overhead Keeps Growing (And Your Profit Doesn't)
- Cost Construction Accounting
- Oct 27
- 5 min read
“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 no one is actively monitoring because there isn’t time or a system to monitor everything.
This article explains why contractors overhead often grows faster than profit and outlines practical steps to regain visibility, allocate costs correctly, and protect margin.
In this Article:
The Growth Trap Most Contractors Fall Into
You start the year planning to do better than last year. And you do revenue grows. You hire another PM, add a truck, bring on more office help.
But here's what typically happens:
Year 1: You do $5M, make decent profit, everything feels manageable
Year 2: You push to $7M. You're busier, but profit per dollar didn't really improve. "Growing pains," you tell yourself.
Year 3: You hit $9M. You're working harder than ever. But when you look at actual take-home, it's not much better than Year 1.
What happened? Your costs grew faster than your ability to track them.
It's not that you're bad at business. It's that when you're running 12 projects instead of 6, the same casual approach to tracking costs doesn't work anymore. Small leaks become big problems.
Where Contractors Actually Lose Money
The "Field Time That Isn't Field Time" Problem
Your lead carpenter makes good money, let's say $80K loaded with benefits. You charge him to projects because he's a field guy.
But talk to him honestly. How much time does he actually spend:
In the office dealing with paperwork?
Fixing mistakes that shouldn't have happened?
Going back to projects for "just one more thing"?
Tracking down materials that got delivered wrong?
Dealing with sub coordination issues?
If it's even 6-8 hours a week (and it usually is), that's 20% of his time. On an $80K person, that's $16K a year you're billing to jobs but not actually doing productive work.
Multiple this across your supervisors and leads, and you're easily looking at $40K-$60K annually in labor you think is going to projects but is really going to fixing internal problems.
Why this matters: You're bidding jobs assuming this person is 90-100% productive. In reality, they're 75-80% productive. Your estimates are systematically too low.
The "I Don't Know Which Job This Goes To" Problem
Your office person means well. She's trying to keep up with invoices while answering the phone and handling walk-ins.
Material invoice comes in. It's probably for the Johnson project. Or was it the Miller project? She makes her best guess and moves on there are 47 other invoices to process today.
End of the year, you run job cost reports. Some jobs look really profitable. Some look terrible. You're not sure which numbers to trust because you know the coding wasn't perfect.
The real damage: You make decisions based on wrong information. You think Type A projects are profitable (so you bid more of them too cheap), and Type B projects lose money (so you avoid work that actually makes you money).
Over a year, on $8M revenue, this easily costs you $50K-$100K in misdirected business strategy.
The "We'll Fix It Later" Problem
Customer isn't quite happy with something. You send a guy back for a few hours. No big deal.
Sub needs to come back and adjust something. Happens all the time.
You swing by a completed project to "touch up" a few things.
None of this gets tracked as rework. It just gets buried in job costs. You think the project made 8% margin. It actually made 4%.
Here's why this matters: If you don't know you have a rework problem, you can't fix it.
Maybe it's your estimating (not including enough time for detail work). Maybe it's supervision (need better QC checks). Maybe it's crew skill (need more training). You can't improve what you can't see.
The Subcontractor Payment Mess (A/P Risk)
You finish a project. Ready to get final payment and close it out. But:
You're missing lien waivers from three months ago
Two subs never sent updated certificates of insurance
You paid one sub before the owner paid you (cash flow hit)
You released retention to a sub but owner hasn't released yours yet
Now you're spending hours chasing paperwork, fronting cash you shouldn't have to, and the project closeout drags on for weeks.
The cost: Not just your time. It's the cash you have tied up that could be working somewhere else. It's the delayed final payment from the owner. It's the frustration of doing this on every single project.
The "We Estimated One Way, Track Costs Another Way" Problem
You estimate jobs by thinking: foundation, framing, mechanical, finishes.
Your bookkeeper tracks costs by thinking: labor, materials, subs, equipment.
Six months into a big project, you ask "Are we on budget?"
The honest answer is: "I have no idea." You're speaking different languages. By the time you figure out you're over budget, you're too far in to fix it.
Why This Happens to Good Contractors
You're not bad at business. You're just really busy running projects.
When you were smaller 3-4 projects, $2M-$3M revenue you could keep track of most things in your head. You knew what every crew was doing. Every big expense crossed your desk.
But at $5M-$10M, with 8-15 active projects? There's too much going on. You need systems, not just effort.
The problem is:
General bookkeepers don't understand construction. They try their best, but they don't know what matters.
Hiring a construction accountant costs $90K-$120K loaded and they're hard to find.
Expensive software requires training, implementation, and still needs someone who knows how to use it right.
So most contractors just live with it. Revenue goes up. Overhead goes up faster. Profit margins slowly erode.
How CCA Can Helps
At Construction Cost Accounting (CCA), we work specifically with contractors, active projects, growing but profit margins under pressure.
What We Actually Do
We become your construction accounting department:
Set up job costing the right way (matching how you estimate and think)
Process invoices correctly the first time
Manage sub payments with proper documentation
Monthly financial review that makes sense
Quarterly planning to keep improving
Why Contractors Choose Us
We speak your language. Our team has decades of construction experience. We know what retainage means, how progress billing works, why lien waivers matter. You're not teaching us, we're teaching our systems to work for your business.
Transparent pricing. Fixed monthly fee based on your volume. Typically $3K-$5K/month for $5M-$12M contractors. No surprises.
You stay in control. You get real-time access to everything. Weekly check-ins. Monthly reviews. We handle the details, you make the decisions.
Start Here: Free Assessment
Your overhead is growing faster than profit because you're making decisions without good information. You're not bad at business. You're just busy running projects. But at $5M-$10M-$15M, you can't keep track of everything in your head anymore.
The solution isn't working harder. It's getting systems that give you visibility into where money actually goes. Whether you build those systems yourself or get help, the key is: you need to see reality clearly enough to fix what's broken.
Ready to streamline your finances and get expert support tailored to the construction industry? Book a free 30-minute consultation with CCA today to discuss your specific needs!
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