PROCESS PIPING JOBS LOOK PROFITABLE. THE CASH IS STILL IN TRANSIT.
Process Piping subcontractors have no cash left for reasons specific to how the work is built and billed, on jobs that are making money. The three that cost the most in this trade are below, taken from process piping contractor research. Most are at 75 to 90 days from finishing work to holding the money, and 45 days is achievable.
Cash and profit are measured on different clocks. Your profit and loss records revenue when you invoice and costs when you incur them, while the bank account only knows what cleared. Labour goes out weekly and collects 45 to 90 days later, minus retention. That distance is what a growing, profitable process piping company funds out of pocket, and it widens as you grow. The specific things that widen it in this trade are what the rest of this page is about.
WHERE IT LEAKS OUT.
Under ASME B31.3, every weld has a unique number traceable to the welder, the welding procedure, heat treatment and examination results. For high-pressure and hazardous (Category M) service "the documentation package becomes legally binding, inadequate weld maps can delay hydrotest sign-off or final acceptance." The pipe is half the product. The traceability dossier is the other half. If your paperwork is behind your production, you've built stainless steel inventory you can't bill.
WHAT MOVES MARGIN IN THIS TRADE.
The Dossier Half
The pipe is half the product. The legally binding traceability package is the other half, and hydrotest sign-off waits on it. Build and bill the documentation labor weld by weld, and that's how you collect.
The Lapsed Ticket
Six months without using a qualified process and the welder loses the qualification, with no notice. You find out at audit, as rework on finished welds. The qualification matrix is a money control. Review it weekly.
The Five Percent Trigger
Sampled examination means one failed weld puts a welder's whole lot in question. Track repair rates by welder and process to see it coming. Price reject costs into every alloy bid.
DAYS SALES OUTSTANDING.
Ninety days is weak, 45 is the target, 30 is strong. Nothing else moves cash faster.
| Position | Days | What it means |
|---|---|---|
| Weak | 90 days | Roughly three months of work funded out of your own pocket. |
| Target | 45 days | You can get here on the days you control. Bill on time, send complete paperwork, and follow up in week two. |
| Strong | 30 days | Takes work every month. It's the cheapest money you can get. |
Moving from 90 days to 45 frees roughly annual revenue divided by 365, times 45 days. At $4M that's about $493,000. At $8M it's about $986,000. That money costs no interest and needs no bank. So we fix billing and collections before we talk about financing.
PROCESS PIPING BENCHMARKS.
Process Piping subcontractors at $1M to $5M net 8 percent, against the CFOS net profit target, set at your trade's net profit average at your revenue plus 3.5 points, never below 10 percent, before taxes. The working capital target is 13 percent of annual revenue, and the monthly close should finish by day 10 so the numbers can still change a decision.
FREQUENTLY ASKED.
