CONSTRUCTION BACKLOG QUALITY ANALYSIS.
Backlog at face value is misleading. Two subcontractors with identical $8M backlogs can have completely different financial profiles depending on margin spread across projects, customer concentration, schedule timing, and how the work converts to cash. Quality analysis examines five factors beyond the dollar figure: margin distribution, customer concentration, schedule timing, cash conversion, and execution risk. Your $10M backlog isn't one number. It's 15 to 30 projects with different margins, timing, customers, and risk, and the aggregate hides every bit of it.
The reason this gets skipped is that the single number feels like an answer. It goes to the surety, the bank, and the crew, and everybody nods at it. But a backlog is a portfolio, and nobody would evaluate a portfolio by adding up the positions and stopping there. Breaking it apart takes a spreadsheet and an afternoon at $2M and a real system at $10M, and either way the output is the same. You find out which projects are carrying the year, which customer you can't afford to lose, and which month runs out of cash.
WHAT IT MEANS.
Backlog quality analysis is the review that breaks a single backlog dollar figure into its margin distribution, customer concentration, schedule timing, cash conversion, and execution risk.
Most subcontractors report backlog as one dollar figure, the sum of all signed contracts not yet completed. That figure goes to the surety, the bank, the owner, and sometimes the employees. It feels meaningful because it's a clean aggregate. It's also close to useless for making a management decision.
A $10M backlog could be 12 projects with healthy margins, a balanced customer mix, and good cash conversion timing, which is a strong portfolio. Or it could be 25 projects with one customer at 60% of the total, three projects expected to run negative, schedule timing that produces cash crunches in months 4 and 9, and two projects the business should never have bid, which is a weak portfolio. Same backlog figure, and two very different financial realities. Quality analysis breaks the aggregate into the components that decide the outcome and surfaces the structural problems the dollar figure averages out.
FOUR THINGS THE AGGREGATE AVERAGES OUT.
Margin distribution across the backlog
Healthy backlogs show a fairly tight margin distribution, with most projects inside 200 to 400 basis points of the company's target margin. Unhealthy backlogs show a wide spread, with some projects at 30% or better subsidizing others at 5% or negative. The distribution tells you whether your bidding discipline is consistent or whether the portfolio is being held together by a few exceptional projects that are covering for systematic underbidding everywhere else.
Customer concentration
What percentage of backlog dollars comes from the top 3 customers? Concentration above 60% to 65% carries significant risk, because losing one customer changes the whole picture. It also costs you negotiating position. Subs with high concentration tend to accept worse pay terms, more aggressive change order behavior, and tighter retention than diversified subs do, because both sides know who needs the relationship more.
Schedule timing distribution
When does the backlog run? A $10M backlog that produces $4M of revenue in the next 6 months and $6M spread across the following 18 months has completely different cash and capacity implications than one where $8M of revenue happens in the next 9 months. Timing analysis tells you whether the backlog matches a capacity ramp the business can execute, and whether the cash coming in matches the expenses going out.
Execution risk
Some projects in the backlog were bid wrong, won at the wrong price, or accepted on terms the business should have refused. Those carry execution risk, meaning they're likely to produce sub target margin, cash flow stress, or an operational distraction while they run. Quality analysis flags which projects fit that profile so management can plan for it with extra PM attention, schedule priority, change order discipline, and occasionally a proactive renegotiation.
WHAT IT LOOKS LIKE IN DOLLARS.
Different customer types pay on different cycles. Private commercial GCs typically pay 30 to 45 days. Public sector pays 60 to 120. Carrier MSA work pays 60 to 90. So the expected cash conversion of a backlog depends on customer mix more than on total contract value, and a backlog heavy in public sector work produces less cash per month than the same dollar backlog of private commercial work.
Quality analysis is what sureties want in front of them when they're evaluating a bonding capacity increase. Subs who produce it get treated differently from subs who only produce an aggregate backlog figure, and the difference in treatment comes through as capacity and rate rather than as a compliment.
THE FIVE INPUTS THE ANALYSIS RUNS ON.
Expected gross margin on every project in the backlog, refreshed quarterly against current cost data rather than bid time data that's 8 months stale. This is the input people skip, and skipping it's what makes the whole exercise decorative instead of useful.
Each project gets assigned to its true customer, whether that's the GC, the owner, or a public agency. Concentration percentages then get calculated from project level data and not from somebody's impression of who the big accounts are.
Expected start, expected substantial completion, and the expected revenue recognition curve for every project, confirmed by the PM every month. A schedule the PM hasn't looked at is a schedule that describes the plan rather than the job.
Each customer's true pay cycle comes out of your own historical receivables data and not out of the contract terms. Contract terms describe what was agreed. Receivables history describes what happens, and the forecast has to be built on the second one.
Every project gets a risk category of standard, watch, or problem, assigned jointly by the PM and the CFO function. Those five inputs produce the outputs, and the outputs feed capacity planning, hiring decisions, banking conversations, and surety reporting directly.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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