GROWTH BREAKS FINANCE ON A SCHEDULE.
A subcontractor's finance function has to do a different job at each revenue step, and the thing that breaks first is different too. SPM publishes 7 revenue bands and quotes$18.5M+ individually, and those band boundaries are the steps on this page rather than round numbers chosen for an article. Below $1M the work is getting a cost code structure and a real overhead rate in place. Through the middle bands it's WIP, a 13 week cash forecast, and a close finished by day 10. At the top it's running all of that without the owner personally looking at anything. Revenue decides which band you're in, and your situation decides which of the 3 tiers fits. Your size has nothing to do with that second question, which is the part most size-based advice gets wrong.
Almost every contractor reading this is one step behind where his revenue says he should be, and that's normal. Revenue can be added in a quarter and a financial structure can't, so the structure is always catching up. The cost of the lag is the one job nobody was watching, and it gets more expensive at every step because the jobs get bigger.
EACH STEP ASKS SOMETHING THE LAST ONE DID NOT.
Read the step you're in and the one above it. The steps are cumulative, so nothing on an earlier one stops being required, and skipping one means the step above is running on a record nobody built. The revenue boundaries are the same ones the rate table uses, which is deliberate: the point at which the work changes is the point at which the price changes.
What the finance function has to do. Get a cost code structure and a real overhead rate in place while there are few enough jobs that you can still check the structure against your own memory of what happened. Nothing else at this size is urgent, and this is, because every number the business will ever produce is built out of it.
What breaks first if it doesn't. What a finished job made lives in the owner's head and nowhere in a record, so the first office hire has nothing to work from and the first bank conversation has nothing to show. The business is funded by the owner deciding what to pay this week, which works right up until two jobs bill late in the same month.
What the finance function has to do. Separate job cost from overhead honestly, and recalculate the overhead rate every time the payroll changes. This is also where WIP starts being worth producing, because there are now enough open jobs that the profit on one can hide the loss on another until both close.
What breaks first if it doesn't. Overhead grows with every hire and the percentage carried in the bid doesn't move, so the business wins work at a price that stopped covering it two hires ago. Nobody notices, because revenue is climbing. The owner is still approving every cost personally and the close finishes too late in the month to change anything.
What the finance function has to do. Monthly WIP with percentage of completion and a reviewed cost to complete, a 13 week cash forecast rebuilt weekly, and a close that finishes by day 10 so the numbers are still worth a decision. Somebody other than the owner has to own whether the record is right.
What breaks first if it doesn't. Several jobs start at once and each one wants money before it pays any back, so shortfalls stop being a single event and start being a schedule. Receivables build faster than anybody is chasing them. WIP becomes a requirement for a bonding or banking conversation that never came up before, and producing it for the first time under a deadline is where the profit fade nobody was tracking becomes visible.
This step has its own page, and it goes considerably deeper than a paragraph: THE FINANCIAL SYSTEM THAT WORKED AT $2M BREAKS AT $5 MILLION.
Three job starts stack three 75 day cash holes at once, and informal collections leave $150,000 to $300,000 uncollected. The four changes $5M requires.
What the finance function has to do. Push cost ownership out to whoever runs the job, with a variance review that happens while the job is still running, with closeout too late to change anything. The line of credit has to be sized against the operation the company runs now, not the one it borrowed against two years ago.
What breaks first if it doesn't. The way of managing jobs that worked when one person could hold all of them stops holding the portfolio, and job costing that was reviewed case by case fails across a dozen simultaneous projects. The second in command the owner just hired has no financial structure to work from, so the owner keeps doing the work he hired somebody to take.
This step has its own page, and it goes considerably deeper than a paragraph: CONSTRUCTION COMPANY $5M TO $10M: THE FINANCIAL INFRASTRUCTURE TRANSITION.
At $8M with 12 active projects the working capital requirement runs $600,000 to $900,000. The five upgrades to make before $10M, and what breaks without them.
What the finance function has to do. A real job costing platform, WIP with enough history to show a trend, a forecast scaled to the receivable and retainage load the business now carries, and 13 months of reporting history so this month can be compared to the same month last year.
What breaks first if it doesn't. Every control that depended on the owner personally looking at something fails, because there's too much to look at. Retainage becomes a material amount of money that nobody owns collecting. A surety and a bank both start asking for reporting on their schedule and not on yours, and the answer has to already exist.
This step has its own page, and it goes considerably deeper than a paragraph: $10 MILLION CHANGES EVERYTHING. IS YOUR FINANCIAL SYSTEM READY?
Receivables above $1.6M, $500K to $800K of retainage, and $200,000 of deposits. What breaks at $10M, and a line of credit sized at 20 to 25% of revenue.
What the finance function has to do. Working capital managed as a target you hold, held around 13 percent of annual revenue, with the current ratio and debt to equity checked monthly against the ranges a bank and a surety underwrite to. Reporting is produced to their calendar.
What breaks first if it doesn't. Growth outruns the balance sheet. The company can win more work than it can fund, and the constraint stops being sales and starts being how much a surety will let it carry. A single slow-paying general contractor stops being an annoyance and becomes an existential problem.
What the finance function has to do. Run the same system with a finance team inside the business, and decide honestly whether the CFO seat should be filled internally. The structure, the cadence, and the reporting standards don't change at this size. Who executes them does.
What breaks first if it doesn't. A finance function assembled one hire at a time ends up with several people and no defined owner of any single number, which produces reports that are late and confident at the same time. The other failure is hiring a CFO with no construction background into a business whose entire problem is job cost, which the owner then has to teach.
Boundaries sit on half-millions because the pricing grid rounds revenue to the nearest million, so $500,000 and above rounds up and the half-million marks are the true edges. A contractor at $3.4M reads the $1M to $3.5M row. $18.5M+ is quoted individually.
THE STEPS PEOPLE ASK ABOUT HAVE THEIR OWN PAGES.
This page is the map. These three are the destinations, written before it and considerably longer, each one on a single transition. If you already know which step you're on, go straight to it.
THREE STANDARDS THAT ARE THE SAME AT EVERY STEP.
Worth stating because the rest of this page is about difference. These three don't scale with revenue, and a contractor at the bottom band is held to the same three as one at the top. That is what makes them standards.
WHAT YOUR PEOPLE ALREADY DO WELL DECIDES IT.
The tempting structure for a page like this is a diagonal line: small business buys the small tier, large business buys the large one. It would be tidy and it would be wrong. The 3 tiers differ by how much of the finance function stays in your office, and that's a question about your people.
You stop guessing.
You already have a bookkeeper who does careful work, and what you're missing is anybody looking forward. You can read a profit and loss and you can't tell which of your open jobs is going to disappoint you.
Your bookkeeper keeps doing the books.
You stop touching the books.
You're still touching the books yourself, or the person doing them is asking you coding questions you shouldn't be answering. Month end is a thing that happens to you.
We do the books. No payroll.
Every job shows its margin while it's still running.
You need every open job to report its own margin while there's still time to do something about it, and you don't want anybody at your company learning a new platform to get it.
We do the job costing.
Tier definitions are read from the same file the pricing page renders, and the three service layers page shows which layers SPM operates at each one. Per-tier prices aren't published, because a published column invites you to pick the cheapest column on the page.
FREQUENTLY ASKED.
