CONSTRUCTION FINANCIAL STATEMENTS EXPLAINED.
Three financial statements tell the complete financial story of a construction business, and most subcontractors read one of them. The P&L shows whether you made money over a period. The balance sheet shows what you own and owe at a point in time. The cash flow statement shows how cash moved. A contractor reading only the P&L is working with a third of the information available and guessing at the rest.
The three are supposed to agree with each other. When they're maintained correctly, the change in equity on the balance sheet ties to net income on the P&L, and cash on the balance sheet ties to ending cash on the cash flow statement. When they don't tie, something is wrong in either the accounting or the business underneath it. Most subcontractors have no idea whether their three statements reconcile, which is worth fixing, because a banker and a surety are going to check on your behalf.
WHAT IT MEANS.
A construction financial statement package is three reports read together, the profit and loss statement, the balance sheet, and the cash flow statement, each one answering a different question about the business.
A banker reviewing a credit application and a surety reviewing a bonding application read all three statements together, looking for the story they tell as a set rather than one at a time. That's the part owners tend to miss. A single strong number doesn't carry the file, and a single weak one doesn't sink it, but a combination that doesn't add up gets questions every time.
ONE STATEMENT OUT OF THREE.
You only look at the P&L
The P&L shows whether you made money over a period. The balance sheet shows what you own and what you owe at a point in time. The cash flow statement shows how cash moved. Each one answers a different question, so a contractor reading only the P&L is working with a third of the information available and filling in the other two thirds by feel.
Your three statements don't tell a consistent story
When the P&L, balance sheet, and cash flow statement are maintained correctly they reconcile to each other: the change in equity on the balance sheet ties to net income on the P&L, and cash on the balance sheet ties to ending cash on the cash flow statement. When they don't reconcile, something is wrong in the accounting or in the business underneath it. Most subcontractors can't say which case they're in.
Bankers and sureties read all three at once
A banker reviewing a credit application and a surety reviewing a bonding application read all three statements together, looking for the story they tell as a set. A P&L showing profit against a balance sheet showing falling equity and a cash flow statement showing negative operating cash is the story of a business in trouble, whatever the income line says. That combination gets caught in underwriting every time it comes through.
THREE STATEMENTS, THREE QUESTIONS.
The P&L, or income statement, shows revenue, direct costs, gross profit, overhead, and net profit for a specific period, whether that's a month, a quarter, or a year. It answers one question, which is whether the business made money. The construction figures to read on it are gross profit margin, targeted at 15 to 25 percent by trade, overhead rate, targeted at 8 to 18 percent, and net profit margin, targeted at 5 to 8 percent before taxes.
The balance sheet shows assets, meaning what you own, liabilities, meaning what you owe, and equity, meaning the difference between them, all at a single point in time. It answers whether the business is financially healthy. The construction items to read are working capital, which is current assets minus current liabilities and targets 10 to 15 percent of revenue, the current ratio, targeted above 1.5, and the equity trend, which should be growing if the business is accumulating value.
The cash flow statement shows cash in and cash out across operations, investing, and financing for a period. It answers where the cash came from and where it went. The section that counts most in construction is operating cash flow, because positive operating cash flow means the business generates cash from the work itself, and negative operating cash flow means the business consumes cash to operate, which is unsustainable regardless of what the P&L says.
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.
| 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.
FREQUENTLY ASKED.
