T&M LOOKS EASY UNTIL THE APPROVAL CYCLE BREAKS
Electrical contractors bill T&M for change-order work, troubleshooting, service calls, and unscheduled additions. On paper, T&M is the highest-margin work you do — rates are loaded with overhead and profit, hours are direct pass-through. In practice, T&M is where margin quietly disappears: ticket approvals stretch 30–60 days, unsigned tickets pile up, lump-sum conversions get pushed at unfavorable terms, and rate erosion happens through unreviewed approvals. The fix is a daily/weekly ticket approval cadence, a rate review every 6 months, and a billing structure that separates T&M from base contract billing in your system.
T&M is the most profitable work on paper and the most under-managed in practice. The leak is small per ticket. The compounding is significant.
WHY T&M LOOKS GREAT UNTIL IT DOESN’T
Electrical T&M billing rates are built to include direct labor cost, burden, overhead absorption, and target margin. A journeyman billed at $95/hour might cover $42 of direct labor cost, $17 of burden, $19 of overhead, and $17 of profit. On the surface, that’s 18% margin built into every billable hour. Beautiful structure.
The structure works when three things hold: tickets get signed daily by the GC’s superintendent, rate sheets are reviewed and updated every 6 months, and T&M billing runs on a faster cycle than base contract billing. When any of the three breaks down, margin erodes — quietly, slowly, but consistently.
The rate looks fine. The cash flow tells a different story.
FOUR PLACES T&M QUIETLY LOSES MONEY
UNSIGNED TICKETS STACKING UP
The journeyman writes the ticket on Tuesday. The GC’s super signs it on Friday — if you’re lucky. More often: the super is busy, the foreman gets the ticket back, the foreman forgets to chase it, and a stack of unsigned tickets piles up in the truck. Three weeks later when you go to bill, half the tickets are disputed because nobody remembers exactly what happened. You eat the disputed portion. That’s pure margin lost.
APPROVAL CYCLE STRETCHING THE CASH GAP
T&M tickets get bundled into pay applications with the rest of your work. The pay app goes out at month-end. The GC reviews. The owner approves. The check arrives. By the time you’re paid for Tuesday’s T&M, it’s 60–75 days later. T&M was supposed to be the fast-cash work. The cycle ends up identical to base contract billing. The cash advantage disappears.
LUMP-SUM CONVERSIONS AT UNFAVORABLE TERMS
The GC says “just convert all your T&M into a single lump-sum change order at the end.” Sounds easier. In practice, you end up negotiating against accumulated tickets — some signed, some disputed — and the lump-sum number is always lower than what the tickets would have paid individually. The conversion happens because nobody wants to fight every ticket, but the result is the same: margin given up to close the books.
RATE EROSION THROUGH UNREVIEWED APPROVALS
The rate sheet was set 18 months ago. Direct labor has gone up 9%. Burden rate has shifted. Overhead absorption needs recalculation. But the rate sheet hasn’t changed because nobody reviews it. The original 18% margin built into the rate is now 8% — and if a journeyman is on overtime, it might be negative. Rate erosion through inaction is the slowest, biggest leak.
WHAT TO ACTUALLY DO
DAILY SIGNED-TICKET DISCIPLINE
Foreman’s job: ticket gets signed by GC’s designated approver at end of every day. No signed ticket, no billing — period. Standard policy, not negotiable. If the GC’s super can’t sign daily, escalate to the PM until the policy is enforced. The 5-minute conversation at end of day is the cheapest billing protection you can build.
SEPARATE T&M BILLING CYCLE FROM PAY APP CYCLE
T&M should bill weekly or bi-weekly, not bundled into the monthly pay app. Most GC contracts allow T&M to be invoiced separately on a faster cycle if you push for the language at contract signing. Faster billing equals faster cash. Treating T&M as fast-pay work changes the cash dynamics entirely.
RATE SHEET REVIEW EVERY 6 MONTHS
Pull current labor cost. Pull current burden rate. Pull current overhead rate. Recalculate the bill rate that delivers your target margin. Update the rate sheet. Notify GCs at appropriate intervals (typically annual, but the rate sheet itself needs to be ready when the conversation comes up). Skipping this review is how 18% margins become 8% margins without anyone noticing.
NO BLIND LUMP-SUM CONVERSIONS
If a GC requests lump-sum conversion of accumulated T&M, the conversion price needs to be calculated as the sum of approved tickets plus a defensible value for unsigned but performed work. Walking in without a number gives the GC the negotiation. Walking in with the math forces the conversation to start at the right place. Always run the math first.
TRACK T&M PROFITABILITY SEPARATELY
T&M revenue and T&M direct labor cost should be tracked as a distinct category in your books, not buried in general project labor. Without separate tracking, you can’t see whether T&M is actually outperforming base contract margin. With separate tracking, the leak becomes visible: T&M booked at 12% margin when the rate was set to deliver 18% means something in the structure is off.
SMALL LEAKS, BIG NUMBER
Each individual T&M leak is small. A disputed ticket costs $400. A delayed approval pushes cash out 30 days. A stale rate sheet erodes 3 margin points. Lump-sum conversion costs 10% on a $25K ticket bundle. None of these triggers a five-alarm reaction in the office.
Stacked across a year on a $4M electrical sub doing 18% of revenue in T&M, that’s $720K of T&M billing. Even a 6-point margin leak through these breakdowns is $43K of lost margin annually — equivalent to half a journeyman’s annual fully-loaded cost. It’s the kind of leak that doesn’t show up in any single conversation but eats real money over time.
T&M margin doesn’t get lost in big chunks. It gets lost in small ones, every week, until the year ends and the number is too big to ignore.
HOW CFOS HANDLES T&M
The Cash Flow Cycle module tracks T&M separately from base contract billing — daily ticket entry, signed/unsigned status, billing cycle position, payment receipt timing. The Job Profitability module shows T&M margin actuals against rate-sheet targets, by GC and by foreman, so the structural issues become visible. The CEO Reporting layer surfaces it monthly: T&M billing volume, signed-ticket discipline rate, average days to collection, and effective margin vs. target.
Same business, but instead of running T&M on tribal memory in the trucks, it’s a measured, managed billing category with its own performance metrics. The leaks become visible. The fixes get applied. The 18% margin built into the rate sheet actually shows up in the books.
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