HOW TO READ CONSTRUCTION FINANCIAL STATEMENTS.
Commercial subcontractor owners need to read four documents fluently: the profit and loss statement, the balance sheet, the cash flow statement, and the work in progress schedule. Each one answers a different question, and each one has construction specific quirks that generic accounting knowledge misses. Reading all four takes about five minutes once you know what to look for.
The order counts. The P&L tells you whether the period made money. The balance sheet tells you what the business is built on today. The cash flow statement explains why the profit isn't in the bank. The WIP tells you which jobs produced the profit and which ones are about to take it back. Read alone, any one of the four will mislead you. A P&L can look strong while the WIP says two jobs are fading, and a bank balance can look fine while the balance sheet says every dollar of it belongs to somebody's retainage.
Rather talk it through first? Book a 20 minute call. Nothing gets sold on this call.
Want it set up for you? Onboarding only, from $4,500 one time. Books migrated and job costing built, then your own team keeps it up.
WHAT IT MEANS.
A construction financial statement package is four documents read together: the profit and loss statement, the balance sheet, the cash flow statement, and the work in progress schedule.
WHAT EACH ONE ANSWERS.
The P&L, did you make money this period?
Revenue is total billings or earned revenue for the period, and under percentage of completion it reflects earned revenue rather than invoices, so a sub billing $10M monthly while completing only 60% of the work shows $6M of earned revenue. Cost of revenue is labor, materials, subs, equipment, and other job tied costs, broken into components you can analyze separately. Gross margin varies by trade and revenue band rather than being one figure for everybody: concrete at $1M to $5M averages 21% and electrical at the same band averages 25%, against CFMA's 21.8% gross profit margin across all respondents and the 15% to 25% specialty contractor range Jones Maresca and Company publish. On overhead, Jones Maresca and Company put total indirect cost at 8% to 15% of revenue and CFMA reports SG&A at 11.8%. CFMA also reports net income before taxes at 6.3% across all respondents, with the best-in-class top quartile at 11.9% before taxes, so most commercial subs in the $1M to $12M range at 4% to 8% are around the industry average rather than well under it. The CFOS target is 12% net profit before taxes, and /construction-subcontractor-financial-benchmarks-by-trade has the figures for your own trade and band.
The balance sheet, what do you own and what do you owe?
It's a snapshot of the business on one specific day. AR gets aged into 0 to 30, 30 to 60, 60 to 90, and over 90 days, and more than 15% over 90 days is a collections problem. Retainage receivable is typically 5% to 10% of pay apps and belongs on its own line as held cash returning at substantial completion. Underbillings are a current asset covering costs incurred but not yet billed, which is normal in moderation and dangerous when it grows month over month without resolving. Overbillings are a current liability, good for cash and a warning when they keep growing, because they represent future revenue already collected. Six months of line of credit balances tells you whether the business generates cash or consumes it.
The cash flow statement, where did the cash go?
It reconciles net profit with cash movement, because net profit can be positive while cash goes out, and the reverse. Operating activities is what the work generated or consumed, and negative operating cash flow is the warning signal. Investing activities is equipment, vehicles, and real estate, usually negative for a growing sub. Financing activities is debt and equity, including line of credit draws, term loan payments, and owner contributions or distributions. The most useful read is positive net profit alongside negative operating cash flow, which means the money is held in AR or in underbillings. The business is profitable on paper and constrained at the bank.
The WIP schedule, which jobs are making money?
No other industry has it, and every commercial subcontractor needs to read it. Each row is one job with contract value including approved change orders, cost incurred to date, estimated cost to complete, percent complete as cost incurred divided by total estimated cost, earned revenue as percent complete times contract value, billings to date, and the over or under billed position. Two questions do most of the work. Does any job show earned revenue more than 10% below billings, which means cash is good now and future earnings are owed? Is estimated cost to complete rising month over month on the same job, which means profit fade is developing? Top quartile commercial subs have profit fade below 2% across the portfolio, while the bottom quartile has 6% or more.
WHAT IT LOOKS LIKE IN DOLLARS.
Top quartile commercial subs have profit fade below 2% across their portfolio, and the bottom quartile has 6% or more. The monthly WIP review is the only place that difference becomes visible early enough to do something about it, which is why the cost to complete column is the one to read first and the one most subs update least honestly.
AR aging with more than 15% over 90 days. The retainage receivable trend. Underbillings growing month over month. And the line of credit balance over six months, where consistent growth means the business is consuming cash even while the P&L looks profitable. Any one of the four is worth a conversation, and two of them together is a forecast.
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. The one-time onboarding fee is right here in the table.
Built for subs doing $1M to $12M. Above $12.5M we quote.
| Last 12 months revenue | Core | Strategic | Platinum | One-time onboarding |
|---|---|---|---|---|
| Under $1M | $1,900 | $3,100 | $3,300 | $2,500 |
| $1M to $3.5M | $2,600 | $4,100 | $5,300 | $4,500 |
| $3.5M to $6.5M | $3,800 | $5,900 | $8,300 | $6,000 |
| $6.5M to $9.5M | $5,100 | $7,600 | $11,800 | $7,500 |
| $9.5M to $12.5M | $6,100 | $8,900 | $14,900 | $9,000 |
| Above $12.5M | Quoted | Quoted | Quoted | Quoted |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers, and it moves with your revenue band. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Just want the setup? Onboarding only is the same onboarding work with no monthly service after it, one time, at the onboarding fee plus $2,000. Start a monthly engagement later and $2,000 counts toward it. It starts at $4,500, and the price for every band is on the pricing page.
The three tier columns are the whole price. Which one fits depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
- Online software only: QuickBooks, Sage, Viewpoint and similar. No VPN or hosted desktop.
- Not in any tier: payroll, pay applications, collections on receivables.
- Pricing valid through 2027.
CFO work. Your own bookkeeper keeps doing the books.
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 and never in a report.
Your bookkeeper still does the books.
Core, plus bookkeeping and bank reconciliations, plus job costing and WIP software set up and managed for you. Use your own online accounting software or we supply it, one price.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
Strategic, plus a controller who handles payables and receivables the way an in-house controller would. You approve every payment.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
FREQUENTLY ASKED.
