NO JOB COSTING AT $25 MILLION. THEN $2.6M IN PROFIT SHARING.
A $25M marine general contractor came to us without job costing or WIP reporting, so nobody could tell which projects were making money. We built the entire finance function from scratch. The bank balance hasn't dropped below $1.2M since the engagement started, the business generated over $1M in net profit, and it paid out $2.6M in profit sharing.
Revenue doesn't build a finance function. This company had grown to $25M on the strength of its crews, its equipment, and its relationships, and none of that growth required anybody to know what an individual project earned. That's more common at this size than people expect, because a business can absorb a great deal of imprecision when the top line keeps rising. What it can't do is make a deliberate decision, and every decision at $25M is large. Building job costing, WIP, and a monthly cadence from nothing was the whole engagement, and the results followed from having numbers rather than from changing how the work got built.
A $25M MARINE SUB. BIG, AND FLYING BLIND.
A marine general contractor doing $25M a year, self performing marine construction work with owned equipment and long duration projects. The company was established, the crews were capable, and the customer relationships were strong enough that work was never the question. There was no job costing, no work in progress reporting, and no financial view of any individual project.
NO NUMBER FOR ANY SINGLE PROJECT.
The company knew what it made in a year and couldn't say what it made on a project. On long duration marine work that's a serious exposure, because a job can run for many months and consume far more than it was priced to consume without anything visible going wrong along the way.
Decisions at $25M are large by definition. Whether to take a project, whether to buy a piece of equipment, whether to staff up, and what to bid the next one at were all being made from experience and from the bank balance, because there was nothing else available to make them from.
The bank balance itself moved in ways nobody could predict. Cash came in large amounts and left in large amounts, and the timing was something the company absorbed rather than managed.
NOTHING WAS BROKEN. NOTHING EXISTED.
This wasn't a company with a failing system. It was a company with no system, which is a different problem and in some ways an easier one, because there was nothing to unwind first. The chain ran from an absent job cost record, into pricing and project decisions made from experience alone, into a cash position that moved without warning at a scale where a surprise is expensive.
The Cash Control System was the system that did the most work here, because a company this size with unpredictable cash timing is carrying risk it hasn't measured. The Job Profitability System was built alongside it from nothing, since a WIP schedule needs a job cost record underneath it before it can say anything.
WHAT CHANGED, WEEK BY WEEK.
THE NUMBERS, NOT THE FEELING.
The bank balance hasn't gone below $1.2M since the engagement began, which at this size is the difference between a company that can commit to a project and one that has to hope. The $2.6M paid out in profit sharing came from profit the business was already producing and had never been able to see.
Total time from first call to the full finance function running, meaning job costing, WIP, cost to complete, and the monthly cadence: about 90 days. The bank floor and the profit sharing followed in the first full year.
DOES THIS SOUND FAMILIAR?
Companies in this position are usually large and usually successful, which is why the missing function goes unaddressed for years. The signals are consistent: revenue is strong and growing, there's no report that shows what an individual project earned, decisions get made from the bank balance and from experience, and the accounting team is busy producing a record rather than producing management information.
At $25M this is a bigger exposure than it looks. A single long duration project running over without anybody seeing it can consume a year of profit, and there's no telling of that story where the crews were the problem.
See how CFOS applies to marine subcontractors specifically on theMarine Operating System page, or book a 20 minute call and bring your own numbers.
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