UNDERCAPITALIZED BACKLOG, MORE WORK THAN CASH TO FUND IT.
It's one of the most common financial crises in commercial subcontracting, and one of the most preventable. The business signed three contracts and all three mobilize inside the same 30 day window. Each one needs $80,000 in mobilization capital before the first billing event. The line of credit is $200,000. Two mobilizations get funded and the third gets funded out of cash that was supposed to cover operating expenses. When the first GC pays late, there's no slack to absorb it, so payroll is at risk on profitable work with a full backlog.
The 13 week cash forecast built from projected billing events shows this 10 to 12 weeks before it happens. That's the whole point of building it. With 12 weeks of warning you can advance a billing cut off, draw the line of credit ahead of the crunch, call the slow GC, stagger a start date, or defer a vendor. With 48 hours of warning your choices are the line of credit or payroll, and one of those isn't a choice. The problem is never that the owner made a bad decision. It's that he found out too late to have decisions.
WHAT IT MEANS.
Undercapitalized backlog is more signed work than working capital to fund the mobilizations it requires.
None of this is a profitability problem. The work is signed, the margins are fine, and the backlog is the kind of backlog a contractor spends years trying to build. The company is short of the cash it takes to start the work it already won, which is a balance sheet condition that better estimating will not fix. Cutting bids won't fix it and winning more work makes it worse.
HOW IT HAPPENS.
Mobilization stacking, several projects starting at once
The most common presentation is three projects starting inside the same 30 day window, each needing $60,000 to $120,000 in mobilization capital before the first billing event. Total requirement is $180,000 to $360,000 against available working capital of $220,000. Two of the three get funded from what's available and the third needs a line of credit draw, which reduces availability for the next unexpected cost. When that cost comes, a vendor who needs paying before the next billing cycle or a payroll week that falls before the first check, the line of credit is already committed and nothing is left to cover it.
Backlog growth outrunning working capital
Between $3M and $6M, most subcontractors grow backlog faster than they grow working capital. Revenue climbs, contracts get signed, and the line of credit grows a little but not proportionally. The working capital ratio, current assets divided by current liabilities, deteriorates as the business runs more simultaneous work off the same capital base. A ratio that was 1.4x at $2M reads 1.1x at $5M without a deliberate effort to grow capital alongside revenue. Below 1.0x the business is technically insolvent on a current basis before any project has gone wrong.
One project paying late is enough
An undercapitalized backlog has no slack in it. When a GC pays a $90,000 pay app 25 days late, that $90,000 isn't there to fund the payroll and the vendor payments it was supposed to cover. So the business scrambles: delay a vendor, draw the line of credit that was earmarked for the next mobilization, or in the worst case miss payroll. The same 25 day delay at a business with adequate working capital is a minor annoyance. The difference is the working capital, which the late payment only exposed.
WHAT IT LOOKS LIKE IN DOLLARS.
Target 10% to 15% of annual revenue in accessible working capital, meaning cash plus undrawn line of credit. At $4M revenue that's $400,000 to $600,000. Below 5% of annual revenue in accessible working capital, the business is running with no cushion at all, and any disruption, a late payment, an equipment failure, or a weather delay, becomes a liquidity crisis.
Most undercapitalized subcontractors are carrying $100,000 to $300,000 in AR that's 45 to 75 days old. Aggressive collections on overdue AR converts revenue you already earned into available cash inside 2 to 4 weeks. A verified civil client at $6.7M collected $309,000 in month one out of existing AR rather than new revenue. That's the fastest working capital improvement available without taking on a dollar of new debt.
FOUR ACTIONS BEFORE IT BECOMES A CRISIS.
Working capital required equals mobilization cost plus the monthly burn rate times the weeks to first payment. Run that arithmetic before the signature, not after. If available capital doesn't cover the peak, the shortfall gets resolved before the contract gets signed, because after it's signed you're no longer choosing, you're coping.
The best time to increase the line of credit is when you don't need it yet. A review at $3M, when the $5M trajectory is visible in the backlog, produces better terms and faster approval than a review at $5M when the need is acute and the bank can smell it. Bankers price nervousness, and the way to avoid paying for it's to ask early.
When several projects are in final negotiation at the same time, stagger the start dates by 3 to 4 weeks wherever the GC will allow it. Sequential mobilizations fund out of the same capital base without a simultaneous peak draw. This costs nothing and it's the single most underused move available to a contractor with a full pipeline.
The 13 week cash flow forecast built from projected billing events and known expenditures shows the problem outright as a week where the projected cash balance goes negative. That week is visible 10 to 12 weeks out. The corrective action, whether that's a line of credit draw, an advanced billing cut off, or a deferred vendor payment, is available in week one and not available in week 12 when the shortfall is two days away.
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.
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