Fractional CFO for Construction Companies
Construction profit hides inside jobs in progress and the timing of billing. A fractional CFO brings job costing, WIP, and progress billing into one view so a builder knows where the money really is.
Book a call with PeterWhere the money actually moves
A construction profit and loss statement for a single month is close to meaningless on its own, because the costs of a job and the billings for that job land in different periods. The work in progress schedule exists to fix that: it compares cost incurred to date against the total expected cost, works out how complete each job is, and compares that to what has actually been billed. The difference is either revenue earned and not yet invoiced, or cash collected for work not yet done.
When that schedule is absent or stale, two failures follow. Over-billed jobs make the company look more profitable than it is and the cash gets spent. Under-billed jobs quietly finance the client. Add retainage held back until completion and a portfolio of overlapping jobs, and cash timing becomes the thing that determines whether a profitable builder survives the year.
What we watch
Gross Profit by Job
How it is built: Contract value less all direct cost charged to that job: labour with burden, materials, subcontractors, equipment time and allocated site overhead.
Why it matters: It is the only level at which a construction business can learn anything. Company-wide margin blends a job that went well with one that went badly and teaches nothing about either.
WIP Schedule Accuracy
How it is built: How closely the estimated cost to complete on each open job matches what the job actually ends up costing.
Why it matters: The whole schedule rests on that estimate. A project manager who is optimistic about cost to complete produces a work in progress schedule that reports profit the company never earns, and the correction arrives at close-out.
Backlog
How it is built: Contracted work signed and not yet performed, expressed in both dollars and months of capacity at current run rate.
Why it matters: It is the forward view that a monthly profit and loss statement cannot give you. Backlog drives hiring, equipment decisions and how hard the estimating team should be chasing work.
Days Cash on Hand
How it is built: Cash available divided by average daily operating outflow, with retainage receivable excluded because it is not collectable yet.
Why it matters: Construction cash swings hard between draws. Knowing how many days of cushion exist, with retainage properly excluded, is what keeps payroll safe during a slow collection month.
Common financial pain points
- Job profitability is unclear until the project closes out.
- Work in progress and retainage tie up cash for months.
- Billings run ahead of or behind the cost actually incurred.
- Change orders slip through without being priced or billed.
- Equipment and overhead sit unallocated, so every job looks better than it is.
How a fractional CFO helps
- Stand up job costing that tracks committed and actual cost.
- Build a WIP schedule that ties to the general ledger.
- Manage retainage and progress billing for cash flow.
- Surface over- and under-billings before they bite.
- Forecast cash across overlapping project timelines.
- Allocate equipment and overhead so job margin is the real margin.
The first ninety days
- 01
Days 1 to 30: rebuild job costing
Set up the cost coding so labour, burden, materials, subcontractors and equipment all land against the right job. Bring committed costs from purchase orders and subcontracts into view alongside actuals.
- 02
Days 31 to 60: stand up the WIP schedule
Build a work in progress schedule that reconciles to the general ledger, with a disciplined cost-to-complete process. Surface every over-billing and under-billing and put a number on what each one means for cash.
- 03
Days 61 to 90: manage the cash
Forecast cash across all open jobs including draw timing and retainage release. Tighten the change order process so extra work is priced and billed. Report backlog against capacity for hiring decisions.
What you receive
- Job cost reporting with committed and actual cost
- Work in progress schedule reconciled to the ledger
- Over-billing and under-billing analysis by job
- Cash forecast across overlapping draw schedules
- Backlog and capacity report
- A live dashboard your numbers flow into
Fractional CFO for construction: common questions
What is a WIP schedule and why does my construction company need one?
A work in progress schedule compares cost incurred on each job against the total cost you expect, converts that into percent complete, and compares it to what you have billed. It tells you whether each job is over-billed or under-billed and how much profit has genuinely been earned so far. Without it a monthly profit and loss statement in construction is close to unreadable.
What is the difference between over-billing and under-billing?
Over-billing means you have invoiced more than the work completed, so you are holding client money that has to be earned. Under-billing means the reverse: you have performed work you have yet to invoice and are financing the client out of your own account. Both distort reported profit, and both are cash issues before they are accounting issues.
How should retainage be treated in cash planning?
As a receivable that cannot be spent. Retainage is typically held until substantial completion and sometimes beyond, so treating it as ordinary accounts receivable overstates available cash by exactly the amount you are least able to access. It belongs in its own line with an expected release date attached.
How do I allocate overhead and equipment to individual jobs?
Equipment should carry an hourly or daily rate covering ownership, maintenance and fuel, charged to jobs on use. Site overhead attaches directly. General administrative overhead is allocated on a consistent basis such as direct cost or labour hours. The method matters less than applying it the same way every time, so job comparisons stay meaningful.
Why do change orders cost construction companies money?
Because the work usually starts before the paperwork does. Crews are on site, the client asks for something extra, and the cost is incurred against a contract value that never moved. A change order process that produces a signed price before the work begins is one of the highest-return process changes available to a builder.
Can a fractional CFO help with bonding or a lender?
Yes, and it is common. A surety or a lender wants a clean work in progress schedule, job-level history, a balance sheet that supports the capacity being requested, and a forecast tied to backlog. Assembling that package properly, before it is asked for, is what usually determines the outcome.
How often should a construction company review job costs?
Monthly at absolute minimum, and weekly on any job large enough to hurt the business if it goes wrong. The value of job costing comes from catching an overrun while there is still work left to adjust, so a review cycle that only produces answers after close-out has most of its usefulness stripped out.
Ready to see your numbers clearly?
Book a call to talk through your construction business and what the first ninety days would cover.
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