Cashflow Job™️ CFO Insights

Answers to the financial questions contractors ask about profitability, cash, operations, growth, and taxes.

Job Profitability

  • There is no single margin that works for every contractor. Your target depends on your trade, job mix, overhead, and profit goals. The right margin is one that consistently covers overhead and leaves enough profit to grow and build cash.

  • Compare the final contract price, including approved change orders, against the actual labor, materials, subcontractors, equipment, and other direct costs. Then compare the gross profit and margin to what you estimated. A job can make money and still fall short of the profit you needed.

  • Being busy only tells you that work is moving. It does not tell you whether the jobs were priced correctly, completed efficiently, or produced enough gross profit to cover overhead. More jobs can create more cash pressure when the margins are too low.

  • Sales can grow while underpricing, material overruns, labor inefficiencies, callbacks, and overhead consume the additional revenue. Compare gross margin, overhead, and net margin over time. The increase in sales only matters if the company keeps enough of it.

  • Start with the full expected cost of completing the job, then add enough to cover overhead, risk, and the profit you expect to earn. Pricing should also account for your market and capacity. Copying a competitor’s price will not tell you whether the job works for your company.

  • Markup is the percentage added to cost. Margin is the percentage of the selling price that remains after direct costs. A 25% markup produces a 20% gross margin, so using the two interchangeably can cause you to underprice jobs.

  • Sometimes, but it should be a calculated decision. Determine whether the job contributes enough toward overhead, protects key employees, and uses capacity that would otherwise sit idle. If low-margin work delays better work or creates cash pressure, keeping the crew busy may cost you more.

Financial Management

  • Start with sales against target, lead conversion, average job value, gross profit margin, net profit margin, cash reserves, receivable days, and production capacity. The right KPIs depend on what the company is trying to accomplish. Track the numbers that help you make decisions, not every number available.

  • Review the balance sheet, profit and loss statement, cash flow statement, accounts receivable, accounts payable, and job profitability. Compare actual results against your budget, forecast, and prior periods. The reports should explain what changed and what needs your attention.

  • Profit is what remains after revenue and expenses are recorded. Cash flow shows when money actually enters and leaves the business. You can report a profit and still have little cash because of slow collections, debt payments, equipment purchases, owner withdrawals, or money tied up in jobs.

  • Profit may be sitting in receivables, retainage, materials, equipment, or unfinished work instead of the bank. Debt payments, taxes, owner withdrawals, and the timing of vendor payments also use cash differently from expenses. Follow where the cash went before assuming the business is not profitable.

  • The amount depends on payroll, overhead, debt, collection timing, seasonality, and the risk within your job mix. Set a reserve target based on the company’s actual monthly obligations instead of using a generic percentage. The goal is enough time to respond without making desperate decisions. A good rule of thumb is 3-6 months of fixed costs.

  • Forecast sales, collections, payroll, overhead, taxes, and debt before the slowdown begins. Build reserves during stronger months and decide which expenses can be reduced without hurting the company. Offer a mix of services that can continue during the winter. A slow season should be part of the plan, not a surprise in the bank account.

Team and Operations

  • Every missed lead wastes part of the money and effort used to generate it. If the team responds too slowly or never follows up, sales suffer while marketing and overhead continue. Before spending more on leads, make sure the company is properly managing the ones it already has.

  • Missing job details can delay change orders, invoicing, collections, purchasing, and job-cost updates. The financial problem may appear in the bank, but it often started with information that never reached the office. Clear handoffs help the company bill sooner and protect job profit.

  • At minimum, you need reliable bookkeeping, job costing, estimating, and invoicing. These systems should connect so the same information does not have to be rebuilt repeatedly. Growth becomes expensive when the financial process cannot keep up.

  • Hire an office manager when coordination and administration are consuming the owner’s time. A controller manages accounting accuracy and reporting.

  • Document how work moves through the company, assign clear ownership, establish KPIs, and review performance consistently. Your team cannot take responsibility for processes that only exist in your head. The goal is to make the company’s expectations visible and repeatable.

Growth and Business Value

  • Consider a fractional CFO when the company has outgrown basic reporting and the owner needs help with profitability, forecasting, cash, taxes, systems, or growth decisions. You do not need to wait until something goes wrong. The value is having better information before making expensive decisions.

  • A fractional CFO connects the financial results to what is happening in estimating, sales, production, collections, taxes, and growth. We identify what is driving performance, determine what needs attention, and help the owner decide what happens next.

  • Make sure pricing, margins, working capital, team capacity, and operating systems can support more work before increasing volume. Growth magnifies whatever is already happening in the company. If the current model leaks profit or cash, scaling will make the leak larger.

  • Review profitability, available cash, borrowing capacity, team capacity, and the expected cost and return of the expansion. Then forecast how long the company can support the investment before it pays off. Having cash today does not automatically mean the company can afford the full commitment.

  • It depends on whether capacity is already limiting sales or production. Forecast the employee’s full cost, the additional revenue or capacity the role should create, and how long the company can carry the cost. Hire with a clear purpose and measurable expectations.

  • Start with due diligence on the company’s financials, tax filings, backlog, contracts, debt, employees, equipment, customers, and legal risks. Then forecast the purchase, transition, and working-capital needs. The purchase price is only one part of what the acquisition will cost.

Tax Planning

  • Tax savings begin with planning before the year is over. Review projected income, entity structure, compensation, retirement options, deductions, credits, and upcoming purchases together. A deduction should support the business and the owner’s goals, not simply reduce the tax bill.

  • Tax planning should happen throughout the year, with a detailed projection before year-end. Waiting until the return is being prepared limits the options available. Regular planning also helps the company set aside cash before the tax payment is due.

  • Taxes are generally based on taxable income, not the current bank balance. Cash may have been used for debt principal, owner distributions, equipment, or other items that are not immediately deductible. A tax projection helps connect the expected bill to the company’s cash plan.

  • There is no percentage that works for every contractor. The amount depends on projected taxable income, entity type, owner compensation, prior payments, and available planning strategies. Use an updated tax projection instead of guessing from the bank balance.

  • An S corporation election may reduce self-employment taxes in the right situation, but it also adds payroll, compliance, and reasonable-compensation requirements. The decision should be based on projected savings after those additional costs, not sales alone.

  • Tax preparation reports what already happened and calculates the resulting tax. Tax planning looks ahead while there is still time to make decisions. Preparation keeps you compliant, while planning helps you manage the tax and its effect on cash.

  • Buy the vehicle or equipment because the business needs it and can afford it. The deduction reduces taxable income, but a deduction is not a cash refund or tax credit. Consider the operational return, financing, cash impact, and tax treatment together.