Four Numbers Every Contractor Should Review Right Now

When you're in the middle of a busy season, it's easy to assume that a full project schedule means the business is doing well.

Crews are working. Jobs are moving. Invoices are going out. Revenue is coming in.

But busy doesn't always mean profitable.

A quick financial review can reveal opportunities—and potential problems—before they become costly. You don't necessarily need to analyze every line of your financial statements to get started. Instead, focus on a few numbers that can tell you a lot about the financial health of your construction business.

Here are four numbers every contractor should be reviewing right now.

1. Gross Profit Margin

Revenue tells you how much work you're doing.

Gross profit margin tells you how profitable that work actually is.

For contractors, this number is especially important because small changes in labor, materials, subcontractor costs, or project timelines can quickly eat into the margin you expected when you originally bid the job.

Ask yourself:

• Are projects producing the margins we expected?
• Have material or labor costs increased?
• Are certain types of jobs consistently more profitable than others?
• Are change orders being properly captured and billed?
• Are project delays increasing our costs?

For example, a project can generate significant revenue and still underperform financially if the actual cost of completing the work is substantially higher than estimated.

That's why revenue alone doesn't tell you whether you're having a successful year.

You need to know what you're keeping after the direct costs of completing the work.

If your gross profit margin is trending downward, don't wait until year-end to investigate why.

2. Accounts Receivable

You've completed the work. You've sent the invoice.

But have you actually been paid?

Accounts receivable is one of the most important numbers for contractors to monitor because profit on paper doesn't necessarily mean cash in the bank.

You can have a strong revenue month and still experience cash flow pressure if customers aren't paying quickly enough.

Take a close look at your outstanding invoices, particularly your aging receivables.

How much is:

30 days outstanding?

60 days outstanding?

90+ days outstanding?

The longer an invoice remains unpaid, the more pressure it can put on your cash flow—especially when you're still responsible for covering payroll, materials, subcontractors, insurance, equipment, and other operating expenses.

Don't just look at the total amount you're owed.

Look at how long you've been waiting to receive it.

A growing accounts receivable balance can sometimes make a business look stronger on paper while creating very real cash flow challenges behind the scenes.

3. Job Cost Performance

Not every dollar of revenue is equally profitable.

That's why contractors should regularly evaluate performance at the job level, not just the company level.

Look back at the projects you've completed or substantially progressed this year.

Which jobs performed better than expected?

Which ones missed their projected margins?

Then ask why.

Maybe labor hours were significantly higher than estimated.

Maybe material prices changed between the bid and the actual purchase.

Maybe a certain type of project consistently requires more supervision.

Maybe change orders weren't documented or billed quickly enough.

Or perhaps some jobs are simply a better fit for your company's team, processes, and capabilities.

This information isn't only useful for evaluating past performance.

It can help you bid smarter moving forward.

If your job costing consistently shows that a particular type of work generates stronger margins, that's valuable information for your estimating and business development strategy.

And if another type of project repeatedly underperforms, it may be time to adjust your pricing, estimating assumptions, processes—or determine whether those projects are worth pursuing at all.

4. Cash Reserves

Here's a simple question:

If one of your largest customers delayed payment tomorrow, how long could your business comfortably continue operating?

Construction businesses often have significant cash demands.

Payroll still needs to be made. Materials need to be purchased. Subcontractors need to be paid. Equipment payments continue. Insurance premiums come due.

And those expenses don't stop simply because a customer hasn't paid you yet.

That's why maintaining an appropriate cash reserve is so important.

Your reserve provides a financial cushion when:

• A customer pays later than expected
• A project is delayed
• Revenue temporarily slows
• Equipment unexpectedly needs repair
• Material costs increase
• An unplanned expense occurs

There's no single reserve amount that's right for every contractor. Your ideal target depends on factors such as your monthly operating costs, customer concentration, payment cycles, seasonality, debt obligations, and overall risk.

The important thing is knowing what your target should be and whether you're currently on track.

Don't Wait Until Year-End to Find the Problem

One of the biggest benefits of reviewing these numbers throughout the year is having time to respond.

If margins are shrinking, you can investigate what's causing it.

If receivables are aging, you can strengthen collection efforts.

If certain jobs are underperforming, you can adjust future bids.

If cash reserves are lower than they should be, you can create a plan to rebuild them.

Discovering these issues at year-end tells you what happened.

Identifying them now gives you an opportunity to change what happens next.

Turn the Numbers Into Better Decisions

Financial reports are only valuable if they help you run your business more effectively.

For contractors, understanding your gross profit margin, accounts receivable, job cost performance, and cash reserves can provide a much clearer picture than revenue alone.

At LaDell CFO Services, we help construction business owners go beyond the numbers on their financial statements to understand what those numbers are telling them—and what to do next.

From evaluating project profitability and cash flow to improving forecasting and planning for growth, the goal is to give you the financial visibility you need to make more confident decisions.

Not sure what your numbers are telling you? Let's review them together and identify where your construction business stands—and where there may be opportunities to improve.