Most contractors run their business on two numbers: the bank balance, and a gut feel about whether the jobs are going well. The monthly financial statements arrive, get glanced at, and get filed.
That is not laziness. It is a reasonable response to reporting that does not answer any question the owner actually has. A profit and loss statement reports a period for the whole business. A contractor does not run a period. He runs a portfolio of contracts, each with its own margin, its own billing position, and its own state of completion.
Four numbers answer the questions he does have.
1. Percent Complete, With Over and Under Billings
For each open contract: how far along is it, how much revenue has that earned, and how does that compare to what you have billed?
Percent complete is normally measured cost-to-cost, meaning costs incurred against total estimated costs. Apply that percentage to the contract value and you have revenue earned. The gap between earned and billed is the number that matters.
- Underbilled means you performed work you have not invoiced. You are funding the job.
- Overbilled means you billed ahead of production. That money is spoken for by work still to come, so it is not the cash it appears to be.
Read the wrong way round, a profitable month looks like a crisis, or a loss stays hidden until closeout. Read correctly, this single line tells you which jobs are funding the business and which are being funded by it.
2. Retainage Position, Aged by Contract
Not a total. By contract, with the release condition each one actually specifies, and reported separately from current receivables.
A total is a curiosity. A breakdown is a plan, because it tells you which closeout to push and roughly when each piece is scheduled to land. Most contractors have never seen this laid out, because retainage gets folded into accounts receivable where it looks like slow-paying invoices rather than money held by agreement.
3. Contract Margin Against Estimate
Not margin. Margin against what you bid.
A job running at eighteen percent tells you very little on its own. A job bid at twenty four and running at eighteen tells you something is happening right now that you can still investigate: labour productivity, material escalation absorbed without a change order, scope performed on a verbal instruction, or a subcontractor overrun on a time and materials arrangement.
The value is entirely in the comparison, and entirely in the timing. The same information at closeout is a post mortem.
4. Cash Against Profit
The reconciliation between what the books say you made and what actually reached the bank. For a contractor the difference is rarely mysterious once it is laid out: it is retainage, underbillings, and the working capital consumed by whatever you started most recently.
Presented as one line, this is the number that stops the recurring conversation about where the money went. It is covered in more depth in why profitable contractors run out of cash.
What Not to Build
There is a strong temptation, once someone starts building reporting, to build a lot of it. Resist it. A dashboard with fourteen tiles gets looked at twice.
- Vanity metrics. Revenue year to date feels good and changes no decision.
- Anything you cannot act on. If a number moving would not cause you to do something differently, it does not belong on the page.
- Real-time everything. Job cost data that updates hourly but is only accurate monthly is worse than a monthly number you trust.
- Industry benchmarks you cannot verify. Comparing your margin to a published average tells you nothing about your jobs, your market, or your bid discipline.
The Date Matters More Than the Precision
Reporting that arrives three weeks into the following month describes a situation you can no longer influence. Reporting that arrives on a fixed early date, every month, becomes something you plan around.
We deliver these four by the eighth business day and walk them on a quarterly call, because the trend across three months carries information no single month does. A good number early beats a perfect number late, and the consistency of the date is what turns reporting into a habit rather than an event.
That is the recurring deliverable we run for every client, at every level. It is described on the page for commercial contractors.
Frequently Asked Questions
What financial reports does a construction company actually need?
Four, monthly, on one page. Percent complete with over and under billings identified, which tells you whether billing is keeping up with production. Retainage position aged by contract, which tells you what is being held and when it releases. Contract margin against the original estimate, which tells you whether the job is performing the way it was bid. And cash against profit, which explains why a profitable month can still be a tight one. A standard profit and loss statement answers none of these, because it reports a period rather than a set of contracts.
What is a WIP schedule and why does my surety want one?
A work-in-progress schedule reports each open contract: contract value, costs to date, estimated total costs, percent complete, revenue earned, amount billed, and the resulting over or under billing. A surety uses it to judge whether your reported profit is real and whether your billing is keeping pace with production, both of which bear directly on how much work you can safely carry. It is the single document that most influences bonding capacity, and a stale one costs capacity even in a good year.
How often should a contractor review job costs?
Monthly at minimum, and the value is in the comparison rather than the number. Costs to date on their own tell you what has been spent. Costs to date against the estimate tell you whether the job is behaving, and that is a signal you can still act on while the work is in progress. Reviewing at closeout tells you what happened, which is history.
Why is my profit and loss statement not enough?
A P&L reports a period for the whole business. A contractor does not run a period, he runs contracts, and each one has its own margin, its own billing position and its own completion percentage. A profitable month can contain a job losing money, offset by two that are ahead. The P&L shows the net and hides the composition, which is exactly the information you would act on.
When should the monthly reporting arrive?
On a fixed date, early enough to be actionable. We deliver by the eighth business day, because reporting that arrives three weeks into the following month describes a situation you can no longer change. The date mattering more than the precision is a genuine principle here: a good number on the eighth beats a perfect number on the twenty fifth.
One Page, Every Month, Same Four Questions
A contractor does not need a dashboard with fourteen widgets. He needs four numbers that answer where every open job actually stands, delivered on the same date every month so the trend is visible. Percent complete and over or under billings, retainage position by contract, contract margin against estimate, and cash against profit. Everything else is decoration.
About the Author
Tom Woolley, MBA
Tom Woolley is a fractional CFO who spent six years running job costing and logistics in construction before founding Today CFO. He works with commercial subcontractors and small general contractors on the reporting a GC and a surety actually read.
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