- Pricing policy anchored to fully loaded costs and capacity: target GM by division, minimum floor for bid/no-bid, and a change-order markup standard.
- 12–18 month financial model (P&L, cash, balance sheet) to test decisions before you make them—new crews, equipment, leases, market entries.
- Capital allocation plan: buy vs. lease rules, LOC usage limits, bonding targets, and a working-capital floor.
- 13-week cash forecast tied to your job schedule and pay-app calendar.
- Billing rhythm that shortens the pay-app cycle and captures change orders in the next draw.
- Collections playbook to pull cash forward: reminders at
- Supplier/GC term strategy that matches inflows and outflows: early-pay discounts when cash is abundant, extended terms when AR stretches.
- Working capital guardrails: minimum cash floor
- Daily cost capture: labor hours and materials posted the same day to the job.
- Current unit costs: live material pricing and vendor updates roll into estimates and buyouts.
- Change-order discipline: price/ submit within [24/48] hours, track approvals, and tag field hours to the CO code from day one.
Variance alerts: PM dashboard flags labor productivity, material overrun and subvariance when thresholds exceed. - Two-level WIP: gross (booked) vs. “real WIP” with pending COs and expected buyout savings/overruns.
- Closeout checklist: punch items, final COs, retainage release plan, as-builts—owned by [Role] with dates.
- Capacity-based revenue model tied to crews, labor hours, productivity, and sub usage.
- 18-month three-way forecast (P&L, cash flow, balance sheet) with monthly view of draws, retainage, AR timing, and materials spend
- Bid/no-bid guardrails: minimum gross margin, labor risk thresholds, material volatility factor (copper/conduit), and CO complexity score.
- Capital plan: LOC sizing, bonding capacity targets, and equipment buy vs. lease policy.
- Bank/surety package ready before you need it: 24-month projections, WIP, AR aging, backlog schedule, covenant tracking.
- Growth dashboard: win rate, average job size, backlog months, DSO, CO cycle time, cash runway. [Publish weekly to leadership on [Day].]
- One source of truth (ERP) integrating estimating → purchasing → job cost → AP/AR → payroll, with estimating feeding cost codes directly to job cost.
- Month-end close in under a week with a published checklist (WIP, accruals, intercos, bank recs).
- Change-order control: scope, units, materials, and pricing signed by the customer’s authorized PM before field work.
- Pre-fab & unitized labor tracking entered daily by field leadership.
- Certified payroll & compliance reviewed pre-submission.
- Three-way match on all materials; cost codes verified at receiving.
- Vendor compliance required prior to payment.
- Retention & lien notices triggered by policy thresholds (e.g., 45–60 days).
- Access controls with dollar thresholds and segregation of duties.
- Pricing policy anchored to fully loaded costs and capacity: target GM by division, minimum floor for bid/no-bid, and a change-order markup standard.
- 12–18 month financial model (P&L, cash, balance sheet) to test decisions before you make them—new crews, equipment, leases, market entries.
- Capital allocation plan: buy vs. lease rules, LOC usage limits, bonding targets, and a working-capital floor.
When progress billing, retainage, and volatile material price changes collide with change orders, delays, and tight schedules, even “profitable” jobs can starve cash. You’re running hard, yet the bank balance doesn’t match the effort—and that gap keeps you up at night. The good news: these are fixable finance problems, not “just the way construction works.” No contractor should grow broke while building other people’s projects. In this article, we’ll flag five finance red flags costing electrical contractors margin and cash and show simple, practical moves to turn busy crews into predictable profit.
Red Flag #1: Persistent Cash-Flow Crunches
Progress billing lags, retainage drags, and long project cycles mean cash can be tight even when jobs look “profitable” on paper. When payroll week collides with a slow pay app or a material price spike, you end up juggling vendors and lines of credit instead of running the business.
What this really means: the timing of cash in versus cash out is misaligned. Pay apps trail labor and material spend, change orders aren’t billed fast enough, and retainage locks up the profit you’ve already earned. Here’s what to do next (and what strong financial leadership will implement for you):
Red Flag #2: Poor Visibility into Project Profitability
Jobs look fine in the WIP, but margin “mysteriously” disappears by closeout. If you don’t trust your job-cost reports, or you get them too late to act, you’re flying blind while labor, materials, subs, and change orders drift.
What this really means: unit costs aren’t current, hours and materials aren’t posted daily, and COs/T&M are lagging the field. Variances surface after the fact, so PMs can’t course-correct in time. Here’s how to see true profitability early (and fix it while it’s still fixable):
Closeout checklist: punch items,
final COs, retainage release plan, as-
builts—owned by [Role] with dates.
Red Flag #3: Difficulty Scaling or Pursuing Growth
You’re eyeing bigger bids, a new market, or an acquisition, but the numbers feel fuzzy. Financing isn’t lined up, risk isn’t quantified, and ROI is more gut than model. The result: stalled decisions, missed opportunities, or growth that strains cash and crews.
What this really means: strategy isn’t anchored to a forward-looking financial model. Without clear scenarios, capital requirements, and guardrails, you either overreach (and stress cash) or hesitate (and lose momentum). Here’s how to make growth safe and repeatable (and what strong financial leadership will build with you):
Red Flag #4: Inefficient Financial Processes and Compliance Gaps
Manual invoicing, disconnected systems, and loose controls slow reporting, invite errors, and put bonded/public work at risk. In electrical, the complexity multiplies—unit pricing shifts, pre-fab labor must be tracked separately, and certified payroll rules are unforgiving.
What this really means: your financial engine can’t keep up with the field. Pay apps go out late, COs miss the next draw, certified payroll is corrected after submission (not before), and audits take weeks you don’t have.
Build a tighter system that moves as fast as the work (and stands up to audits):
Access controls with dollar
thresholds and segregation of duties.
Red Flag #5: Lack of Strategic Financial Leadership
Most owners live in the field: crews, schedules, bids. Finance becomes “close the books and pay the bills.” Without strategic leadership, you leave money on the table. Pricing drifts, tax opportunities get missed, working capital gets thin, and growth decisions feel like guesswork.
What this really means: no one owns the profit model of the business. Pricing isn’t tied to real overhead and capacity, capital spending isn’t stress-tested against cash, and leadership doesn’t share a single, forward-looking scorecard.
