Construction CFO Services for Plumbing Contractors

New-construction plumbing earns its margin per house or per building on material takeoff accuracy, crew productivity by stage, and the builder's pay schedule. Service earns its margin per call on pricing, first-visit completion, and technician utilization. We set them up as separate divisions with their own revenue, direct labor, material, vehicle, and allocated overhead so the monthly report shows two gross margins and two contributions to overhead. When one is carrying the other, the report says so in a number rather than a feeling.

The division split also settles the warranty question. A service call on a house you plumbed within the warranty period is charged to the new-construction division, against the warranty reserve for that builder, not to the service P&L as an unbilled call. That single reclassification changes the apparent margin of both divisions on most plumbing contractors we assess, and it changes the conversation with the builder about whose fixtures keep failing.

Residential new-construction plumbing bills in stages, and each builder defines the stages and the payment timing differently. We build a billing matrix by builder: what percent of the contract is billable at underground, rough-in, top-out, and trim, what inspection or milestone triggers each, what documentation the builder wants with the invoice, and how many days the builder actually takes to pay each stage. That last column comes from your own history, not the contract, because the two often differ.

Each lot then moves through a stage tracker that the field lead updates as inspections pass. An inspection passed without an invoice sent the same week is a delay you chose. The tracker feeds billing on a fixed weekly cadence, so the office bills every stage that was earned that week, with the backup attached, rather than waiting for the builder to ask what is owed. On commercial work, the same discipline runs through a schedule of values and a monthly pay application, with retainage tracked by job and lien waivers exchanged with each payment.

• Billing matrix by builder: stage percentages, triggers, backup, and actual days to pay
• Lot-level stage tracker updated by field leads as inspections pass
• Weekly billing run for all stages earned that week
• Commercial pay apps, retainage ledger, and lien waiver exchange on a calendar

Every house you plumb carries a warranty obligation, typically one year for workmanship and longer on some fixtures. That obligation is a cost of the job whether or not anyone records it. We establish a warranty reserve per house or per building, funded as a percentage of contract value at the time revenue is recognized, and charge callbacks against it. The percentage comes from your own callback history by builder and by fixture type, reviewed quarterly against actual cost so the reserve is neither a guess nor a slush fund.

The callback data is also management information. Callbacks by builder, by crew, by fixture manufacturer, and by cause show whether the warranty cost is a workmanship problem, a product problem, or a builder problem. A crew with three times the callback rate of the others is an expensive crew regardless of how fast it roughs in. A fixture line with a rising failure rate is a conversation with the supplier before it is a conversation with the builder.

Warranty cost that is never reserved does not disappear. It arrives in the service division 14 months later, unbilled, and gets called a bad month.

On residential work, fixtures are sometimes builder-supplied, sometimes contractor-supplied against an allowance, and sometimes a mix that changes by plan and by option package. We standardize the cost codes so material is separated into rough material (pipe, fittings, valves), fixtures and trim, and water heaters and equipment, with builder-supplied items tracked at zero cost so the per-house report is not distorted. Allowance overages get billed the week the selection is made, not at trim.

Purchase orders go into the system before material is pulled, so committed cost by lot is known and the supply house statement can be reconciled to purchase orders rather than accepted on trust. We report material cost per house by plan against the takeoff, which catches a takeoff error or a price change on a plan type within a few lots rather than at year end. The supply house statement is a document many plumbing contractors pay and few reconcile. It rewards the ones who do.

Labor is the cost that decides the margin on production plumbing. We compute a fully loaded burden rate for plumbers, apprentices, and service technicians, including payroll taxes, workers' compensation at your class rates, benefits, vehicle allocation, and paid time off, and post payroll weekly to lots and to service calls at the loaded rate. Crew hours per stage by plan type are then a weekly report: hours at rough-in, top-out, and trim against the estimate for that plan, by crew.

The result is a cost per house by plan that includes labor, material, warranty reserve, and allocated overhead, compared to the contract price per house by builder. That is the number that tells you which builders are worth the float they take. A builder that pays in 71 days on a plan you are losing money on is a customer twice over. On the service side, the same burden rate drives technician utilization, average ticket, and margin per call, reported weekly by technician.

The cash forecast for a plumbing contractor is built from the stage tracker and the billing matrix. For each builder, the lots expected to pass each inspection over the next 13 weeks become invoices, and each invoice becomes a receipt on the builder's actual pay lag. Service receipts are forecast by week from your own pattern. Disbursements include weekly payroll, supply house payments on their terms, fixture purchases for upcoming trims, vehicle and equipment financing, and the retainage you are waiting on from commercial jobs. It is updated every Monday.

This is where builder concentration becomes visible. A builder that represents 40 percent of new-construction revenue and pays in 70 days creates a receivable that is larger than your line of credit, and the forecast shows the week that happens. We report concentration by builder, days to pay by builder, and the cash tied up in each stage, so decisions about taking on the next community, negotiating a deposit, or adding a crew are made with the float counted. In 90 days, you should have a billing run that fires weekly, a warranty reserve on the balance sheet, a per-house cost you believe, and a forecast that tells you which Friday will be tight.