Construction CFO Services for Remodeling Contractors

A deposit is a liability. It is money the homeowner has given you against work you have not done, and the day it is recorded as revenue is the day the company's picture of itself goes wrong. We record deposits as customer deposits on the balance sheet, apply them against draws as the schedule is earned, and report deposits held versus work completed by project every week. That report is the single most useful number in a remodeling business, because it shows how much of the cash in the bank belongs to future work.

Draw schedules get the same discipline. Each contract's draw triggers (demo complete, rough-in inspection, cabinets set, substantial completion) go into a project tracker that the PM updates weekly. When a trigger is met, the draw is invoiced that week with the trigger noted, not when the PM remembers. Draws billed late are the most common reason a profitable remodeler is short on a Friday. The forecast then shows draw receipts by project and week, so the cash plan is built from the contracts rather than from hope and the next deposit.

• Customer deposits on the balance sheet, applied as draws are earned
• Deposits held versus work completed, by project, weekly
• Draw trigger tracker updated by PMs and billed the week the trigger is met
• Draw receipts by project in the 13-week cash forecast

Allowances are estimates the homeowner is invited to exceed. Tile, plumbing fixtures, lighting, countertops, and appliances each carry an allowance in the contract, and each selection either lands under it, on it, or over it. We install an allowance ledger per project: the allowance amount, the selection made, the date, the purchase order, the overage or credit, and whether the overage has been signed and billed. It is reconciled before the item is ordered, which is the last moment the number can still be changed without a conversation about who pays.

Selections that drift past their deadline are a schedule cost as well as a margin cost. A late tile selection delays the tile installer, who is now on someone else's job, and the delay pushes the draw. The ledger includes a selection deadline by item and a weekly report of selections outstanding by project, which the designer or PM uses to push homeowners. Every remodeler has a client who chose the faucet in the eleventh week. The ledger does not make the client faster. It makes the cost of waiting visible.

Remodeling change orders are small, frequent, and often verbal. The homeowner asks for a second outlet, the PM says sure, and the electrician bills you $340 for a scope that was never priced. We set a change order log per project with a hard rule: no change proceeds without a price, a signature, and a billing date, and change orders are billed the same week they are signed rather than folded into the next draw. The log shows pending, signed, billed, and collected, with days outstanding at each step.

The log also feeds job cost. Approved change order revenue is added to the contract value, the associated cost gets its own cost code line, and the margin on changes is reported separately from the base contract margin. Change orders on a well-run remodeling job carry a higher margin than the base contract. On a badly run one, they carry the whole loss. Either way, you should be able to see which one you have by project, and by PM.

Unsigned change orders are gifts. The log turns them back into invoices, one project at a time.

Design-build remodelers carry a front end that most contractors do not: designers, selections coordinators, showroom space, and sales time that runs for months before a contract is signed. That cost is overhead until it is recovered, and it is recovered only if the design fee, the markup structure, and the close rate are set with the cost in view. We compute the fully loaded cost of the design and sales function, report it against design fee revenue and against contracts signed, and give you a cost-to-acquire number per signed project.

The same analysis settles the markup question. Overhead, including the front end, is allocated to projects on a written method, and the resulting fully loaded cost per project is compared to contract price so the reported margin by project includes its fair share of the showroom. A project that shows 32 percent gross margin and 4 percent after overhead is a different conversation from one that shows 32 and 14. The markup you charge should be a calculation. On most design-build firms we assess, it is a tradition.

Job costing a remodeling company is a volume problem. Dozens of projects, each with subcontractor invoices, material purchases, and labor, and each needing a report that a PM will read. We set a compact cost code structure (demolition, framing and carpentry, mechanical trades, finishes, fixtures and allowances, design, and general conditions) that is the same on every project, so the report is comparable across projects and PMs, and the estimate is built on the same codes so estimate versus actual is automatic.

Labor posts weekly at a fully loaded burden rate that includes payroll taxes, workers' compensation, benefits, vehicles, and small tools, so carpenter hours on a project are a cost the PM can act on Friday rather than a month-end surprise. Subcontractor invoices are matched to a subcontract or purchase order before they are paid, and lien waivers are collected from subs and suppliers on jobs where the homeowner's lender requires them. The monthly report shows every open project with contract value, approved changes, cost to date, estimated cost to complete, margin, and deposits held versus work completed. That is a WIP schedule, sized for a remodeler.

The per-project report goes to each PM monthly with their name on it. Fade by project and by PM is visible, and the causes are the usual ones: allowances not reconciled, changes not signed, sub invoices above the buyout, and labor over the estimate. Each has a control now. The report is one page per PM, because a report nobody reads is a cost with no control attached, and remodelers have enough of those already.

Most remodeling and design-build firms between $2M and $15M do not have a finance problem that a strategy fixes. They have a control problem: deposits, draws, allowances, and change orders leaking a few thousand dollars per project across dozens of projects. That is Controller work, and it is where we start: the close, the deposit ledger, the draw tracker, the allowance ledger, the change order log, job cost, and a 13-week cash forecast built from the project trackers. The Controller scope starts at $2,500 per month.

The CFO scope begins when the questions change. Adding a second location, buying a competitor, bringing on a partner, taking on a line of credit for the first time, or preparing the company for sale are CFO questions, and the fractional CFO scope starts at $3,500 per month. Many remodelers start with the Controller scope and add CFO time for a specific decision. In 90 days, the plan is a balance sheet that shows deposits and work completed, draws billed on time, allowances reconciled before trim, change orders signed and invoiced, a project report each PM reads, and a cash forecast that has replaced the next deposit as your cash plan.