Fractional CFO and Controller Services for General Contractors

On a $10M contract, the general contractor's own scope may be a small share of the cost. The rest is subcontracts and material you buy, bill, collect, and pay out. Your fee is the difference, and it only exists if every dollar in the chain moves on schedule. A 30-day slip by the owner becomes a 30-day slip to 14 subcontractors, and one of them will file a preliminary notice while the others call your PM.

Finance for a general contractor is therefore mostly about timing: billing the owner for everything the subs billed you, collecting it, and paying it out under pay-when-paid terms while keeping the fee and retainage math straight in both directions. Retainage you hold on subs should never be smaller than retainage the owner holds on you. It happens more often than you would think, usually because two different people manage the two sides.

The odd truth of general contracting is that the company with the biggest revenue in town often has the least cash. The fee is real. It just arrives last. Which is why the finance function of a general contractor is judged less on the income statement than on the balance sheet: how much of the pass-through is stuck, where, and for how long, and whether the fee will still be there when it finally clears.

Your pay application is the most important invoice your company sends, and it is often assembled by whoever has time on the 24th. The schedule of values should be built with cash in mind: weighted within what the owner and architect will accept, with mobilization, general conditions, and early trades set so that the job funds itself rather than your line of credit.

Each pay application needs a matching stack of subcontractor invoices, conditional lien waivers for the current period, and unconditional waivers for the prior payment. Miss a waiver and the owner's lender holds the draw. Miss a sub's invoice and you have paid for work you cannot bill for another 30 days. We build the billing calendar backward from the owner's draw date so the field, the subs, and the office are working toward the same deadline.

• Schedule of values weighted to fund early phases
• Subcontractor pay applications due five days before your own
• Conditional and unconditional waivers tracked per sub, per period
• Stored material billed with proper documentation, not left in the yard

A subcontractor default in month 14 of a 20-month job is the most expensive thing that can happen to a general contractor, and the warning signs are financial before they are physical. Subs who bill ahead of their work, subs whose second-tier suppliers start sending notices, and subs who ask for joint checks are telling you something. The accounts payable function should be listening.

We set up sub payables so that each subcontract shows contract value, approved change orders, billed to date, retainage held, paid to date, and remaining balance, and so that no sub is paid more than the owner has paid you for that scope without someone senior approving it. Prequalification data lives in the same place, so when a sub's exposure exceeds what their financials support, the PM hears about it from finance and not from the sub's bank.

Compliance items ride along: insurance certificates, waivers, and certified payroll on public work. None of it is glamorous. All of it is the difference between a clean closeout and a claim. The subcontract ledger becomes the one place the PM, the accounts payable clerk, and the owner look for the same answer, which ends the weekly ritual of three people reconciling three spreadsheets that were never going to agree.

Your superintendent, project engineer, jobsite trailer, temporary power, dumpsters, and the truck that runs to the supply house twice a day are all general conditions. They were estimated as a lump sum per month for the schedule you bid. When the schedule slips 60 days because of an owner change, the general conditions keep running and the fee stops growing. Many general contractors discover this at closeout, which is the worst possible time to learn anything.

We cost general conditions by job against the estimate, monthly, with the schedule variance right beside it. When the job extends, the finance team quantifies the extended general conditions the same week, and the PM has a number to put in the change order request instead of an argument. The same report shows whether your supervision cost is rising faster than your revenue, which is the earliest signal that the company has outgrown its structure.

A 4 percent fee on a 20-month job can disappear in a few weeks of unbilled schedule extension. Track general conditions like a trade, not like overhead.

Bonding capacity grows on the strength of three documents: a WIP schedule that reconciles to your financial statements, a balance sheet with working capital and equity that support the program you are requesting, and a track record of gross profit that holds from estimate to closeout. Underwriters also read your over-billings as a liability, your under-billings as a warning, and your related-party receivables as something they would prefer not to see.

A general contractor that wants to move from a $5M single job limit to $15M needs a finance function that produces those documents monthly, explains fade job by job, and can walk an underwriter through the cost-to-complete assumptions without the PM in the room. That is a controller and CFO responsibility. We prepare the package, attend the surety meeting, and manage the relationship between renewals so that the annual review is a formality.

The same package serves the bank. Lenders want borrowing base certificates that exclude retainage and over-90 receivables, covenant calculations before the quarter ends, and a forecast that shows how the line gets paid down between jobs. Producing one set of numbers for both audiences, on the same schedule, is faster than producing two and far more convincing than producing neither until asked.

The most valuable meeting in a general contracting company is the monthly project review, and most companies either do not hold it or hold it without numbers. Each open job gets 10 minutes: contract value, approved and pending change orders, cost to date, cost to complete by major trade, projected fee, and the schedule. The PM defends the projection. Finance challenges it. The owner listens.

When this meeting exists, fade gets caught at 40 percent complete rather than 95, pending change orders get submitted rather than discussed, and general conditions overruns get a cause and a plan. The WIP schedule that comes out of the meeting is the one your surety sees, so it is defended internally before it is presented externally.

We run the meeting, prepare the packet, and document the process so it survives us. The PMs learn to expect the questions, which is when they start answering them before the meeting. Within a few cycles the review takes an hour, the WIP moves less between months, and the owner stops hearing about a job's problems from the subcontractor first.