Over the past few weeks, I have spent a lot of time in financial reviews and Quarterly Business Reviews (QBRs) with contractors. Different trades. Different company sizes. Very similar themes.
Cash feels tight.
Work is moving. Crews are busy. Projects are getting completed. Yet the margin for error feels smaller, and the gap between money coming in and money going out feels narrower than expected.
When contractors slow down and look closely at their numbers, the pressure tends to come from a short list of familiar areas. These are not unusual issues. They are common, manageable, and often overlooked during periods of growth or sustained busyness.
Below are the patterns showing up most often, along with practical ways to address them.
High-Interest Debt Is Absorbing Cash
Most contracting businesses carry some level of higher-interest debt. Credit cards, short-term loans, or lines of credit often serve a purpose at one stage of growth.
The challenge is how long these balances stay in place without review.
Interest absorbs cash every month before it can be directed toward operations, staffing, or reserves. That limits flexibility and increases financial pressure over time.
What to do
- List all outstanding debt with balances and interest rates.
- Prioritize paydown based on interest rate, not balance size.
- Talk with your banker about restructuring, refinancing, or consolidating where appropriate.
- Set a realistic plan to reduce one balance consistently.
- Avoid layering new high-interest debt on top of existing balances.
Reducing interest expense creates immediate and measurable relief in monthly cash flow.
Pricing Has Drifted Out of Alignment
Pricing is usually set carefully at one point in time. Then the business moves forward.
Costs change. Labor rates increase.
Overhead grows. Demand shifts. Pricing often stays static longer than the business itself.
That misalignment narrows margins gradually, job by job.
What to do
- Review current pricing against today’s labor, material, and overhead costs.
- Evaluate backlog and schedule pressure as market signals.
- Review margins with your CPA to understand where pricing is actually landing.
- Introduce measured increases on new work and track the impact.
- Revisit pricing on a regular cadence instead of treating it as a one-time decision.
Pricing does not need dramatic adjustments. It needs regular attention.
Pay Decisions Lack Structure
Most owners want to compensate people fairly and competitively. What often develops instead is a series of individual pay decisions made over time.
Raises happen when requested. Adjustments occur to retain key people.
New hires enter at different rates. Over time, pay becomes uneven and harder to manage.
That shows up as internal tension, turnover risk, and recurring payroll conversations.
What to do
- Define wage ranges by role and responsibility.
- Set a regular review schedule rather than handling pay reactively.
- Review total payroll cost with your CPA to understand broader impact.
- Talk with your workers’ compensation professional about how wage structure affects premiums.
- Document pay decisions to maintain consistency over time.
Clear structure reduces friction and supports stable production.
Labor Burden Is Incomplete
Labor burden remains one of the most common gaps in financial reviews.
Hourly wages and salaries are visible. The full cost of employing people is often less clear.
Payroll taxes, insurance, benefits, paid time off, training time, and non-billable hours all factor into true labor cost.
When labor burden is underestimated, pricing and cash planning lose accuracy.
What to do
- List every cost associated with employing someone, beyond base pay.
- Review payroll taxes, benefits, and insurance with your CPA.
- Confirm classifications, rates, and experience modifiers with your workers’ comp provider.
- Calculate labor burden as a percentage and use it consistently.
- Revisit labor burden annually or when benefits, insurance, or staffing levels change.
Accurate labor burden improves pricing decisions and reduces financial surprises.
Why Financial Reviews Matter
These issues do not appear because contractors lack discipline or experience. They show up because businesses evolve, and financial assumptions do not always keep pace.
Financial reviews and QBRs create space to step back and assess what is actually happening. They allow owners to identify where money is leaving the business and where targeted adjustments will have the greatest impact.
That clarity leads to calmer decisions and better use of available resources.
Where to Focus Next
If cash feels tighter than expected, start with one area and work through it deliberately. Many improvements come from conversations with professionals you already work with: your banker, CPA, insurance agent, or workers’ compensation advisor.
If you want structured support, I do offer QBRs for contractors who want dedicated time to review financials, pricing, labor costs, and cash flow with someone who understands contracting businesses. The focus is practical, decision-oriented, and grounded in real operating conditions.
Whether you work through this independently or with assistance, the goal is the same: clearer numbers, stronger margins, and fewer financial surprises as the year progresses.
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