May is the unofficial kickoff to busy season for many construction businesses. New jobs ramp up, crews expand, and cash flow starts moving faster than it did in the winter months. May is the perfect time to pause, review your numbers, and make sure your financial foundation is strong enough to support the rest of the year.
Here are 5 mid-year financial checkpoints every contractor, builder, and trades business partner should review before the summer months:
- Job Profitability: Are your Projects Actually Making Money?
Most construction businesses have several active jobs and a few completed ones by this time of the year. This is the ideal time to review:
- Estimated vs. Actual Labor
- Material Cost Variances
- Subcontractor Overages
- Change Orders that weren’t billed
- Jobs that look profitable on paper, but aren’t in reality
A mid-year profitability review helps you catch margin leaks early, before they repeat themselves all summer long.
2. Cash Flow Forecast: Do You Have Enough to Cover the Busy Season?
Construction cash flow is notoriously uneven. Before peak season hits, review the following:
- Upcoming payroll increases
- Material prepayments
- Retainage still outstanding
- Large invoices that haven’t been collected
A simple quarterly cash flow forecast can prevent the stress of scrambling for funds when expenses spike.
3. Work-in-Progress (WIP) Accuracy: Are Your Numbers Telling the Truth?
If your WIP schedule isn’t accurate, your financials won’t be either. May is a great time to confirm the following:
- Percent complete is upated
- Over- and under- billing is correct
- Revenue is recognized properly
- Costs are assigned to the right job
Clean WIP = Clean Financials = Confident Decisions
4. Overhead Review: Are Rising Costs Eating Your Profit?
Fuel, insurance, materials, and labor have all increased in the last few years, so mid-year appears to be a great time to evaluate the following areas:
- Subscription Creep
- Equipment Maintenance Costs
- Admin Hours vs. Billable Hours
- Insurance Renewals
- Office Expenses
Small adjustments now can protect your year-end profit margins.
5. Tax Planning: Are You Preparing for Year-End Early Enough?
Smart contractors don’t wait until December to think about taxes… review these now to get ahead:
- Estimated tax payments
- Depreciation strategy
- Equipment purchases
- Owner draws
- Potential credits or deductions