Construction and development
Construction is a cash business dressed as a margin business. A project can show a healthy margin on paper and starve the company of cash for eighteen months through holdbacks, slow draws, change orders that are never billed and subcontractors who need paying before the owner pays you. We bring project-level finance to builders, contractors and developers across British Columbia, working alongside their CPA and their lawyer.
How the money works
- Holdbacks under the provincial builders lien regime keep a share of every invoice out of reach until the end of the project
- Progress billing lags the work, and draws from lenders lag the billing, so the company funds the build in between
- Change orders are where margin is made or lost, depending on whether they are priced, approved and billed
- A handful of large projects dominate revenue, so one bad job or one slow-paying owner changes the year
The moves we make
- Project cost reporting with committed cost, cost to complete and margin at completion, updated monthly
- Billing and draw schedules aligned to cash needs, with holdbacks tracked by project and by release date
- A change order process that prices, approves and bills every change before the work is done
- A company-wide cash flow that rolls up every project and shows the low point before it arrives
Where cash and margin leak
Margin leaks through estimates that missed site conditions, subcontractor quotes that rose between tender and award, change orders done on a handshake and overhead that was never allocated to the job. Cash leaks through holdbacks, slow billing, slow draws and the gap between paying crews and subs on their terms and being paid on the owner's terms.
The company that bills late and chases slowly ends up financing its clients. The company that tracks cost to complete late finds out it lost money on a project after the next one has already been priced the same way.
The numbers to watch every week
Margin at completion by project, with the trend since the estimate. Committed cost against budget. Billed against earned, which shows whether you are ahead of or behind the work. Holdbacks receivable by release date. Receivables aged by project. Backlog in months. Cash low point over the next thirteen weeks.
A builder who reads these every week makes decisions about staffing, bidding and borrowing with the facts in front of them. A builder who reads them at year end finds out what happened after it is over.
How pricing works in construction
Estimates set the price and the estimate is built from unit costs, subcontractor quotes, allowances and a margin. The leaks are in the allowances that were too low, the overhead rate that has not been updated and the risk that was not priced. A post-mortem on every completed project, comparing estimate to actual by cost code, is the only way the next estimate improves.
Lenders and investors in development projects want a proforma that connects to the construction budget, a draw schedule and a sensitivity on cost and absorption. We build and maintain those with the developer and present them.
Questions from construction and development owners
Can you help with lender reporting on a development project?
Yes. We build the proforma, the draw schedule and the monthly report the lender expects, track the budget against committed cost and attend the lender meetings with you. The legal side of the lending stays with your lawyer.
How should we handle holdbacks in our cash planning?
Track them as a separate receivable by project with an expected release date, exclude them from the cash you count on, and plan the release into the 13-week forecast. Treating holdbacks as ordinary receivables is the most common reason a construction cash forecast is wrong.
We lose money on change orders. What changes?
A rule that no change is started without a priced, approved change order, a change order the site lead can complete in minutes, and a weekly review of changes done and changes billed. Margin on changes is often higher than on the base contract when they are captured.
Start with a finance review.
Ninety minutes with Ali on your cash, margin and pricing. You leave with the four numbers to watch and the two or three moves that change them, whether or not we work together.