Your construction client knows their revenue, but has no idea about their margin

"I mean, they all are... I think. We're busy. We're growing."

They're not growing. They're just busy. And they have no idea which jobs are making money and which ones are destroying the business.

Worse: their accountant doesn't know either.

The busy trap

Construction clients confuse activity with profitability. They're running multiple jobs. Managing subcontractors. Chasing payments. Quoting new work. Revenue keeps flowing. The bank account moves. They feel busy, so they assume they're profitable. Then one day, they can't pay suppliers. Or make payroll. Or cover the ATO.

They thought they were making money because they were busy making revenue.

The annual review gap

Most accountants review construction clients once a year. Tax time comes. WIP gets calculated. Returns get lodged. Everyone moves on.

That annual review creates a dangerous blindness. A residential builder completing 25 jobs per year gets financial feedback once every 25 jobs.

By the time the accountant reviews last year's numbers, the builder has already completed another 25 jobs using the same broken assumptions.

What gets missed

In liquidations, I often see builders who've been working with the same accountant for many years. Annual reviews every year. Tax returns lodged on time. No red flags.

If they reviewed their numbers regularly, they would have seen obvious patterns like:

Jobs under $300,000: Consistently profitable (12-18 per cent margin)
Jobs $300,000-$500,000: Break-even or small losses (0-3 per cent margin)
Jobs over $500,000: Significant losses (negative 5-12 per cent margin)

The builder's quoting process broke down at scale. He underestimated labour coordination. Missed material price movements. Failed to account for project management overhead. But nobody spots it because nobody’s looking at project-level data.

The annual WIP review shows aggregate numbers that look reasonable. Profitable small jobs subsidise losing large jobs. Net result seems fine.

Until the builder lands three large jobs in the same year. Lost money on all three. Couldn't recover.

The aggregate number problem

Accountants typically review WIP as a single number.

Total work in progress: $850,000. Looks reasonable given annual revenue.

But that single number hides everything:

• Which projects are ahead of estimates

• Which projects have blown their budgets

• Which project types consistently underperform

• Where margins are being destroyed

The conversation that doesn't happen

Builder: "How are we tracking financially?"

Accountant: "WIP looks good. Revenue is up. You're doing well."

What the builder hears: "All my projects are profitable."

What the accountant actually said: "The aggregate WIP number seems reasonable for compliance purposes."

This gap in communication kills construction businesses.

What real-time tracking reveals

Some accountants have figured out a better approach. They track WIP monthly, project-by-project, as a management tool. Here's what that reveals:

Pattern recognition

Let’s say a builder was quoting residential renovations using a standard 20 per cent margin assumption.

Monthly project tracking showed:

• Kitchen renovations: 18-22 per cent actual margin (quotes were accurate)

• Bathroom renovations: 15-18 per cent actual margin (slightly under)

• Whole-house renovations: 8-12 per cent actual margin (significantly under)

• Heritage property work: 2-8 per cent actual margin (massively under)

The builder thought all renovation work was equally profitable. The data showed otherwise.

Armed with this information, they stopped quoting heritage work. Adjusted whole-house renovation quotes. Focused on kitchens and bathrooms.

Profitability improves dramatically. Cash flow stabilises. Business survives.

Early warning

Another builder tracks job costs monthly against estimates. One project started trending over budget in month two of a six-month build. The monthly review caught it early. Builder investigates. Found subcontractor inefficiencies. Makes changes. Project recovered.

Without monthly tracking, this would have been discovered six months later – too late to fix.

Cash flow linkage

WIP and cash flow are connected. Growing WIP without corresponding cash receipts means you're funding growth from working capital.

Monthly tracking shows this in real-time:

• WIP increased by $150,000 this month

• Cash received was only $80,000

• Net drain on working capital: $70,000

Do this for three months running, and you've drained $210,000 from the business.

The annual review catches this 12 months later when you're out of cash. Monthly tracking catches it before it becomes fatal.

The tools they need

This isn't complicated. It's not expensive software.

It's basic project tracking that shows, for each active project:

• Estimated costs versus actual costs to date

• Estimated margin versus actual margin to date

• Percentage complete versus budget consumed

• Projected final outcome

Across all projects:

• Which project types perform best

• Which size jobs are most profitable

• Which clients pay reliably

• Where problems consistently appear

Updated monthly:

• Before decisions get made about new quotes

• While projects can still be rescued

• When patterns can still be spotted and fixed

The spreadsheet version

You don't need sophisticated software. I've seen this work effectively with a shared spreadsheet updated monthly:

One tab per active project showing costs, progress, and margins.

One summary tab showing all projects at a glance.

One analysis tab grouping by project type, size, and client.

Takes a few hours monthly. Saves businesses from insolvency.

The accountant's blind spot

Many accountants resist this because "it's not our job."

"We prepare annual accounts and tax returns. If they want project management, they need different advisers."

Fair enough. Except your construction clients don't understand the difference. They think annual financial reviews mean you're monitoring their business health. They don't realise you're only checking compliance numbers, not operational profitability.

When they fail, they'll wonder why you never warned them.

The construction CFO difference

The accountants who keep construction clients alive don't just prepare annual returns. They provide monthly financial visibility that helps clients make better decisions.

They're not doing project management. They're doing what accountants should do: showing clients their financial reality in time to act on it.

What that looks like

Monthly meetings, not annual reviews. Project-level data, not just aggregate numbers.

Forward-looking questions: "This project is trending 15 per cent over budget. What's happening?" Not backwards-looking compliance: "Last year's WIP was $X."

Pattern identification: "Your jobs over $400k consistently lose money. Have you noticed that?" Not just aggregation: "Total WIP is reasonable."

Decision support: "Before you quote that $600k job, let's look at how your last three jobs this size performed." Not post-mortem: "Last year's profit was $X."

The questions you should ask

Look at your construction clients.

Can they tell you, right now:

• Which projects are currently profitable?

• Which project types consistently make money?

• Which size jobs they should avoid?

• Where their actual margins are versus estimates?

If they can't answer these questions, they're operating blind.

How often are you reviewing their financial performance?

If annually, you're giving them feedback too late to matter.

How granular is your review?

If it's aggregate WIP only, you're hiding their profitability problems in a single number.

The challenge

Your construction clients are busy. They're generating revenue. They feel like they're running successful businesses. Until suddenly they're not.

The difference between construction businesses that survive and those that fail isn't the quality of their work. It's whether they know which work is actually profitable. Annual reviews and aggregate numbers don't provide that visibility.

Monthly tracking and project-level detail does. The question isn't whether your construction clients need better financial visibility. They do. The liquidation statistics prove it.

The question is whether you're providing it or just checking their compliance boxes once a year. Because when I'm appointed to liquidate their company, the last tax return will look fine. It always does.

Until you dig into the project-level data and discover they've been losing money on a third of their jobs for three years.

By then, it's too late.

What construction clients actually need:

Monthly financial reviews – not annual compliance checks

Project-level visibility – not aggregate numbers that hide patterns

Real-time profitability data – not historical reporting

Forward-looking questions – not backwards-looking summaries

Eddie Senatore is a Fellow of Chartered Accountants Australia and New Zealand with over 30 years of experience in business recovery and insolvency.