What are the 5 numbers every builder should check monthly?

Five numbers: gross margin by project, work in progress, debtor days, project ROI, and cash cover. Together they take about half an hour a month and they will tell you whether your construction business is in trouble roughly six months before your annual accounts do. Everything else is detail.

Most builders we meet manage on two numbers: the bank balance and the feeling in their stomach. Both are lagging indicators. The bank balance tells you what happened. It cannot tell you that the job you're halfway through has quietly lost four margin points, or that you've claimed $180,000 you haven't earned yet and the back end of the build is going to be funded out of your own pocket.

Here are the five that can.

1. Gross margin by project — is each job making what you priced?

Not the whole-of-business margin. Per job, every month, forecast to completion.

Business-wide margin is an average, and averages hide the job that's killing you. A builder running six projects at a blended 11% can very easily be running five at 14% and one at negative 4%. The blended number looks survivable. The negative job is the one that ends the year.

What it should say: within two points of tender, and stable month to month.

What it usually says: drifting down. That drift has a name — profit fade — and in Australian commercial construction it routinely runs 5 to 12 margin points between tender and final account. We've written about where it hides.

The rule that matters: a forecast margin that falls two months running is a job in trouble, whatever the site report says. Someone visits with the cost report open.

2. Work in progress — have you claimed more than you've earned?

WIP is the gap between what you've earned on a job and what you've billed for it. Over-claimed means the cash sitting in your account belongs to work you haven't done yet. Under-claimed means you've done work you haven't been paid for and your P&L is understating real profit.

Both are dangerous. Over-claiming feels like a good month and ends with you finishing the job on your own money. Under-claiming means you're financing your client for free.

What it should say: a small, deliberate position you can explain per job. What it usually says: nobody knows, because the WIP schedule is done once a year for the accountant, under duress. It takes about fifteen minutes per job per month — we've set out the full routine here.

3. Debtor days — how long are clients actually taking to pay?

Take your trade receivables, divide by revenue for the period, multiply by the number of days in the period. That's your real collection cycle, as opposed to the one in your contracts.

What it should say: close to your contractual terms. If you claim on 30 days, you want to see something in the 35–45 range.

What it usually says: 60, 70, 85. And the gap between "30 days in the contract" and "72 days in reality" is exactly how much of your business you are funding on behalf of somebody else.

Watch the trend more than the level. Debtor days creeping up by five each month is a client relationship going bad, and it shows up in this number weeks before it shows up in a phone call.

4. Project ROI — which jobs are worth doing again?

Margin tells you what a job made. ROI tells you what it made relative to what it tied up — your cash, your PM's attention, your site supervision, your bonding capacity.

A $4M job at 9% and a $1.2M job at 14% both look fine on a margin report. If the $4M job ran eleven months, consumed your best PM and swallowed $300k of working capital while the $1.2M job ran ten weeks with a deposit up front, they are not remotely the same business decision.

What it should say: enough for you to name the two job types you should be chasing and the one you should stop quoting. What it usually says: nothing, because nobody calculates it — so builders keep bidding the biggest jobs they can win rather than the best ones.

If you want a rough sense of what better project selection is worth in your business, our value calculator runs the numbers in about two minutes.

5. Cash cover — how many weeks can you survive without a payment?

Total available cash divided by weekly overheads, including wages. One number, expressed in weeks.

What it should say: four to six weeks of total overheads. Builders carrying big retentions or long claim cycles should sit at the top of that range.

What it usually says: under two — at which point one late progress claim forces you into an overdraft or invoice finance at an effective 8–15%, and the timing gap you didn't fix keeps growing while you pay for the privilege. This is the number that decides whether a bad month is an inconvenience or an emergency, and it's the one builders check least. Our cash flow forecasting service exists to keep it above four.

What do the five numbers look like together?

• Gross margin by project — is this job making what I priced? Healthy: within 2 points of tender, stable. Check monthly, per job.

• Work in progress — have I claimed more than I've earned? Healthy: small, explainable, deliberate. Check monthly, per job.

• Debtor days — how long am I really waiting for money? Healthy: terms plus 5 to 15 days. Check monthly.

• Project ROI — which jobs are worth repeating? Healthy: an improving job mix over time. Check quarterly.

• Cash cover — how long can I survive a late claim? Healthy: 4–6 weeks of overheads. Check monthly, or weekly if under 4.

Read down that list and you have a diagnosis. Margin holding, WIP tidy, debtors at terms, cash cover at five weeks — you have a business you can grow. Margin fading, WIP unknown, debtors at 70 days, cash cover at ten days — you have a business that is one late claim away from a very bad fortnight, and the annual accounts won't tell you until March.

Why don't builders track these already?

Three reasons, and none of them is laziness.

The first is that most builders' accounting files can't produce job-level numbers cleanly. If your Xero tracking categories don't map to jobs, three of these five numbers are a manual archaeology exercise every month, and the habit dies within a quarter. That's a setup problem, and it's a one-off fix.

The second is that the reporting pack you get from a general accountant is built for tax, not for management. It arrives months late, it's business-wide rather than job-level, and it answers a question the ATO asked rather than the one you have.

The third is that nobody has ever shown a builder what the numbers are worth. On a $10M-turnover business running a 10% margin, catching a three-point fade on one $2M job six months early is $60,000 that stays in the company. That single catch pays for a year of proper monthly reporting several times over.

FAQ

What financial reports should a construction company review monthly?

At minimum: a project-level margin report with forecast to completion, a WIP schedule, an aged receivables report, and a rolling cash flow forecast. A standard P&L and balance sheet are necessary but not sufficient — they're business-wide and backward-looking, so they can't tell you which job is losing money right now.

How many weeks of cash should a construction business hold?

Four to six weeks of total overheads including wages. Builders with large retentions or claim cycles beyond 45 days should sit at the higher end. Below two weeks, a single late progress claim can force expensive short-term borrowing.

What is a good gross margin for an Australian builder?

It varies widely by sector — residential, commercial and civil all price differently — so the useful benchmark is your own tender margin, not an industry average. The number to watch is the gap between what you tendered and what the job is forecast to deliver. Anything more than two points of slippage warrants a look.

Can my bookkeeper produce these five numbers?

Some of them, once the file is set up properly. A bookkeeper records what has happened; producing forecast margin and WIP requires someone to re-estimate cost-to-complete and challenge the answer. That's the difference between bookkeeping and financial leadership — and it's usually why the numbers exist but never get used.

How long does this take each month?

About 30 to 45 minutes for a builder running five or six jobs, once the systems are set up. The setup is the hard part; the monthly discipline is not.

Know where every job stands — every month. We build the monthly reporting pack, sit in the review, and make sure the numbers actually change decisions. See our project profitability service, or book a free strategy session and we'll walk through your last month's numbers together, or call 1300 886 347.