Where is the money going?
I do not start a question like this with the annual accounts. They look backwards. I want to know what is happening on the projects today. How many hours were budgeted? How many have been used? And where is the variation work that has not yet been invoiced?
I want to know where the money is actually going.
In construction and installation companies, information is often scattered. The project manager knows the status of the work. Finance sees which invoices have been sent. The owner knows where extra people were needed. But who puts that information side by side every month?
That is where things go wrong. Not through one enormous mistake, but through small amounts that keep accumulating. A few extra hours here. Materials costing more there. Elsewhere, additional work performed without written client approval. By the end of the project, those deviations add up to a substantial shortfall.
When he saw the difference, he lost it
An installation company with around thirty employees expected a good year. Its order book was full. With revenue of about €3.2 million, a result of €420,000 seemed achievable.
A few months later, the new forecast landed on the table: €250,000. €170,000 was missing.
The owner lost it. Understandably. He worked long days, his team was stretched and there was no shortage of new work. His first response was that the figures could not be right. Then he wanted to know who had allowed this to happen.
This is where I usually become critical. Not of one employee, but of the way the company is managed. If deviations only become visible months later, finding one person to blame serves little purpose. What is missing is a fixed moment when someone puts hours, costs, variation work and invoices together.
We reviewed the largest projects. On one assignment, more than 1,100 additional hours had been worked. At €45 an hour, that was almost €50,000. Another €62,000 of variation work had been completed. We could still invoice less than half of it.
That was painful. The extra hours were not the result of laziness. The engineers wanted to finish the job. The variation work was also carried out deliberately. The client needed to move forward and the project manager wanted to avoid delays. Good intentions, in other words. The installation company simply ended up paying part of the bill.
Profit on paper. Stress in the bank account.
During the same period, roughly €148,000 went to staff and fixed costs each month. Materials and subcontractors cost another €96,000. Those amounts had to be paid immediately.
The next stage invoice was €260,000. It could only be sent once a particular phase was complete. Then the thirty-day payment term started. The company was therefore advancing almost €244,000. For a month. Sometimes longer.
According to the budget, the project was profitable. Yet it created stress every month. This is a distinction I often have to explain. Profit appears in the accounts. Cash sits in the bank. You need both, but they rarely arrive at the same time.
That is why I assess profit and cash flow separately. What are we earning on the work? When will we receive the money? The article Profit, but no cash flow explores this difference in more detail. Working capital in a growing business also plays a major role.
Calculate first, then fill the 2027 schedule
Many construction and installation companies are now filling their schedules for 2027. That provides reassurance. Yet I still see quotations based on this year’s rates, or the same mark-up on materials even though actual costs have changed.
My advice is simple: calculate again before you sign. Review wages, materials, transport and subcontractors. Check when you are allowed to invoice as well. A healthy margin is of little use if you have to finance the costs yourself for months.
At this installation company, we did not start with new software. We scheduled a short conversation every four weeks. The owner, project manager and finance team put the hours, purchases, variation work and outstanding invoices on the table.
Sometimes the conversation was uncomfortable. Fine. Twenty minutes of discussion during the project is better than explaining €170,000 afterwards. Variation work was recorded immediately from then on. Once a project phase was complete, the invoice went out that same day.
Calm did not return immediately. Visibility did. That gave the owner something to manage again.
Where is your project profit going?
With the Impact Growth Partner business scan, I examine where profit and cash flow leak out of your company. We look at the figures and at what happens on projects every day.
Would you rather discuss your situation first? Request a no-obligation introductory conversation. We will look at where your projects drift off course and what you can change first.
The company in this article has been anonymised. The figures have been rounded.
Mylène Duurland is the founder of Impact Growth Partner and a financial strategist for growing businesses. Drawing on experience in finance, private equity and M&A, she helps business owners manage cash flow, profit, growth and business value. Depending on what a business needs, she also works as a Fractional CFO.
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