The 7 Numbers Every Contractor
Should Watch Every Month
Revenue isn't one of them. The seven numbers that tell a contractor the truth — margin by job, WIP, backlog, cash, AR days, labor burden, and the net-margin trend — what each one risks, and what it buys you.
Short answer: revenue isn't one of the seven. The numbers that tell a contractor the truth are the ones that reveal whether the work is actually making money and whether the business can carry the next job: gross margin by job, work-in-progress, backlog, cash and cash conversion, accounts-receivable days, labor burden, and the net-margin trend. Watch these every month and you stop running your company on the bank balance.
By Jason Anderson — Co-Founder, 406 Consulting Group. Big-firm-trained accountant who builds the job-costing and reporting that show contractors their real margins, not just their revenue.
Quick Answer: the 7 numbers
- →Gross margin by job — not one blended number.
- →WIP (work-in-progress): over- vs under-billing.
- →Backlog — signed work ahead of you.
- →Cash + cash conversion — and how fast work becomes money.
- →AR days — how long you're financing your customers.
- →Labor burden rate — the true cost of an hour.
- →Net-margin trend — the direction that matters.
The 7 numbers, and why each one matters
For each one the real question isn't just "what is it" — it's what ignoring it costs you, and what watching it buys you.
Gross margin by job
The profit each job actually throws off after its own labor, materials, and subs — not one blended company average.
Ignore it
A full schedule hides the money-losers. You keep winning work that quietly bleeds margin and never see which jobs to stop bidding.
Watch it
You bid and staff the work that actually pays and walk away from the work that doesn't — margin climbs without adding a dollar of revenue.
WIP — over/under billing
How much of each job is complete versus how much you've billed: the schedule that shows whether you're billed ahead of the work or behind it.
Ignore it
Overbilled jobs feel like profit that isn't there; when the billing runs out mid-job the cash crunch hits with no warning. Sureties read a missing WIP as “unbondable.”
Watch it
You see real earned profit, draw against future billings on purpose, and bond bigger work with confidence.
Backlog
Signed, not-yet-built work — your forward revenue and hiring signal.
Ignore it
A shrinking backlog is a revenue cliff you won't feel for months — until the crews run out of work and you're bidding desperate.
Watch it
An early read on hiring, equipment, and how hard to chase the next bid — long before the bank balance would tell you.
Cash & cash conversion
What's in the bank, and how fast a finished job turns into usable cash.
Ignore it
Profitable on paper, broke in practice. Growth eats cash first — you fund payroll and materials long before the customer pays.
Watch it
You know exactly how much growth you can fund, and you stop confusing a profitable month with a safe one.
AR days
How long your invoices sit unpaid, on average.
Ignore it
Every extra day is you financing your customers for free — and starving the cash you need for the next job's materials and payroll.
Watch it
Tighten collections and you free up cash you already earned, without selling a single new job.
Labor burden rate
The true, fully-loaded cost of an hour — wage plus payroll taxes, workers' comp, and benefits.
Ignore it
Bid off the bare wage and you lose money on every hour without knowing it; the busier you get, the faster you bleed.
Watch it
Price on real cost and every estimate protects your margin instead of guessing at it.
Net-margin trend
Net profit margin tracked over time — the direction, not just the dollars.
Ignore it
Revenue up while margin slips is the classic “getting bigger, not growing” trap — more work, more risk, less to keep.
Watch it
You catch the slide early and fix pricing or costs while it's a trim, not a crisis.
At a glance: healthy vs. warning
Illustrative| Number | Healthy | Warning |
|---|---|---|
| Gross margin by job | At or above bid, job over job | Jobs drifting below bid margin |
| WIP | Billing tracks % complete | Overbilled early, scrambling late |
| Backlog | Steady or growing months of work | Shrinking with no pipeline |
| Cash conversion | Jobs turn to cash quickly | Cash lags weeks behind the work |
| AR days | Trending down / within terms | Creeping up every month |
| Net-margin trend | Flat or rising with revenue | Falling while revenue climbs |
Why not revenue?
Because revenue is the number that lies. Picture a Montana GC who doubles from $2M to $4M and ends the year with less in the bank than before — more trucks, more crews, thinner margins, more stress. (Illustrative scenario.) The seven numbers above would have caught it in month two: margin slipping by job, WIP drifting, AR days climbing. Revenue measures how much money passed through the business; these measure how much stayed, and whether you can carry what's next. We go deeper on that trap in Is Your Business Growing — or Just Getting Bigger?
If margin, cash, and backlog are all moving the right way, you're growing. If only revenue is, you're just getting bigger — and the bill shows up later.
FAQ
What is a WIP schedule?
A WIP (work-in-progress) schedule compares how much of each job you've actually completed against how much you've billed, so you can see whether you're overbilled (billed ahead of the work) or underbilled (worked ahead of billing). On long, phased jobs it's the single most important report a contractor produces, and sureties and lenders demand it because it tells them whether your reported profit is real.
How often should I review these numbers?
Monthly, from a real close — not once a year at tax time. The whole point is to catch a slipping margin, a stretching AR balance, or a shrinking backlog while you can still act on it. A number you see in March about last year is history; the same number in a monthly review is a decision you can still make.
Who tracks these for a small contractor?
This is controller-level work — accurate job costing, a monthly close, and the reporting that turns raw transactions into these seven numbers. You don't need a full-time hire; we build and run this for contractors remotely, so the numbers show up every month without you chasing them.
Want these seven numbers every month without chasing them?
We build the job costing and monthly reporting that show contractors their real margins — remotely.
The 7 Numbers
See Your Real Margins