How can contractors improve profitability without simply raising prices?
Chavon Wilcox
Construction Industry Leader and Audit Partner
Aprio
The construction profession is shifting from volume-driven growth to margin-driven discipline, and the contractors who recognize that shift first are the ones protecting profitability without touching price.
Job selection is where that discipline starts. A formal go/no-go process, weighing owner creditworthiness, contract terms, schedule risk and crew availability, keeps low-margin work from consuming capacity that better-fit projects need. Declining the wrong bid is the single most reliable margin decision a contractor can make, and it requires treating every opportunity as a capital allocation decision, not just a revenue opportunity. The most profitable jobs are often the ones a contractor chooses not to pursue.
Change-order discipline follows close behind. Unpriced, undocumented or verbally authorized scope changes are margin surrendered in real time. Getting changes priced and signed before work begins, and tracking them through to billing, is the fastest profitability gain available to most firms today.
The deeper shift is closing the loop between estimated and actual costs by cost code. Contractors collect this data on nearly every job; few feed it back into the estimating model. That feedback is what separates firms that price by instinct from firms that price by evidence, and it compounds every year it is in place.
Layered together, these habits change how a contractor prices, staffs and manages risk. None of it requires raising prices. It requires sharper visibility into the work already on the books, and that visibility is where sustainable margin improvement starts.
What financial risks do contractors face when adopting AI-powered estimating, scheduling or accounting tools?
Carl Oliveri, CPA, CCIFP, CFE
Partner and Construction Practice Leader
Grassi
Many contractors adopting AI still have gaps in job-cost data, WIP reporting and system integration. A model trained on that history can inherit the same project bias that contributed to profitability challenges on prior jobs. Faster analysis doesn’t automatically produce better assumptions.
Cost-to-complete is where those assumptions can get expensive. Estimated cost to complete is a vital driver under a percentage-of-completion revenue recognition model; an overly optimistic forecast can overstate progress and margin while understating the work still left to perform. This gap tends to surface later as profit fade translating into working capital pressure.
AI-driven scheduling tools carry a similar risk. Unrealistic productivity, labor availability or resource-loading assumptions can drive overtime, extended general conditions and margin erosion as a project runs longer than planned. When forecasts miss repeatedly, credit providers and other users start asking harder questions about estimating discipline, which can affect bonding capacity or borrowing terms.
Automation also changes the control environment. When AI codes invoices or drafts accruals, management still needs to understand how each number was derived and who approved it. Auditors, lenders and sureties will expect this level of accountability. Reducing independent reviews or weakening segregation of duties creates exposure of its own, separate from any estimating risk.
Contractors should first address the quality of their job-cost data and establish the right controls, then let AI-powered tools accelerate decisions built on a stronger foundation.
How are connected ERP systems changing the way construction companies manage projects?
Aisha Ali
President
Premier Construction Software
For most of my career, contractors learned what a job really cost weeks after the money had already been spent. By the time they saw the problem, profit had already slipped away. That gap is where margin quietly disappears.
A 2025 national survey put a number to it: General contractors reported paying subcontractors within 30 days, while subcontractors reported waiting 56 days. Nobody was wrong. The same transaction lived in two systems, and each side was working from its own record. That 26-day discrepancy captures an industry problem. It is not a dispute over facts; it is a lack of shared facts.
Connected ERP systems can close that gap. The real shift is not faster reporting. It is moving control closer to the moment decisions are made. When budgets, commitments, actuals and field data live in one system, financial checks happen when costs are committed, not weeks later at month-end.
A purchase order that would push a cost code over budget can be flagged before it is issued, rather than appearing as a variance months later. A project manager who is not spending Thursday piecing together numbers has time to fix the problem instead of explaining it.
The firms getting the most value from this approach have stopped treating accounting, job costing and field operations as separate conversations. The cost of a job becomes one continuous record, from budget through final billing, rather than competing versions maintained by different teams.
Real-time data does not make hard decisions easy—it makes them possible while there is still time to act.
Joel Hoffman
Director, Product Management, Construction
Acumatica
Connected ERP systems are changing construction project management by bringing contracts, schedules, change orders, budgets, job costs, payroll, inventory, field reports and compliance into one place. Instead of relying on disconnected systems that create data silos and manual workarounds, teams gain access to accurate, real-time companywide information from the office or field. This shared data keeps everyone on the same page, improves communication and gives project leaders clearer visibility into progress and costs. It also eliminates duplicate entry, reduces errors and helps contractors allocate resources and control costs more effectively. Modern platforms also make project information easier to act on. Dashboards and reporting can bring cash flow, profitability, committed and forecasted costs, variance and work-in-progress together, helping teams anticipate needs, address issues sooner and reduce risk. Document management, scheduling, time-entry and automated change-order processes further simplify daily work. Acumatica Construction Edition combines these capabilities in a connected, integrated platform, enabling contractors to manage projects, documents, employees and customers within one system while still integrating with important third-party applications. The result is faster decision-making, more efficient operations and a better opportunity to deliver projects on time and within budget.
What KPIs separate the highest-performing contractors from the rest?
Joseph Natarelli
National Construction Leader
CBIZ
The KPI’s most important to a contractor will likely reflect their individual business goals and the sophistication of their business. After all, not every contractor has the visibility into operations and data to compile comprehensive reports. Furthermore, no single metric in isolation tells the full story. For example, what good is this year’s strong revenue without healthy backlogs to signal long term security?
Instead, the high performing contractors consider financial, operational and workforce metrics from across the business, put them in context, and use the findings to identify risks as well as opportunities for improvement. Often, those include: gross profit by project to assess the jobs that represent value; backlog quality and predictability to understand how future work predicts profitability; work-in-progress and margin fade/gain to identify and correct systemic issues that may affect profitability; cashflow, including under billings and retainage outstanding to support financial strength and bonding capacity; schedule performance and rework rates to measure efficiency and consistency; safety and employee retention to create a strong culture; and revenue and profit per employee to evaluate productivity and scalability.
Better insight yields stronger decision making and these are the areas of focus the highest performing contractors account for in their strategies. Visibility into the business and how value is created or eroded, equips contractors to be agile as market conditions change and project risks emerge. With competition growing and input costs rising, insights into business performance and high value projects can help keep growth projections on track in the face of rapid change.
Emilio F. Alvarez
Managing Partner | Audit
H&CO
Best-of-Class contractors live and die by two concepts: Control risk and manage cash flow.
Experience has shown that contractors fail when they run out of cash. We have also learned from investigations conducted by others that most contractor failures are due to one catastrophic job.
Consequently, it is to be expected that most of the attention is dedicated to the subject of cash flow and risk.
While it is very difficult to be shielded totally from the occasional catastrophic job, there is a way to mitigate such risk. The answer is “early detection”. When a contractor finds out early in the process that there is a problem, he has available alternatives that often provide the ability to mitigate the downside. In many cases, these alternatives are found because of giving importance and carefully examining the key performance indicators that the financial data are providing.
You cannot manage what you don’t measure. Cash, risk and management are all about key performance indicators.
Michael B. Ceschini, CPA, CCIFP, CM&AA
Managing Member
Ceschini CPAs Tax & Advisory PLLC
The strongest contractors don’t necessarily have the most revenue. They tend to have a much better handle on which jobs are making money, where margins are changing and how quickly profit turns into cash.
Gross profit fade is one of the first things I look at. If jobs routinely finish at lower margins than originally estimated, there may be problems with estimating, change-order management, labor productivity or project controls. One bad job happens. A pattern tells you something needs attention.
Cash flow and working capital matter just as much. Contractors can be profitable and still run into trouble if receivables and retainage aren’t collected promptly or if they’re consistently funding projects for too long. Backlog also needs context. A large backlog sounds good, but the better questions are whether the work is profitable, whether the company has the people to perform it and whether it has enough working capital to support it.
Labor productivity, equipment utilization, overhead, bid-hit rates, safety and employee retention can provide additional warning signs or opportunities depending on the business. But I wouldn’t recommend watching dozens of KPIs just because the data is available.
The contractors we see make the best decisions are disciplined about a handful of numbers that matter to their business. They close their books and update WIP consistently, compare actual results with what they expected and investigate meaningful differences while there’s still time to do something about them. The value isn’t in having more reports. It’s in using the information you already have to run the business better.
How should contractors prepare financially for increased use of AI across their operations?
Jilson Rodgers
Management Consulting Principal
Plante Moran
AI requires a financial mindset shift. Today, 87% of contractors believe AI will meaningfully affect construction and 85% expect to spend less time on repetitive tasks (2026 Dodge Construction Network x CMiC Report on AI use in construction). Over 90% struggle to fill positions and 45% say labor shortages are delaying projects (AGC and NCCER). Yet adoption remains limited. Just 55% of firms have begun implementing AI, while fewer than 1% have embedded it firmwide (RICS). Plante Moran’s survey shows the appetite in construction is unique: 59% of construction firms want more guidance on Microsoft Copilot rollout and 53% want to explore AI agents and automation—both 25 to 31 points higher than other industries. Contractors must view AI as a change in their operating cost structure, not just a technology purchase. As routine work is automated, back-office spending shifts from human wages to AI tokens. That expense creates capacity to grow without adding people. But the return is not immediate. Automation only creates value when the new capacity is used to do more, and near-term that capacity often goes to improving the automation.
Want faster value from AI? Start with sound data architecture. Many contractors rely on disparate estimating, project management, accounting and field systems. Automating processes on bad data, disparate systems and ambiguous definitions costs more to build and even more to maintain. Contractors that start with a structured data foundation and strong governance create more AI momentum. They can pilot use cases faster and with less effort. Their operations team can build agents that automate individual tasks and later combine into entirely new agentic processes. AI spending feels expensive as an added technology cost. It looks different as an investment in future organizational capacity. Contractors that prepare their data, technology and people today will be better positioned to grow through the 2030s despite labor constraints and avoid paying to rebuild later.
Brian Kassalem
Principal, Construction Industry Leader
Baker Tilly
The increasing use of artificial intelligence requires contractors to make financial decisions beyond the cost of the technology itself. Investments in systems, data, training and implementation need to be weighed against potential gains in employee capacity, operating efficiency and profitability.
Before moving forward with widespread AI implementation, contractors should establish a realistic budget that reflects the full investment required. Key components of the budget should include both hard-dollar costs, such as software, consulting and systems integration, and soft-dollar costs, particularly the opportunity cost of employee time devoted to AI implementation rather than existing projects and responsibilities.
One area contractors often overlook when implementing AI is the cost associated with systems integration and data preparation. A contractor may focus on the price of an AI application without fully considering the costs of integrating it with the company’s existing ERP, project management software and other systems. Contractors should also consider whether their existing data will need to be cleaned, organized or standardized before it can be effectively used by AI applications.
As contractors budget for the increasing use of AI, they should take a page from their own estimating playbook: Just as they account for uncertainties when estimating a new project, they should build contingencies into their AI budgets for costs they cannot fully anticipate.
A realistic budget for the cost and time required to implement AI should ultimately be paired with clearly defined, measurable expectations for the return on that investment.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought.
Nick Mortensen
Principal—Development and Integration
Eide Bailly
First, if it’s important to make sure you are doing what you can to control cost. There are a number of levers most folks have no idea exist that can drastically reduce AI spend when using AI in operations. And don’t discount the importance of internal education. Often, people are using AI when AI doesn’t add value and process automation is actually more effective.
Second, AI is changing what you should expect from your employees and your processes. The name of the game is doing more with less. And you can’t measure if you’re doing more with less if you aren’t measuring anything. Align AI spend with specific business problems you can measure progress on. And make sure you take a baseline measurement.
What strategies can contractors implement to proactively manage cash flow and survive slow-paying clients?
Marshall Shepherd
Audit Partner
Melton & Melton LLP
Cash flow is a management system, not a collections problem—by the time an invoice is 90 days old, your options are expensive. Here’s what I advise contractor clients to implement.
Build a rolling cash forecast. Map committed inflows against payroll, vendor and equipment obligations weekly, then update it every Friday. That forecast tells you in February whether you can fund March. Discipline on the outflow side matters just as much: Pay vendors to terms, not early, and hold subcontractor retainage roughly in step with what is withheld from you.
Run a work-in-progress schedule monthly, with over/underbilling analysis by job. Underbillings quietly finance your customers; caught early, they become billing corrections instead of losses. Measure days sales outstanding against your contract terms—a widening gap is your earliest warning of a payer in trouble.
Negotiate money in the contract, not after. Clarify retainage caps and release timing, interest or finance charges on late payments, and pay-when-paid versus pay-if-paid language. Track statutory notice and lien deadlines—most prompt-payment and mechanic’s lien rights die on a calendar, not a conversation. Structure the schedule of values deliberately. Reasonable front-loading of mobilization and early-phase work improves cash, but keep it defensible; aggressive front-loading invites disputes, withholding and bonding problems.
Vet the payer before you sign. Pull financials, trade references and payment history on owners and general contractors.
Finally, arrange liquidity before you need it: a revolving line of credit, or disciplined receivables financing. Idle capacity is cheaper than emergency capital.
What role should predictive analytics play in preventing project delays and cost overruns?
Steve Antill
Chief Revenue Officer
Foundation Software
Every contractor wants the same thing: to identify a problem and fix it before it derails a job.
That’s where predictive analytics come in—it’s the front line of defense against shrinking margins and project delays. With it, you can see the trends before the trends happen and adjust accordingly.
Seeing Into the Future
Most contractors already have the data they need — they just aren’t using it.
Every job leaves records: what it cost, how long it took and where things went wrong. Predictive analytics, especially ones built with AI, put those records to work. They compare a current job against patterns from your past projects to show you where it’s headed.
The result is immediate: potential cost overruns get flagged while there’s still time to fix them, and cash flow issues surface before they create delays.
Value Now and in the Future
Predictive analytics tools improve based on the data you give them. Every job you run adds to the data the model learns from, so predictions get sharper the longer you use it.
That’s the real return: not a one-time insight, but a model that gets more valuable every time you use it. Contractors investing in these tools now are the ones building a real advantage over their competition because they can predict where a job is headed before it even begins.
How can contractors better prepare for audits from owners, lenders and sureties?
Todd Feuerman, CPA, CCA, MBA
Director
Ellin & Tucker
Contractors should treat audit readiness as a year-round discipline, not a year-end scramble. A good place to start is simply understanding exactly what the owner, lender or surety require. Whether that’s an audit or review, what supporting schedules are needed, when everything is due and how it needs to be submitted. From there, work backward and leave enough time for internal review, corrections and follow-up questions.
It’s also important to have one person take the lead, typically the CFO or controller. That person can manage the CPA request list, keep track of document versions and uploads, and serve as the main point of contact with the audit team. Internally, the team should make sure key schedules (cash, receivables, WIP, job costs, payables, debt, equipment, leases and related-party activity) are complete, current and tied back to the final trial balance.
The same goes for supporting documentation. Signed contracts and amendments, approved change orders, project forecasts, job-cost detail, retainage, backlog reports, covenant calculations and other key records should be organized and ready to go. The more contractors can resolve inconsistencies or missing information before fieldwork begins, the smoother the process will be.
Ultimately, audit readiness comes down to clean records, current estimates and good communication. When WIP, job costs, billings, contract assets and liabilities are reconciled ahead of time, it makes the audit more efficient and gives owners, lenders and sureties greater confidence in the company’s financial reporting.
And contractors shouldn’t think of the audit as simply a compliance exercise. It’s also an opportunity to use their CPA as a resource—to identify potential risks, strengthen internal controls, benchmark performance and plan ahead for issues such as cash flow, profitability, taxes and succession.
How can contractors use business intelligence and dashboards to improve executive decision-making?
John Gallo
Managing Director
UHY
Contractors do not have a data problem. They have a visibility problem.
Most construction companies already generate enormous amounts of information across ERP, project management, payroll, estimating and field systems. The challenge is turning that information into a clear, timely view of what requires executive attention.
Business intelligence and dashboards can help bridge that gap.
The most effective dashboards are not simply digital versions of existing reports. They surface the few measures that matter most to decision-makers and make it easier to identify where performance is changing. For contractors, that might include projected versus actual gross margin, backlog, cash flow, labor productivity, committed cost, change-order exposure and forecast-to-complete.
The real value comes from context. Knowing that gross margin has declined is helpful. Knowing which projects are driving the decline, whether labor productivity or material costs are responsible, and how the trend affects the forecast is far more actionable.
Dashboards should also be role-based. A CFO, operations leader and project manager may rely on the same underlying data, but each needs a different level of detail and a different view of risk.
The objective should not be to put every available metric on one screen. It should be to shorten the distance between data, insight and action.
When business intelligence is designed around how leaders actually make decisions, executive conversations change. Less time is spent reconciling reports and debating whose numbers are correct. More time is spent addressing risk, protecting margin and deciding what to do next.
How is technology helping contractors reduce administrative work and improve workforce productivity?
Woody Chamberlain
President
eMars
The Davis Bacon Act mandates that contractors who receive at least $2,000 from the government must file weekly payroll reports. There are a total of 31 compliance issues in the Davis Bacon and Related Acts. The prevailing wage must also be adhered to for all trades and apprentices.
A general contractor with six sub contractors and a total of 100 employees has a daunting task: stay compliant or possibly be fined or go to jail. Doing manual payroll is labor intensive and requires adherence to very strict guidelines. Typically manual preparation for a Friday payroll starts on Monday, and never ends
We will do better next time. Some of our people are new and don’t know the compliance issues. We just had four small errors. None of those is an acceptable answer for government officials.
What can contractors easily do to have a compliant payroll without errors and drastically reduced administrative costs?
A system that requires no installation or maintenance, provides immediate, concurrent, real time visibility of all payroll records of the sub, prime, plus the owner agency is one possible answer. All screens are printable. Every submitted payroll is audited, on line and in real time, against the wage determination and all 31 causes that are in support of Davis-Bacon and Related Acts.
The results of comparisons to the provisions set forth in the act are immediately reported, allowing corrections to be made promptly. A typical payroll is prepared in less than eight minutes.
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