A Houston commercial contractor with $11.4M revenue had operated without a formal budget for 14 years. The first project-based budget immediately surfaced a $1.2M receivables crisis building silently.
01The Situation
The contractor had grown the business from $2M to $11.4M in 14 years. Cash was occasionally tight but he always managed through it. He had never needed a budget, until his CFO retired and the bank asked for one as a condition of increasing his credit line.
When we started building the budget, the receivables analysis immediately surfaced a problem: Office Complex A had $260,000 outstanding at 94 days, sitting on a disputed change order for two months while billing kept running. Without the budget exercise, this would have continued until it became a crisis.
02What We Did
We built the budget project by project: contract value, billing schedule, expected collection timing, and subcontractor payment obligations. Each project got its own cash flow timeline. The aggregate revealed Office Complex A and three other projects with collections running more than 45 days behind billing. Total at-risk receivables: $662,000 across five projects.
We helped the owner draft dispute resolution letters for change orders on two projects and escalated collection on three others. DSO improved from 68 to 41 days within six months. The credit line increase was approved.
03Client Impact
The contractor had run the business for 14 years without a budget because it had always worked out. It almost did not work out in year 15. The $1.2M in slow receivables, hidden in aggregate numbers, would have caused a genuine cash crisis within 90 days.
Breakdown
| Project | Contract Value | Billed to Date | Collected | Outstanding | Days Out |
|---|---|---|---|---|---|
| Office Complex A | $3,240,000 | $1,944,000 | $1,684,000 | $260,000 | 94 days |
| Warehouse B | $2,160,000 | $1,728,000 | $1,598,000 | $130,000 | 62 days |
| Retail Fit-Out C | $1,440,000 | $864,000 | $820,000 | $44,000 | 28 days |
| Medical Office D | $1,080,000 | $540,000 | $486,000 | $54,000 | 38 days |
| 4 Other Projects | $3,480,000 | $1,740,000 | $1,566,000 | $174,000 | 48 days avg |
| TOTAL | $11,400,000 | $6,816,000 | $6,154,000 | $662,000 | 68 days avg |
What changed
First Annual Budget Built in 14 Years
Project-by-project budget with billing schedules, collection timing, and subcontractor obligations.
$1.2M Receivables Problem Identified
94-day receivable on Office Complex A and four other slow-pay accounts found during budget exercise.
DSO Improved from 68 to 41 Days
Collection process restructured. Change order disputes resolved. Credit line approved.
Monthly Budget vs Actual Review
Owner reviews budget-to-actual every month. Cash management now proactive.
The contractor had run the business for 14 years without a budget because it had always worked out. It almost did not work out in year 15. The $1.2M in slow receivables, hidden in aggregate numbers, would have caused a genuine cash crisis within 90 days.
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