Not sure how much work you have lined up
Backlog is contract value minus billed, added up by job.
Most owners can tell you what's on the schedule this month and what they hope to win. Very few can say how much signed work is left to bill, and that number drives hiring, buying, and how hard to push on bids. If the backlog is thin and you don't know it, you find out when the crews are idle. If it's heavy and you don't know it, you take on work you can't staff, and the jobs finish late. A number you update monthly tells you which problem you have before it costs anything.
Three moves, in order
What CFOS does about it
CFOS keeps jobs with contract values and the schedule of values, so billed to date and the contract amount are already on each job. The monthly WIP schedule uses cost to complete entered by the PM and approved, and it shows over and under billing job by job. A master WIP puts the open jobs on one page, and the bid pipeline holds your pending bids with the chance of winning. That means signed work and expected work are in the same place and you can see both without building a spreadsheet.
Who owns this: Owner.
At $6M, you might find you have four months of signed work, not six. That changes how many bids you send this month. It also changes whether you add a crew.
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Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
Other problems step 07 solves
Other things that go wrong
What owners ask
Construction backlog how much work?
Backlog is contract value minus billed, added up by job. Most owners can tell you what's on the schedule this month and what they hope to win. Very few can say how much signed work is left to bill, and that number drives hiring, buying, and how hard to push on bids. If the backlog is thin and you don't know it, you find out when the crews are idle. If it's heavy and you don't know it, you take on work you can't staff, and the jobs finish late. A number you update monthly tells you which problem you have before it costs anything.
Which part of the system fixes this?
The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It's drawn from chapter 7 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
List every signed job with its current contract value, including approved change orders, and the amount billed to date.
Should backlog include bids I haven't won yet?
No. Keep signed backlog separate from pending bids. You can weight the pending bids by your chance of winning and look at them as a second line, but the signed number is the one you can count on.
How do change orders affect backlog?
Approved change orders raise the contract value and so raise the backlog. Pending change orders shouldn't count until the GC signs them. Keep the change order list current or the backlog number will be too low.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 07 depends on step 03, overhead calculation and step 04, estimating system and step 05, software and bookkeeping alignment and step 06, project management. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.