LOW VOLTAGE AND AV · ELECTRICAL AND TECHNOLOGY · FIXED BY STEP 06

Shop-Built Racks Stall as WIP With No Billing Against Them

You loaded, terminated, burned in, and tested the rack in your shop because that's the cheapest place to do it. That's also the one place it can't be billed.

WHY IT'S A LOW VOLTAGE AND AV PROBLEM

Most trades install their material in the building, so material on site and material billable end up meaning close to the same thing. AV integration pulls a large share of the labor and nearly all of the hardware value into a shop build, because racking and burning in a system inside a finished conference room costs about triple. The practice that protects your labor margin is the same practice that strands your cash.

WHAT IT COSTS

The size of it

For six to twelve weeks the largest single cost on the job stays as work in process with nothing billed against it, while the invoice for that same gear is already due.

OVERHEAD AT $1M to $5M

16%

CFOS target 15% for low voltage and AV.

GROSS MARGIN AT $1M to $5M

24%

CFOS target 26.5% for low voltage and AV.

NET PROFIT AT $1M to $5M

CFOS target 11.5% for low voltage and AV.

G703 stored material billing generally wants material on site, or offsite in a bonded and insured warehouse with title transferred and the owner listed as loss payee. A rack on your shop floor meets none of those conditions. So the equipment is bought, paid for, assembled, and proven, and there's still zero dollars billed against it. The distributor's net-30 clock started the day that gear shipped to you.

WHAT TO DO

Three moves, in order

STEP 01

Negotiate offsite stored material language before the first PO goes out and not at the first pay app, covering the storage condition the owner will accept, the insurance certificate, title transfer, and tagging.

STEP 02

Give shop rack fabrication its own cost code so the dollar value parked in your building is a number you can read on a Friday afternoon.

STEP 03

Sequence buyout so racks get built close to ship date. A rack finished eight weeks early is eight weeks of your money parked on a shelf.

THE FIX

Step 06: Project management

Billing dates, change orders, and notices, written as standards that work without anyone following up on them.

CFOS-06 · CHAPTER 6

Billing and change orders that hold without follow up

What this step changes, what it depends on, and how to tell it's installed.

BENCHMARKS

Low voltage and AV by revenue band

All 7 bands are published. The CFOS target is beside the figure up to $10M to $25M, and the 4 bands above that are labelled modeled.

ACROSS EVERY TRADE

The change orders you did and never billed

The field did the work. The paperwork never caught up. Ninety days later there is no record that proves it happened.

SAME TRADE

What else costs low voltage and AV contractors money

LOW VOLTAGE AND AV · CFOS-01

Your Distributor Credit Line Sets Your Revenue Ceiling

The hardware is half the contract and it buys on a net-30 line from ADI or Almo, while the GC pays 90 days later. A credit manager who never saw your backlog sets your ceiling.

LOW VOLTAGE AND AV · CFOS-04

You Bid a Model Number, Then It Goes End-of-Life

Copper moves and comes back. A model number that gets discontinued never comes back, and the spec still calls for it.

LOW VOLTAGE AND AV · CFOS-06

Commissioning Waits on the Owner's IT Department

Your commissioning crew is mobilized, on site, and idle, waiting on a help desk ticket. No one on the GC's schedule owns that date.

LOW VOLTAGE AND AV · CFOS-07

Your Own Closeout Releases Your Month-Three Retention

Retention comes off the rough-in cable bill in month three and releases at final acceptance in month twenty-four. Your own training session is the event that releases it.

LOW VOLTAGE AND AV · CFOS-03

Parts Are Covered. The Truck Roll Is on You.

The manufacturer warrants the box. Everything it takes to get a tech up a ladder to swap that box comes out of your overhead for twelve months.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

CONCRETE

Ten Jobs Used Those Forms, One Job Paid for Them

Your yard is full of panels and shoring, every job report says you made money, and the bank account disagrees. The form buy was charged to job one and jobs two through ten absorbed none of it.

DEMOLITION

The Scale Wants Cash Today, The GC Pays In Sixty Days

Almost everything a demolition job costs goes out in the first two weeks, and the first pay application hasn't even been submitted yet.

FLOORING

You bankroll the mill six months before you get paid

The mill wants a check before it ships, the GC won't pay for stored material, and your cash is stuck in a warehouse for four months waiting on a space that isn't ready.

QUESTIONS

What low voltage and AV owners ask

Billing stored materials for racks built in my own shop?

You loaded, terminated, burned in, and tested the rack in your shop because that's the cheapest place to do it. That's also the one place it can't be billed.

What does it cost?

For six to twelve weeks the largest single cost on the job stays as work in process with nothing billed against it, while the invoice for that same gear is already due.

What do I do first?

What are low voltage and AV contractors supposed to be making?

Low voltage and AV has 24% gross margin, 16% overhead and 8% net profit after taxes at $1M to $5M. The all-trade average is 7%, so this trade is 1 point above it. The CFOS target is 11.5%.

Which part of the system fixes it?

The step is number 06, project management. Billing dates, change orders, and notices, written as standards that work without anyone following up on them. It comes from chapter 6 of CONTROL: C.F.O.S. Construction Financial Operating System.

OR HAVE IT HANDLED

Everything on this page is something you can install yourself, and CONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for low voltage and AV contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, led by the same author.

What a fractional CFO does for low voltage and AV contractors

AUTHOR

JOSH LUEBKER

MASTER ELECTRICIAN · 150+ PROJECTS · $2.1B+ MANAGED

Wrote CONTROL, the 8 step system behind these figures. More about the author.