Small-Contractor Bookkeeping: The 4 Numbers You Must Track Monthly

Most Hardin County contractors only look at their checkbook. The 4 numbers that actually predict cashflow and profitability are gross margin, accounts receivable aging, labor efficiency (billable vs paid hours), and fixed overhead coverage ratio. Each takes 10 minutes monthly. Together they flag problems before the bank does. A contractor in Elizabethtown KY or Radcliff KY who tracks these four numbers on the first business day of every month will see a slow-paying customer, a margin leak, or a labor problem weeks before it shows up as a bounced check.

Why Do These 4 Numbers Matter More Than Your Bank Balance?

A bank balance is a lagging indicator. It tells a contractor what already happened, not what is about to happen. By the time a checking account runs low, the problem that caused it started 30, 60, or 90 days earlier. Gross margin, AR aging, labor efficiency, and overhead coverage are leading indicators. They show the trajectory of the business before cash hits or misses the account.

A contractor can have a healthy bank balance in March and be out of cash in May. This happens all the time across Hardin County KY trades. The business took on three jobs with thin margins, the customers on those jobs are slow payers, the crew logged more hours than the estimates allowed, and fixed overhead kept rolling every week. The checkbook looked fine for six weeks. Then it did not.

These four numbers catch that sequence the month it starts. They are also the same numbers a commercial lender, a bonding company, or a buyer will ask for if the contractor ever wants a line of credit, a performance bond, or an exit. Tracking them monthly means the paperwork is already done when the opportunity shows up.

How Do You Calculate Gross Margin on Contractor Jobs?

Gross margin is revenue minus cost of goods sold, divided by revenue, expressed as a percentage. For a contractor, cost of goods sold means direct job costs: materials, subcontractors, direct labor on the job, fuel to the site, dump fees, permits tied to the job, and equipment rental for the job. It does not include office rent, the owner's truck payment, insurance, or admin salaries. Those live in overhead.

The formula: (Revenue minus COGS) divided by Revenue, times 100. A job that billed $20,000 and cost $11,000 in direct costs produced a 45% gross margin. A healthy gross margin for most trades in Hardin County KY runs 45 to 55%. Trades that rely heavily on materials (roofing, flooring) tend to land on the lower end. Trades that are labor-heavy with owned equipment (painting, handyman, small remodel) tend to land higher.

The 10-minute monthly review is simple. Pull the month's revenue from the invoicing tool. Pull the month's direct job costs from the bookkeeping software. Run the formula. Write the number down. Compare it to last month and last quarter. If it dropped more than 3 points without an obvious cause, something is leaking. Common leaks: materials pricing changed and estimates did not, a subcontractor raised rates, or a crew is burning too many hours per job.

How Do You Calculate Accounts Receivable Aging?

Accounts receivable aging is a breakdown of unpaid invoices by how old they are. Most contractors group AR into four buckets: 0 to 30 days, 31 to 60 days, 61 to 90 days, and 90+ days. The dollar total in each bucket tells the story. The percentage of total AR in each bucket tells the trend.

The rule of thumb: anything over 60 days is a flag. Anything over 90 days should be assumed uncollectible unless there is an active payment plan or a signed commitment. A healthy contractor carries 70 to 80% of AR in the 0 to 30 day bucket. A contractor carrying 30% or more past 60 days has a collections problem, a customer-selection problem, or both.

The monthly workflow. Open the AR aging report in QuickBooks Online, Jobber, or whatever tool the contractor uses. Print it or export it. Highlight anything over 60 days. Call those customers that week. Do not email. A phone call from the owner collects money at a dramatically higher rate than an invoice reminder. A contractor in Fort Knox KY or Radcliff KY who runs this review on the first of every month will collect 2 to 4 weeks faster than one who waits for the customer to remember.

How Do You Measure Labor Efficiency (Billable vs Paid Hours)?

Labor efficiency is the ratio of billable hours (hours charged to a job) to paid hours (total hours the crew was on the clock). The formula: Billable Hours divided by Paid Hours, times 100. A crew that logged 160 paid hours in a week and charged 112 of those hours to jobs produced 70% labor efficiency.

The target for small contractors is 65 to 75%. Anything below 60% means the crew is spending too much time on shop work, drive time, re-dos, waiting on materials, or internal errands. Anything above 80% probably means time is being over-charged to jobs or the crew is skipping legitimate non-billable tasks that will cause problems later (truck maintenance, safety meetings, tool organization).

The monthly review. Pull total payroll hours for the month. Pull total hours charged to jobs from the job costing or time tracking system. Run the ratio. If the number slipped, the first question is usually where the non-billable time is going. Drive time between jobs in Hardin County KY is a common silent killer. A crew running four jobs a day across Elizabethtown KY, Radcliff KY, and Fort Knox KY can burn 2 hours daily just driving.

What Does Fixed Overhead Coverage Ratio Actually Mean?

Fixed overhead coverage is the ratio of monthly gross profit to monthly fixed overhead. Fixed overhead is every cost that shows up whether the business did 10 jobs or zero: office rent, insurance, owner draw, admin salaries, software subscriptions, truck payments not tied to specific jobs, phone, utilities, and any recurring debt service. Gross profit is revenue minus direct job costs (the same COGS used in gross margin).

The formula: Monthly Gross Profit divided by Monthly Fixed Overhead. A ratio of 1.0 means the business covered its fixed costs and earned zero. A ratio of 2.0 means the business produced twice its fixed overhead in gross profit, leaving the second half as owner profit or reinvestment. The target for a stable small contractor is 3.0 or higher. That 3x buffer is what lets the business survive a slow month or an unexpected expense without scrambling.

The monthly workflow. Add up every fixed cost for the month. Calculate gross profit (revenue minus direct job costs). Divide. If the ratio is under 2.0, the business is running too tight. If it is under 1.0, the business lost money that month. Two consecutive months under 1.0 is a red alert. It means either fixed overhead needs to come down or the top line needs to grow, and the owner has maybe 60 days to fix it before the bank balance tells the same story.

What Is the Monthly Review Workflow That Actually Works?

The workflow fits on a single page. First business day of the month, block 45 minutes. Pull the numbers from the prior month. Gross margin takes 10 minutes. AR aging takes 10 minutes. Labor efficiency takes 10 minutes. Fixed overhead coverage takes 10 minutes. Write all four on a simple tracker (a Google Sheet works fine). Compare to the prior month and prior quarter. Circle anything that moved more than 3 points or crossed a warning threshold.

Then act. One phone call per flagged number, same day. If gross margin dropped, call the lead estimator or review the last 5 job cost reports. If AR aging is ugly, call the slow payers. If labor efficiency slipped, walk the job sites. If overhead coverage is weak, look at the fixed cost list and mark anything that could be cut or renegotiated.

The point of the review is not the spreadsheet. The spreadsheet takes 45 minutes. The phone calls and the walk-throughs are where the money actually gets made back. A contractor who runs this loop every month will spot problems in weeks instead of quarters. Horizon's contractor operations build-out sets this review up inside the contractor's existing tools so the numbers pull automatically.

Which Tools Make Monthly Contractor Bookkeeping Easy?

Three tools cover 95% of small contractor bookkeeping needs in Hardin County KY. The contractor does not need all three. Most need two.

Google Sheets is the free option. A clean 4-number tracker with last 12 months of history takes under an hour to build. The contractor manually enters four numbers per month. Total annual time cost: 9 hours. Total dollar cost: zero. This works for contractors doing under $250,000 a year in revenue with one crew and a short AR list.

QuickBooks Online is the standard for contractors doing $250,000 to $2 million. QBO produces gross margin, AR aging, and overhead coverage reports natively. Labor efficiency requires adding a time tracking tool like QuickBooks Time or pulling hours from the payroll export. QBO runs $30 to $90 per month depending on the tier. Most Hardin County KY contractors land on the Plus tier at $90.

Jobber is a job management and invoicing tool purpose-built for service contractors. It handles quoting, scheduling, invoicing, and job costing in one place. Jobber integrates with QBO. Labor efficiency and gross margin per job come out of Jobber cleanly. Jobber runs $69 to $349 per month. Contractors with 2+ crews usually find the investment pays back in saved admin time alone. Losing track of invoices or forgetting to bill completed jobs is one of the most common ways contractors leak money. Horizon documented this pattern in the [missed revenue audit](/missed-revenue-audit) framework.

What Are the Warning Signs These 4 Numbers Flag?

Each number has a specific warning pattern. Gross margin sliding 3+ points over two months usually means estimate pricing is behind current material or subcontractor costs. The fix is reviewing the last 5 to 10 estimates against actual job cost reports and updating the pricing template.

AR aging creeping past 60 days usually means the contractor is taking on customers who were not qualified for payment terms, or the invoicing cadence is slipping. Many contractors in Elizabethtown KY and Radcliff KY invoice at job end and wait. Invoicing at milestones (mobilization deposit, midpoint draw, completion) on jobs over $5,000 cuts AR aging dramatically.

Labor efficiency dropping under 60% usually means drive time, shop time, or re-do time is eating the crew. The fix is usually scheduling (grouping jobs geographically) or process (better material staging so the crew is not running back to the shop). Sometimes it is a single problem employee.

Overhead coverage dropping under 2.0 usually means fixed costs crept up while revenue stayed flat. New software subscriptions, an extra admin hour, a truck payment. Each one feels small. Added together over 12 months, they can push a healthy 3.0 ratio down to a scary 1.5.

How Do You Benchmark These Numbers Against Other Contractors?

Four reference points for small contractors in Hardin County KY. Gross margin: 45 to 55% for most trades. Roofing and flooring closer to 35 to 45%. Painting and handyman closer to 55 to 65%. AR aging: 70% or more of total AR in the 0 to 30 day bucket, less than 10% past 90 days. Labor efficiency: 65 to 75% for field crews. Fixed overhead coverage: 3.0 or higher for a stable business, 2.0 as the minimum floor.

Industry benchmarks from the Construction Financial Management Association and NAHB run slightly different by trade and region. A contractor who wants exact peer comparison can pull free benchmark reports from those groups. For most Hardin County KY contractors, the four reference points above are close enough to run the business on. The discipline is tracking consistently every month, not chasing benchmark precision.

Ready to Get These 4 Numbers Working in Your Business?

A contractor in Elizabethtown KY, Radcliff KY, or Fort Knox KY who runs these four numbers every month for a year will know more about their business than 90% of their competitors. The tools are cheap. The time cost is 45 minutes a month. The payoff is every slow-paying customer caught early, every margin leak flagged before it compounds, every labor problem addressed before it becomes a cash problem.

Horizon builds this review process directly into the contractor's existing books, job tools, and scheduling. The contractor does not add software. The contractor gets a 4-number dashboard that updates automatically and a monthly review cadence that takes 45 minutes. Book a contractor operations consultation with Horizon and we will show you exactly how your current numbers look and what the first fix should be.

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