What is a P&L and Why Does it Matter?

You’re running a successful construction business, and you know you’re making money, but you’re not sure exactly how much. If you've gotten this far, you're not dumb. You have good business instincts. You know you need better accounting—you’re just not sure how to make it happen.

What you need is a reliable profit and loss statement, and it’s simpler than you think.

A Profit and Loss Statement (P&L) is your business’s financial scoreboard. It tells you whether you're making money, where your biggest expenses are, and where your financial blind spots might be. If you don’t have a P&L, you’re flying blind.

How to Get to a P&L That Actually Works for You

1. Run ALL Business Transactions Through Your Accounting Team & Software

A charge here, a Venmo there, a cash infusion into your business from time to time… they add up. To have an accurate P&L, you HAVE to start tracking these.

Your business finances should be crystal clear. That means tracking:

• Little Home Depot runs on your personal card.

• Venmo payments for subcontractors.

• Capturing handwritten receipts currently in a shoebox.

Every transaction—no matter how small—should go through your accounting system. If it doesn’t, you won’t have an accurate financial picture.

The easiest way to track these? Lean on your team. When they happen, snap a picture on your phone, text it to your assistant or other responsible party, and have them track it. You don’t have to create more work for yourself here. Just delegate this responsibility to someone on your team, either your assistant or bookkeeper, and get in the habit of snapping a quick pic and texting it to them.

2. Make Sure Delivering a P&L is in Your Accounting Team’s Scope

Many construction business owners assume their accountant is tracking their P&L. That’s a mistake. Unless it’s in their job description, don’t assume it’s getting done.

Before you do anything else, confirm with your accountant:

• Are they preparing your P&L?

• How often?

• Who is responsible for ensuring its accuracy?

If this isn’t already part of their scope of work, fix that now. (For help setting clear expectations with consultants, contact me for help. I’m always happy to exchange a few emails free of charge.)

3. Set a Weekly Accounting Meeting

If you want an accurate P&L, you’ll need to talk to your accounting team more often. A weekly accounting huddle works like magic to get everyone on the same page and keep your books clean. You should be doing something strategic with your accounting every single week. Not quarterly. Not “when things slow down.” Every. Single. Week.

During this meeting, you should:

• Review income and expenses.

• Answer your team’s questions about any transactions they’re having trouble matching.

• Flag any unusual spending patterns.

• Discuss cash flow and upcoming financial needs.

If you make this a habit, your finances won’t get away from you.

4. Start Reviewing Your P&L at Least Monthly

Your first P&L might be messy. That’s okay. Keep reviewing it anyway. Over time, the numbers will become more accurate, and trends will emerge.

Here’s why that matters:

What gets measured, gets managed.

If you track your numbers, you’ll start to see where things are getting out of whack.

Example: I had a client whose labor costs jumped from about 30% to about 50% of his expenses in a matter of months. When we pulled up the P&L, he immediately said,

“I know my guys are getting complacent. We’ve got to get more efficient on job sites. I’m paying too much in labor, and I need to let some people go. Seeing this in black and white just solidifies that for me.”

When you look at your P&L regularly, you start making decisions based on facts, not gut feelings.

Take Control of Your Business Finances

A P&L isn’t just an accounting report—it’s a tool to run your business smarter. If you don’t have one, start today. It doesn’t have to be perfect; it just has to be in place.

Once you have your P&L set up, the next step is making sure your accounting team is structured to support it. Need help? Just contact me. Again, I’m always happy to exchange a few emails with some pointers free of charge.)

Where to start when dialing in your operations: Accounting and Job Descriptions

You’re seeing problems in your business. Your team keeps making the same mistakes over and over again, and it’s costing you money and driving you nuts. Problems and fires hit your desk, distracting you from the important work, and you solve them one by one, with no confidence a similar problem won’t pop up next month.

Operations can help. Systems and processes are the key to not making the same mistakes over and over again. Systems and processes will free you from the daily fire fighting.

Create a Culture in Which It Is Okay to Make Mistakes and Unacceptable Not to Learn from Them
-Ray Dalio, Principles

But where to begin?

Is it a quality control checklist? A meeting structure for your internal meetings? A process for employee feedback and reviews? A new software that promises to solve it all?

Don’t begin with any of these things. Begin by asking questions. You need to discern what your most pressing operational problem is, because if you don’t solve that one, the other solutions won’t stick. Solving symptomatic issues, instead of the core issue, is like trying to fix a bad foundation with good framing. It never works.

Below are the questions I ask my consulting clients to determine what we’ll tackle first. I’ll walk you through them so you can begin the process of identifying your real issue.

Okay, ready? I’m going to ask you to rate yourself on each of these categories a 1, 2 or 3.

1 means “This is a disaster in my company. Or we aren’t doing this. Or we don’t have this.”

2 means “This is going okay, not great. It could be better.”

3 means “We’re great at this. We’re nailing this. I feel pretty good about this one.”

Let’s go. Write down each category in bold on a piece of paper. Read the supporting questions, and then give yourself a 1, 2 or 3 for that category.

Accounting and bookkeeping: How do you feel about accounting and bookkeeping in your business? Do you know how much money you’re making? Do you know where it’s going? Is it categorized? Is filing taxes fairly straightforward? Can you produce a P&L when requested?

Job Descriptions: Do you have meaningful job descriptions for everyone on your team? Are they written down? Do you and your team consult them regularly? Are they used in 1-1 meetings, performance reviews and compensation meetings?

Onboarding: How is onboarding in your business? Do you have a process for it? Are your employees signing an employment contract that covers the important points? If you need to hire and onboard someone new, is that pretty easy, or a total headache?

Offboarding: When an employee resigns or is terminated, do you have a process you follow? How do you ensure their secure access to job sites, the office, sensitive files and so forth is removed in a timely manner? Are you collecting company assets, such as tools, electronics, credit cards and keys? Do you have good processes in place to do this respectfully and professionally and avoid employment disputes?

Sales and Revenue: Are you bringing in enough revenue? Does it come in consistently and predictably? Are you happy with your sales team?

Customer Service: Are your customers happy most of the time? Do you get referrals and repeat customers?

Quality of work: How do you feel about the quality of your work/product? Is the quality consistent across your team and across projects?

Scheduling and deadlines: Are your projects typically running on schedule? Do you have a written schedule or a scheduling software? Is your team on the same page about deadlines? Does your team take deadlines seriously?

Risk Management and Compliance: How do you feel about risk management and compliance? Do you have solid contracts that protect you, and are they consistently signed and filed? Do you have the proper insurance in place? Is there a list somewhere you can consult when you want to check? Do you have a process for collecting or signing lien waivers? Are you in compliance with state and federal regulations for your business (such as franchise tax filing, Corporate Transparency Act and so forth).

Security: How do you feel about security in your organization? Are your job sites, office or shop a target of theft, arson or vandalism? Do you have any processes for regularly changing keys/access codes? How do you keep sensitive files secure? Do you have security cameras?

Okay, now review your results. If you gave yourself a “1” on most of these categories, take a deep breath. It’s okay. Many small construction businesses lack solid processes, which is why my consulting firm exists. This just means that a bright future is ahead of you, because if your business is running today with very little structure, imagine how awesome it will be after a tune up.

If you gave yourself a “1” for accounting/bookkeeping or job descriptions, start there. I don’t care what else is broken in your organization. Your priority is to get these two categories to a 2 and then 3 as quickly as possible. If you try to build out any other process for quality or scheduling or any other category, it will fail. This is like pouring a bad foundation, going “eh, we’ll deal with that later” and then trying to finish the house. I don’t care how well you frame it, how well you finish it, that house will never be quite right.

Here’s why that is true.

If you don’t have your accounting and bookkeeping in order, then you don’t honestly know if your company is headed in the right direction. You don’t know if you’re profitable and how profitable. You aren’t holding the dollars you spend accountable to results. And you’re a target for embezzlement, fraud and theft. Once you do have your books in order, you can look at them and make some clear, smart decisions. Do you have enough staff, or too much? Are you pursuing the right projects? Would you be more profitable if you did less work with a smaller staff, or do you need to scale up? Which of your projects are profitable, and which are not? Are you on track to be profitable next year? Until you answer these questions, don’t waste your time building processes that may be obsolete.

How do you start solving this issue? Get the right accounting and bookkeeping team in place. I’m no longer surprised when I talk to company owners who say they’re behind on bookkeeping and need to sit down and make themselves do it. “Wait,” I ask, “why isn’t your accounting team doing this and then just brining you questions they need help with?”

This is something I help my clients get sorted. If you don’t have the right accountant now, I interview and present a handful of accounting firms that know your type of business and we choose one together. I also manage your accounting firm for you with your input and consent along the way. Imagine that instead of you having 5 boring hour-long calls onboarding a new accounting team or redirecting your current one, I take 4 of them and you join 1 to give everything your stamp of approval.

Now let’s talk about job descriptions. I can guarantee you that if you don’t have written, meaningful job descriptions, you are not getting as much out of your team as you could be. There are certainly unspoken assumptions and expectations on both sides of the equation, for you and your employee. They think you want something different from them than you do. You think they know what you want, and they don’t. The only way to be sure everyone is on the same page is to put it on one page.

If you want everyone on the same page, put it on one page. -Something like that said by someone important

Everyone on your team should know their primary responsibility and enthusiastically agree to own that. They should know who they report to. And they should know what specific benchmarks you are measuring to determine if they have met their responsibility. When this happens, all kinds of problems begin to disappear. First, people who cannot or do not want to perform the role you need them performing either exit the organization or find a new place within your organization that is a better fit. Employee stress goes down. Gossip, workplace drama and unhealthy politics decrease. With clear direction, your people start working more productively and they’re happier. They appreciate each other more for what each team member brings, because what their colleagues contribute is clearer. Resentment among the team decreases because low performers who are hiding behind (or struggling because of) a lack of clarity either level up or get out. Compensation and performance improvement conversations become much less emotionally charged.

If you don’t tackle this, and instead try to implement, say, a scheduling process, I can tell you what happens, because I made this mistake.

I was once hired in a construction organization that did not have meaningful job descriptions. My role evolved over time from sales and investor relations to COO. Before I was COO, I saw problems leaking over from construction into my domains. Deadlines missed, miscommunications about specifications that upset buyers, unexpected budget overages and so forth. I was regularly communicating bad news to buyers, agents and investors, and I didn’t like it one bit. Being operationally minded, I start trying to solve the problems one by one. When we’d have a scheduling issue, I’d sit down with construction and discuss how to fix our scheduling. We’d talk in circles, getting nowhere. Frustrated, I started proposing solutions. Let’s use this software. Let’s do this kind of update together weekly. None of it worked. The solutions would be half-heartedly adopted by everyone for a week, then kicked to the side. The scheduling issue would pop up again, we’d meet again, and the cycle would continue.

Without meaningful job descriptions, this is the fate of any process you try to implement. Nothing will stick. Until you communicate clearly to your people “Here is the responsibility I am holding you accountable to, and here’s what I will be looking at to determine if that’s happening” any process you try to implement is a waste of time.

So let’s say your accounting is in good order and you have meaningful job descriptions. What should you tackle next? That depends on where else you have a “1”. If you don’t have enough revenue, for example, that would be an important one to tackle. But if you don’t have enough revenue and your quality isn’t great either, you might choose to work on your quality so you can keep your current customers happy and generate repeat business and referrals. But then again, if your quality is not great and you only have two customers right now, you might need to ram up your sales and then immediately turn your attention to quality. Trust your gut. From here, it’s really a bit of an art. If you’re struggling and need someone to help you think through this, that’s where I come in.

If you want to talk more, book a call. Let’s chat.

Job Description Template

Job descriptions are, alongside accounting, the most important process you can put in place for your company. They have all kinds of benefits from empowering your team to reducing toxic culture problems to keeping you in compliance with the workforce commission to facilitating effective feedback conversations. The list of benefits is long. You can read more about why these are so important here.

If you’re sold on why you should have them, here is a template for you to employ to create a clear, concise, one page job description for your team. I have used a real job description I wrote for a client, with a few adjustments to make it more general for various trades.

Delivery and Install Manager

Primary Responsibility: Ensure smooth, efficient and timely delivery and installation of <product>.

This role reports to ______________________. 

Scheduling

Ensure <products> are delivered and installed according to agreed schedules. 

• Coordinate delivery to ensure timely delivery of materials

• Coordinate field employees for proper staffing for installation

• Ensure materials are available when needed for installation to reduce completion delays

Managing Costs

Reduce overages due to rework and ensure all costs are properly accounted for. 

• Manage your team and department to reduce rework and limit additional site visits

• Ensure all field invoices are entered in <software> in a timely manner

Quality

Ensure the final product is of excellent quality with strict adherence to plans and specifications. 

• Ensure your team is familiar with <product> designs and details

• Ensure the proper materials are delivered to sites

• Ensure field team is familiar with design details to ensure <products> are installed with strict adherence to plans and specifications

• Oversee field punch and ensure the final product meets quality standards

Managing team

Empower your team to work in ways that support the smooth, efficient and timely delivery and installation of cabinets. 

• Manage your team through weekly meetings, 1-1s and performance improvement plans

• Remove obstacles to success and provide training and resources

• Advise ownership on staffing for your department (hiring, termination, role adjustments).

Here are the basic parts of this job description.

1. Title: What is this role called? This should be in simple language, and clearly communicate internally and externally what this person does.

2. Primary Responsibility: What does this person need to be doing well for the company to be successful? This should be one sentence. If you can’t articulate this in one sentence, you aren’t clear enough yourself on what you need from this person.

3. Reporting structure: Who does this role report to? Who has authority to approve or deny time off, give constructive feedback, assign tasks, oversee work on a regular basis, adjust priorities when the person is overbooked and take disciplinary actions? If your organization is not structured in a way that you can easily answer this question, that’s a whole other operational conversation. I feel strongly that hierarchy is healthy in an organization and that matrix organizational charts or fluid reporting structures do not work in construction.

4. Categories: I aim for 5 categories (this particular example has 4, but 5 is typical). In the construction world, I find that Scheduling, Costs/Budgeting and Quality are almost always 3 of the 5. The other two depend on the role. Other common categories include:

   • Risk Management and Compliance (typically more office side employees)

   • Managing Your Team (for any role managing people)

   • Managing Trades (for field roles like superintendents)

   • Drawings and Specifications

   • Preconstruction

5. Subtext to the category: For each category, I like to include one sentence in plain English laying out what I mean. So for example, with Scheduling, I mean in this case “Ensure products are delivered and installed according to agreed schedule.” That subtext will vary with each role. So while everyone in the organization may have some responsibility for scheduling, they will each have a different role to play. For example, a different role in the same organization, someone overseeing the shop, might have the directive to “Ensure products are produced according to agreed schedules.” (As an aside, products here might be cabinets, decorative or structural steel, specialty stone, countertops etc. Any trade that has a shop/production arm in their business.) While both the field manager and the shop manager both have scheduling responsibilities, the shop manager controls whether products are made on time and the field manager controls whether those products are sent to the field and installed in a timely manner.

6. Bullet points for each category: The bullet points further break down the expectations for this category. It gives specific steps and benchmarks the employee can hit to be successful, and clearly articulates your expectations.

Why does this all matter? Let’s imagine a scenario. Let’s say your Delivery and Install team is struggling. The first person you should be talking to is the Manager. You have tasked this person with ensuring this department runs smoothly, and it isn’t. You are not consistently seeing smooth, efficient and timely delivery and install of your products. Good thing you have this job description. This tough conversation just got easier.

After you determine that the primary responsibility is not being met, the next question is: in which category is the problem happening? Is the scheduling off? Are installs taking too long? Or is it costs? Are installs always over budget? Or, are they happening on schedule and on budget, but the quality is a problem? If any of these categories is off, it’s likely that this manager is not managing their team effectively. Are they having team meetings, giving feedback, empowering their team? You can go through and rate each category with a 1-5 (1 being very bad, 5 being excellent) and quickly see what problems you need to tackle.

You can also keep track of these rankings over time, facilitating kind and direct feedback conversations and tracking improvement. Good job descriptions are an excellent way to remove some of the emotion from managing people, and to manage them more fairly.

When business owners don’t implement real job descriptions, the biggest objections I see are:

• My brain doesn’t work that way/I don’t know where to begin.

• I don’t have time.

• That’s not my style/it’s not our culture/The idea of having a conversation like this makes me uncomfortable.

The first two are simple. They’re tactical issues, and you can pay someone like me, whose brain does work that way and who does have time, to do this for you.

The third is trickier. This is a mindset issue and requires some hard emotional work on your side. What I can say from experience is that you’re probably a nice person, and you like being friendly with your employees. You have some hang ups about being a “mean boss.” I have something really tough to say here, and it might sting. You’re being nice, but you’re not being kind. Leaving your employees unsure about whether they’re succeeding is not kind. Letting your top performers stew about the low performers in your organization who are hiding in the chaos is not kind. Stealing quality time from yourself and family to fight the same fires every week because your employees aren’t owning their roles isn’t kind. My best advice is to take one of two pathways:

1. Do the hard work to reframe your thoughts on this. Decide to be kind instead of nice when you can’t be both. Learn to respect yourself and your role as a leader. Consider where this people-pleasing tendency may have come from, and do some work on it. Have hard conversations early and often. Hold people accountable. Respect them enough to expect they are able to handle it.

2. Recognize that you have a weakness here (everyone has weaknesses) and that this isn’t one you feel the need to conquer. Let someone else who has the disposition be the tough love king (or queen) in the organization. But a word of caution here. This is a pathway of less personal, emotional work for you, but it’s not zero. You MUST back this person up clearly, firmly, repeatedly and enthusiastically and this will probably be uncomfortable for you. If you send someone into your organization to fix your issues, there will be organizational resistance. If your employees come to you to complain about a performance review or tough feedback or task they were assigned, and they find a sympathetic ear, you have undermined this person’s ability to perform their role and encouraged your employees to actively resist them and this is toxic for your culture.

But trust me when I say, it’s worth it. Change is never easy, but this is the pathway to a well-functioning, thriving, predictable organization where everyone, including you, loves to be.

You can do it. I can help. Book a call here.