Kitchen & bath renovator CFO services: profitable on paper, short on cash

Cash is forecast off the install calendar, not the sales funnel

A renovator's 13-week cash forecast is built from project milestones. For every signed job it lists the deposit date, the manufacturer payment when cabinets are ordered — often half the cabinet cost, months before install — the progress draw at install start, subcontractor payments as trades finish, and the final draw at completion. Laid end to end across all open jobs, those dates show the weeks when three cabinet orders land at once and no draw comes in, which is where lines of credit get used for the wrong reasons. Our 13-week forecast guide shows the mechanics; the renovation version simply replaces sales assumptions with the schedule you already keep.

The second number we put on every report is free cash: the bank balance less deposits held, less vendor bills, less HST collected but not yet remitted. Many renovators who feel flush are negative on this line, and the Construction Act's trust rules mean that gap is not only a planning problem. If you have ever wondered why a profitable business is always short on cash, in this trade the answer is usually sitting in that one calculation.

Backlog is the real sales report

Signed contracts not yet started, measured in weeks of crew capacity, tell you more than last month's revenue does. Backlog growing faster than install capacity looks wonderful — deposits pile up, the bank balance climbs — right up to the month when all those jobs need cabinets paid for and crews to install them. Backlog shrinking below six or eight weeks, on the other hand, is the earliest warning that the showroom needs attention before the crews run out of work.

We also age the backlog: jobs waiting on cabinet lead times, jobs waiting on permits, jobs waiting on the client to finish selections. Selections are the usual culprit, and a design-retainer policy — charging for the design phase and crediting it against the contract — turns the showroom from a free consulting service into a filter that only advances committed clients. Conversion from showroom visit to signed contract, average contract value, and the mix of kitchens, bathrooms, and product-only sales round out the monthly page.

Margin by job, by product line, and by labour hour

Gross margin on a renovation is only useful when it is computed while the estimator still remembers the job. We report it per project as contract plus approved change orders, less materials, subcontractors, burdened labour, job overhead, and warranty, and we show the product and install sides separately so you know which one carries the other.

Two pricing habits come out of this work. The first is markup-versus-margin discipline: a 30 percent markup on cost is a 23 percent margin on price, and estimators who confuse the two under-price every job by the difference. The second is a quote validity window, because a cabinet price list that moves between the quote and the order eats margin you never agreed to give up. Where clients pay through a consumer financing partner, the dealer fee comes off the payout; we record gross revenue and the fee separately so job margin is not quietly understated.

Growing past the owner-operator

The decisions that follow a full backlog are capital decisions. A second in-house crew adds fixed payroll but keeps install margin; more subcontract crews keep costs variable but hand margin away. Vans and tile saws raise the lease-or-buy question, and a showroom lease is a fixed cost that should be judged as a percentage of gross sales, not as rent. We model each of these against the forecast rather than against last year's profit.

We also keep the owner out of the shareholder-loan trap that cash crunches create, and we build lender packages that explain a deposit-heavy balance sheet — deposits, work in progress, and backlog presented together — because a banker who cannot read those numbers reads them as risk. If part of your cost base is US cabinetry paid in US dollars, exchange exposure belongs in the forecast too; the renovator cross-border guide covers how. Our advisory and CFO services page describes what a monthly engagement includes.