Episode 177 of the Construction Accounting Podcast with George Ghazarian, CPA · 4 min 39 sec · Published 29 July 2026

Eight or nine months of work on the books, crews maxed out, phone ringing — and at the end of the month there is nothing left in the bank.

A full backlog can hide a failing business. Here is what is eating the margin you priced in, and the levers you still control.

What you’ll learn

  • Why a record backlog can still leave you broke
  • How tariffs on steel, aluminum and copper compress bid margins
  • What the labor shortage does to your schedule and overhead
  • Why financing cost belongs in every bid you write
  • How escalation clauses move material risk back to the owner

Why a Record Backlog Can Still Leave You Broke

Backlogs are near record highs. A lot of contractors are carrying eight to nine months of work. That feels safe. At the same time, most contractors surveyed believe the industry is contracting. Both things are true at once, and the reason is the same reason your bank account is flat.

It is margin. The backlog you are proud of was priced when steel was cheaper, when labor was cheaper, and when money was cheaper. You locked in the price. The costs kept climbing. Now you are building month after month of work at a margin that does not exist anymore. That is not a busy problem. That is a going-broke problem in slow motion.

Force One: Materials Moved After You Quoted

Steel, aluminum and copper — some of these are carrying tariffs as high as fifty percent. In early 2026, nonresidential input prices were climbing at over twelve percent on an annualized basis, the fastest pace since the supply chain mess back in 2022.

That means the quote you gave in January was already wrong by March. If your bids do not move with your costs, you are donating margin to your suppliers one job at a time.

Force Two: A Labor Market You Cannot Buy Your Way Out Of

The industry needs roughly half a million more workers, and more than ninety percent of contractors say they cannot fill open spots. That does three things to you at once. It drives wages up. It stretches schedules. And a stretched schedule means your overhead sits on a job longer than you bid it.

Every extra week a crew is on site is margin leaking out the bottom of the job, whether or not anything went visibly wrong.

Force Three: The Cost of the Money You Float

Interest rates came down a little, then stalled out, sitting around three and a half to three and three-quarters percent. The line of credit you use to float payroll between draws costs you real money every week it is drawn.

Most contractors never put a dime of that interest into the bid. Materials are up, labor is up, money is still expensive, and your price was locked in months ago. That is the squeeze.

Escalation Clauses Belong in Every Contract

You cannot control tariffs. You cannot control the Fed. You cannot manufacture skilled workers. You can control how you price, how you protect a bid, and how you manage cash.

Start with contract language that lets you pass material spikes through to the owner. If steel jumps, the price jumps. You are not a bank for your customer’s project, and a fixed price with no escalation language makes you exactly that.

Price Your Real Costs, Then Get Selective

Second, put your real costs in the bid. Real labor burden, not just the base wage. Real overhead per week of schedule. Real interest on the money you float between draws. If it costs you money, it goes in the bid.

Third, use the backlog. A full book of work is the one thing that finally lets you say no. Walk away from the garbage-margin jobs. The contractors winning in this market are not the ones chasing every bid. They are the ones filling a backlog with the right work instead of any work.

Watch Cash Weekly, Not Profit Annually

Profit on paper does not make payroll. You need your cash position weekly, so a slow-paying owner cannot sink you in the middle of a job while you are technically busy.

An HVAC contractor doing about three million came in booked solid and barely breaking even. The bids had no escalation language, no interest in the numbers, and badly underbaked overhead. Rebuilding how he priced, adding escalation clauses, and walking away from two lowball jobs he would have taken out of habit produced the same revenue the next quarter — with money actually left over. Stop measuring yourself by how full the calendar is and start measuring what is left when the job closes.

The short version

  • Backlogs near record highs were priced before material, labor and financing costs climbed
  • Some steel, aluminum and copper carry tariffs as high as fifty percent
  • Nonresidential input prices climbed over twelve percent annualized to start this year
  • The industry needs roughly half a million more workers to fill open positions
  • Interest on money floated between draws belongs in the bid, not on your books
  • A full backlog is permission to walk away from garbage-margin work

Want this applied to your numbers?

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