Five Companies. One Set of Books.
A family holding group ran several operating companies that billed each other through month-end journal entries. How inter-entity pricing and job-level discipline surfaced $963,500 in annualized value.
Multi-Entity Holding Group — Construction and Equipment
Five Companies. One Set of Books.
A family-owned holding group operated several related companies, including an equipment entity that served the others. The group was profitable in total. Which entity was generating that profit, and which was being carried, was not a question the books could answer. A Financial Discovery Assessment identified $963,500 in annualized value.
A group of companies under one roof will hide a weak entity inside a strong consolidation.
Multi-entity groups grow for good reasons. A new line of work justifies its own company, an equipment fleet gets separated for liability, a second location becomes its own operation. Each decision makes sense when it is made. The accounting rarely gets rebuilt to match.
This group had assembled itself over three decades. Several operating companies, an equipment entity that supplied the others, and a shared back office serving all of them. Consolidated results were solid and the bank was comfortable.
The equipment entity billed its sister companies for the machinery they used. It did this through two journal entries at month end, sized to produce a result that looked reasonable, rather than through rates tied to actual usage. That single practice meant every operating company's job costs were approximations, and the equipment entity's own performance was whatever the entry made it.
Because job costs were approximate, the group could not see which work was worth taking. A review of active jobs found a substantial share of them small enough that they consumed more overhead in administration, mobilization, and billing than they returned. The group had never set a floor, because it lacked the numbers to justify one.
The same pattern ran through the rest of the operation. Purchase orders were raised after the spend, change orders were approved verbally and papered later, and closed jobs sat unbilled because no one owned the closeout. That's when they called us.
The Assessment
What we found when we priced the entities against each other properly.
Most of the value was not new money. It was margin the group was already earning and could not see, and margin it was giving away without deciding to.
Equipment billed to sister companies by month-end journal entry
The equipment entity charged the operating companies through two manual entries each month rather than through usage-based rates. Job costs across every operating company were therefore estimates, and the equipment entity's margin was an artifact of the entry rather than a measurement. Building a rate structure based on actual hours and machine class, and pushing those costs to the jobs that incurred them, identified $284,000 in annualized value and made entity-level performance visible for the first time.
Projected Annualized Value: $284,000
No minimum job size, and a long tail of work that lost money
A review of the active job schedule showed a significant share of jobs small enough that the fixed cost of running them exceeded their contribution. Each had been accepted for a defensible reason, usually a client relationship, and the cumulative drag had never been quantified. Establishing a minimum job size with a documented exception process, and pricing small work to cover its true administrative load, identified $173,000 in annualized margin recovery.
Projected Annualized Margin Recovery: $173,000
Purchase orders raised after the money was committed
Purchase orders were being created to document spending that had already happened rather than to authorize it in advance. With no pre-spend control, field and shop purchases were visible only after they hit the ledger, and vendor pricing was never tested at the moment of commitment. Implementing pre-spend approval thresholds with proper purchase order workflow identified $121,000 in annualized value.
Projected Annualized Value: $121,000
Receivables managed by relationship rather than by process
Collections depended on individual project managers following up with clients they knew, without a standard escalation path or aging discipline. Some accounts were pursued weekly and others not at all. Establishing a standard collections process with defined aging triggers and clear ownership identified $114,500 in annualized working capital value without changing a single client relationship.
Projected Annualized Value: $114,500
Completed jobs sitting open and unbilled
A meaningful number of jobs had been finished in the field and never closed in the system, which meant final billings were delayed or missed entirely and the job schedule overstated work in progress. Assigning closeout ownership and enforcing a billing trigger at completion identified $97,000 in annualized value, most of it revenue already earned.
Projected Annualized Value: $97,000
A workers' compensation experience modifier nobody was managing
The group's experience modifier had drifted upward over several policy periods, raising premium across every entity. No one owned claims management, return-to-work coordination, or the reserve review that drives the calculation. Assigning ownership and implementing a claims review process identified $88,000 in annualized premium value.
Projected Annualized Value: $88,000
Change orders approved verbally and documented afterward
Scope changes were agreed in the field and papered later, sometimes weeks later, and occasionally not at all. Work was performed against undocumented authority, which delayed billing and weakened the group's position whenever a client disputed the charge. Implementing a change order lifecycle with written authorization before work proceeds identified $86,000 in annualized value.
Projected Annualized Value: $86,000
When related companies bill each other with a journal entry, the consolidation is still right and every entity inside it is wrong. Owners make decisions at the entity level.
Is This Your Group?
If related entities bill each other by journal entry, no entity's numbers are real.
A Financial Discovery Assessment prices the entities against each other properly and shows what each one actually earns.
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