Accounting & Fractional CFO for Metal Fabrication Shops

What makes fabrication accounting different

Steel prices move faster than quotes. A bid priced on last month's plate or structural steel can lose its margin before the material arrives. We track material cost by job against the quote and help you build escalation clauses and quote validity periods into your terms.

Labor rates are usually understated. Many shops price from a wage-plus-a-bit rate. A true fully loaded labor rate includes payroll taxes, benefits, paid time off, non-billable hours, supervision, consumables, equipment and overhead. When it's built correctly, the shop finally sees which jobs earn money.

Custom work means job costing, not standard costing. Every job is a little different. Job costing with labor captured by job and operation — cutting, fitting, welding, finishing — is essential, and so is comparing estimated to actual hours after each job.

Code work and certifications carry real cost. Certified welding, inspection, documentation and testing for code or structural work add hours that must be priced, not absorbed.

Progress billing and retainage. Larger projects bill on milestones and hold back retainage. Revenue, costs and cash rarely line up, so you need percentage-of-completion or milestone tracking, WIP schedules, and a forecast that knows when retainage will actually be paid.

Drops, remnants and scrap. Offcuts have value, and scrap metal sales are real income. Both need to be tracked so material cost per job isn't overstated and scrap revenue isn't lost.

Key numbers we track for fabricators

Metric	Why it matters
Estimated vs. actual hours by job and operation	Shows where estimates and processes need fixing
Fully loaded labor rate	The basis for every profitable quote
Material cost vs. quote by job	Flags steel price risk before it erodes margin
Gross margin by job, customer and job type	Tells you which work to pursue
Backlog and booked margin	Shows future revenue and profit, not just sales
Over/under billings on open jobs	Keeps progress billing aligned with work performed
13-week cash forecast	Plans payroll, steel purchases and retainage timing

More on each service: bookkeeping for manufacturers, outsourced controller, pricing and margin analysis, cash flow management and fractional CFO for manufacturers.

A related case study

A code-certified fabrication shop was bidding on a labor rate that didn't cover its true costs. We rebuilt the rate, costed jobs against quotes, and put a cash forecast in place — and Harrow Fabrication quoted with confidence and expanded into new markets. Read the case study or the in-depth version.

Frequently Asked Questions

How do I calculate a true labor rate for a fabrication shop?

Start with total annual payroll for production staff, add payroll taxes, benefits, paid time off and supervision, then add shop overhead and consumables. Divide by the hours your team actually spends on billable jobs — not total paid hours. The result is usually well above the wage rate most shops quote from.

How should fabricators handle rising steel prices in quotes?

Price material at current replacement cost, limit quote validity periods, and use material escalation clauses on longer projects. Track material cost by job against the quote so you can see when price movements are eroding margin and adjust quickly.

What is over/under billing and why does it matter?

On progress-billed jobs, over billing means you've invoiced more than the work completed; under billing means you've done work you haven't invoiced. Tracking both on a WIP schedule keeps revenue accurate, shows lenders and sureties a reliable picture, and highlights jobs that need billing attention.

How do we account for scrap and remnants?

Track usable remnants as inventory at a reasonable value and record scrap metal sales as income or a reduction of material cost, consistently. Ignoring both overstates job material costs and loses real money.

Can you help with bonding and bank requirements?

Yes. We produce the timely, accurate financial statements, WIP schedules and forecasts that sureties and lenders ask for, and we help you prepare for those conversations.