A troubling balance sheet needed a closer look.

When the leadership team of a multi-entity specialty construction company reviewed its balance sheet, one number immediately raised concerns: a negative cash balance. The financial statements appeared to suggest a serious cash flow problem, leaving leadership questioning the company’s financial position.

TGG Accounting Consulting CFO Charles Cecil took a closer look and discovered that the negative balance wasn’t what it appeared to be. A fully secured intercompany line-of-credit draw had been netted against cash rather than reported separately, creating a misleading picture of the company’s finances.

A Negative Cash Balance Raised Concerns

For construction companies, understanding available cash is essential to managing projects, meeting financial obligations, and planning for growth. A negative cash balance can raise immediate questions about a company’s liquidity, particularly when multiple business entities share financial resources.

In this case, the company’s accounting presentation made its financial position appear more concerning than the underlying transactions indicated.

Rather than treating the negative balance as evidence of a cash shortage, Charles examined how the company’s intercompany financing arrangements were reflected in its financial statements.

Finding the Real Problem

Charles identified that the company’s line-of-credit draw was being offset directly against cash instead of appearing as a separate liability.

The distinction was important. By combining the two balances, the financial statements made it difficult for leadership to distinguish between the company’s cash position and its outstanding borrowing.

TGG recommended reclassifying the line-of-credit draw into current liabilities, allowing cash and the related debt to be presented separately.

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A Clearer Picture of the Company’s Finances

TGG’s review gave the construction company’s leadership team an explanation for the negative cash balance and a clear recommendation for correcting its presentation.

Accurate balance sheet reporting is particularly important for construction companies that rely on financing, manage multiple entities, or need to demonstrate financial stability to lenders and other stakeholders.

By identifying the accounting issue, TGG helped leadership better understand what its financial statements were showing and how the presentation could be improved.

The case demonstrates how TGG’s outsourced CFO services go beyond routine accounting to help construction business owners interpret their financial information and identify issues that might otherwise lead to costly misunderstandings.