Your CFO Solutions provides professional financial services—on an interim or part time basis—that allows construction contractors and trade contractors to increase profitability and manage cash flow through the ups and downs of economic cycles, including:

  • Improve profitability through an accurate and controlled bidding processes
  • Tracking changes over time for large projects and change order management
  • Extensive Job costing experience and expertise

Economic Conditions for Construction Companies and Trade Contractors

Current economic conditions in the construction and trades industry have been characterized as “high risk, low margin,” despite the fact that the industry, as a whole, has experienced a significant uptick in the wake of the 2008 recession. In the last few years, demand for construction and trade services has grown alongside a rebound in private and public sector construction markets.

Although spending on construction has increased, competition has also increased, therefore construction and trade companies need to pay particularly close attention to how they manage their financial matters to be competitive and encourage long-term growth.

One way in which construction and trade contractors have elected to improve their chances of continued growth and profitability involves hiring an experienced outsourced CFO. By outsourcing CFO duties rather than relying on an in-house CFO, construction and trade contractors can benefit from comprehensive corporate strategic planning guidance and streamline finances and operations at an affordable investment level.

CFO’s Role in Construction Companies

The role of finance in a construction company is critical and often has three distinct roles that need to be performed.

  1. Like all businesses the foundation for the finance department is the day to day bookkeeping. Depending on the size of the business this can be done by one person or a staff headed by a Controller. Their prime responsibility is to make sure that accurate books and job costs are maintained on a timely basis, from recording and collecting sales, to paying and recording payroll and paying and recording transactions with all the vendors.
  2. An independent CPA is needed to prepare income tax returns (and often times other tax reporting such as personal property returns or annual business licenses. In addition they serve a vital role in preparing financial statements more suitable for outside distribution (i.e. financial statements given to banks and bonding agents). Most often these are prepared on a “review” basis, but sometimes financial complexities will call for these statements to “audited”
  3. A CFO’s duties do involve considering day-to-day to financial matters, but also involves long-term planning and decision making on issues such as cash flow, risk, performance, budgeting, forecasting and expense control, asset management, finance and raising working capital and shareholder relations. In addition they are much more involved in working with the other departments, both to gain an understanding of their processes but also to infuse financial controls and knowledge to those departments.

A good example of the role of a CFO is to be a part of the monthly meeting in regards to updating job status. The operations department personnel are often correctly tasked with reviewing and updating the job budget as the job progresses. After all, no matter how good the original estimate is, once work begins, the Company has much better knowledge of the job and what it will entail, both good and bad, to complete. Every job has unknowns at the beginning – from losing a supervisor to illness that slows down the job, to hiring a first time subcontractor that meets or exceeds every deadline, allowing the job to finish on time (or early).

The CFO’s responsibility is to take the results of that meeting and:

  1. Update the financial statements monthly to reflect the current status of over/under billing or jobs with losses. This is imperative if good decisions are going to be made throughout the year. Having an incorrect view of actual net income because it is “too hard to update WIP” can have disastrous results, the most obvious being spending money you think you have earned when in fact you have overbilled and job costs will come in at the back end.
  2. Update the budget expectations for the company based on all the changes at the job level.
  3. Make sure the bank and / or bonding company know of any potential problems early on. Many times relations with these finance partners become strained because they are taken by surprise and do not have time to react. Maintaining honest and open relations with them generally allows for potential workouts to occur to the benefit of all parties and often allows the business to survive a bad job.

A CFO performs duties that involve advanced financial planning often beyond the bookkeeper/controller or even outside CPA’s expertise. The CFO will provide financial leadership and planning to address and engage in strategic planning which add value to an organization in the following ways:

  • Plan ahead for the significant economic ups and downs associated with the construction industry
  • Prepare accurate costing models for large projects to establish competitive prices and win bids
  • Track changes and change orders for large projects to manage risk, cash flow and profitability

Investing in a CFO

Investing in a CFO can realize significant gains in terms of improved cash flow and profitability. However not all businesses will need a full time CFO on staff. Your CFO Solutions provides the answer—interim or part time services with the added benefit of extensive experience within the industry, experience from other businesses that can be leveraged to your benefit.

Besides optimizing cash flow, a CFO can also optimize how managers at construction and trade firms use their time. In the current economic cycle owners of construction and trade firms will likely take on extra work administering their firm’s finances when practical considerations would dictate that these individuals’ time would be better spent in the field.

The most effective method of freeing up manager’s time would be to bring on a CFO to oversee financial matters, enabling managers to handle the operational side of the business. There are significant efficiencies to be gained by asking construction and trade professionals to focus on their areas of expertise rather than take on duties outside of their core skill set.

Your CFO Solutions’ experience with helping construction and trade contractors with outsourced CFO services can provide, professional services with every element of finance, accounting systems and industry specific requirements.

Interim or part time professional financial services are an affordable alternative to a full time CFO and help create a solid financial plan for managing the budget.

Contact Your CFO Solutions for more information on how an outsourced CFO can benefit your company.