Construction business owners understand that the construction industry comes with unique challenges which make it difficult to maintain a strong financial position. CFO services can help proactively manage those pain points to contribute to the stability and growth of construction companies.
Construction Industry Pain Points
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- Maintaining liquidity. In the construction industry, businesses often don’t get paid (at least in full) until the job is done. Due to this, it can be difficult to maintain enough cash to complete current and future jobs.
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- Understanding the profitability of each project. Because construction businesses have multiple projects going at once, and get payment for the jobs depending on project milestones, it can be difficult to fully understand the profitability of each project while it is in work and after completion.
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- Managing changing costs. Factors such as long project timelines, quickly-changing material and labor costs, the cyclical nature of the industry, and changing economic conditions contribute to the difficulty of managing changing costs and maintaining cash reserves.
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- Large upfront starting costs. It is challenging to finance the expensive machinery and equipment needed to start new projects.
How The Construction Industry Benefits from CFO Services
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- Planning for future operations. CFOs provide cash flow reporting, financial reporting, and milestone planning to help maintain liquidity and cash reserves, and create strategies for growth and scaling.
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- Gross profit analysis. CFOs facilitate understanding of job profitability by creating systems to correctly assign revenue and labor/material costs to the appropriate projects.
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- Weekly dashboard. Data updated on a weekly basis provides information regarding changing labor and job costs for different projects and how that impacts job profitability.
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- Financial reporting & asset management. Accuracy of the balance sheet and P&L statement allows construction businesses to more easily obtain loans and lines of credit to finance equipment and future projects.
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- Technology implementation and strong financial systems. Efficient accounting & finance processes (such as collections and accounts payable) contribute to a construction business’s profitability and ability to maintain cash and liquidity.
Sentinel Finance Group has experience working with various construction clients. We implement these financial systems and processes to help our clients navigate profitability and liquidity pain points, make informed decisions, and effectively grow their companies.
Sentinel Finance Group is a fractional CFO firm in Kansas City and provides outsourced CFO services and controller services to local businesses.
