They’re Not Bean Counters
Ours is an extraordinary business. Think of the Egyptians who built the great pyramids of Giza with hand tools in the 26th century BC. Or the 20,000 artisans organized to fashion the remarkable Taj Mahal back in 1643. And the bold, adventuresome iron workers who erected the wrought-iron Eiffel Tower in 1887. Or the generations of Mohawk Indians who worked hundreds of feet above the ground walking on girders less than 12 inches wide to build the Empire State Building, the Chrysler Building, the George Washington Bridge, and the World Trade Center. This is our construction industry’s heritage. This is who we are.
Many of the contractors I know still fit the mold of tough, formidable risk takers who learned the business on the job not in the classroom. The construction professional who bragged to the Pharaoh in ancient Egypt that they could build the largest limestone and granite edifice in the world to mark the Pharaoh’s resting place were not too different from construction professional today. We are bold. We are risk takers. We like to think big. And we don’t always play it safe. (A major difference is the penalty for failing to complete a contract on-time and on-budget back in ancient Egypt was death.)
People who take the unbelievably difficult CPA Exams and those who study accounting and finance are generally different personalities than the construction people who are stamped from the 3000-year mold described above. The tough construction risk takers see accounting and bookkeeping as more of an indoor sport. Many consider their internal accountants “numbers people” who compile financial reports for banks and sureties. This complicates communication between contractors and their accountants because they don’t always converse the same way, and one personality type has less patience than the other. Contractors expect their “numbers people” to put a good spin on the ball and keep the bankers off their backs. If the banks and sureties didn’t insist on formal financial statements, many contractors wouldn’t even have a CFO position on their organization chart. This is a serious misjudgment, and here’s why.
Critical Functions of Construction Accountants
The jobs of the professional accountants and CFOs in construction go far beyond counting numbers for banks. The construction business is complicated and requires trained specialists in many different fields to successfully accomplish each task. Financial management is one of these fields. If you have relegated your accounting manager or CFO to compiling after the fact financial statements to appease your banker and surety, you are overlooking some critical functions that a financial specialist must play in your company’s ongoing business.
- Borrowing – The professional CFO thinks like a banker. He or she understands the leverage points your lender relies on to free up the capital you need to take on new projects. Playing golf with your banker no longer works so it’s time to utilize the special training of your accountants and CFO that enables them to speak the banker’s language. Give it a try. You won’t regret it.
- Leveraging Data – In the modern business environment the compilation and use of accurate data has become one of the key competitive elements. The day you admit you lack the time, training, personality, and patience to become a computer expert is the day you recognize your accountants and CFO as specialists in electronic data collection and leverage. That day “numbers people” will take on a whole new meaning for you.
- Risk Management – Trying to measure risk without data analytics is like betting on a football game without knowing the spread. You’d sneer at a bookie who invited you to place a blind bet, yet you’re willing to assume enormous risk in your business without knowing the odds. Setting the line when your company assumes risk is your accountants’ and CFO’s job and expertise. Let them do it. You can’t manage what you can’t measure.
- Cash Flow – Cash flow is the life blood of the contracting business. But cash doesn’t flow into and out of a construction company from one continuous source like a river. Rather, cash flows into a construction concern from multiple sources, at varying rates, and at different costs. Project owners, banks, sureties, and vendors are all sources of cash flow. Each flow has a cost and a varying flow rate. When an owner holds up payment, your bank might take up the slack, but it will cost you more. A surety who understands your business will provide bonding that frees the bank to extend an expanded working line of credit. A net thirty-day supplier may be turned into a net forty-five-day supplier when circumstances require. It takes a financial professional to turn on the right tap at the right time for the right cost. This is the job of a CFO.
Managers, engineers, and accountants all bring essential professional skills to the contractor’s table. You cannot afford to overlook any of them because you are in the second most risky business in the nation. This is deadly serious. The construction firm where the CFO is not an integral part of the top management team is at continuous and extreme risk.
Details on these issues in my latest book The Secretes To Construction Business Success, published by Routledge https://bit.ly/3G9ornf.
For a deeper look into financial management, read more here: FINANCIAL
For a broader view into, organizational change, read more here: ORGANIZATIONAL CHANGE
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