Financial Management

financial managementFinances make or break a construction firm. Superior financial management is a keystone to continued success for each organization. Conversely, the loss of money erodes a company’s ability to perform.

Every owner starts out with limited funds and a few projects. He or she learns very quickly the importance of good financial management. As the firm grows, others take over the daily responsibility of building projects and managing cash flow. Do they have the same deep understanding of its importance?

Senior Managers must have a laser-like focus on financial matters. It affects every aspects of a business. Not knowing enough can lead to a slow but steady downward spiral. All activities expand or curtail due to money. Adopting technology, hiring, office expansion and bidder list qualification just to name a few. Well-managed firms keep clients, attract talent and build value for its owners.

Day to day, who makes money for the construction firm?
There is a triad of people who influence it greatly.
1) Estimating Manager 2) Field Supervisor 3) Project Manager

Each of these people has profit and loss responsibility. However, Financial Management is more than that. It is all aspects of sources and uses of funds. Some activates require cash and others do not. Knowing the difference improves the performance of the firm.

For every construction executive, here are some questions that lead to improved results:

What is the cash-to-cash conversion cycle (days) of your firm?
What is the true Return on Investment of a project?
What are the key control measures you should be reviewing at least, monthly?
What is the cost of rework and / or loss?
Which construction factor is the true profit opportunity for most firms?
Do you have a superior overhead recovery formula?
Do you a “smart” profit markup system?

Working smart with money leads to a competitive edge. Understanding risk better is part of any financial management improvement. The construction industry is one of the top five riskiest industries in the United States based on bankruptcy statistics.

Building the value of a firm indicates superior management. Client, contractors, suppliers and financial partners judge increasing financial worth as positive. Neglecting this area can only lead to diminishing opportunities. It is that important.

We are a resource for firms in the construction business. Please contact us if you have an interest in improving the way you build your projects and manage your finances. After our initial conversation, we will tell you how we can help.