Small Contractors Discuss Top Challenges
Representing contractors in the $1-25 million revenue category, more than 70 small construction financial professionals met to discuss their challenges and opportunities. The session focused on best practices and challenges in two areas: Dashboard Job/Financial Reporting and Creating the Right Risk Management Program For Your Company. Highlights from a survey sent to all CFMA small contractor general members were presented as part of an opening presentation by Robert Biehl, CCIFP, Director of Construction Industry Services at GBQ Partners LLC in Columbus, OH.
Bob presented his perspective from working with multiple construction clients. He indicated that owners are typically focused on estimating and project management, which produces a silo mentality. The best run construction companies integrate the estimating, project management, and accounting processes. He further emphasized challenges, including segregation of duties and educating the PM on the importance of financial reporting. He explained that allocation of indirect costs, understanding cash flow needs, and WIP analysis are keys to company success. He stated that the use of dashboards and summary financial information analysis are ways to obtain buy-in and understanding from nonfinancial staff.
Tracey Fenolio, CPA, CCIFP, Controller at Riis Borg Construction in Chicago, IL, facilitated the roundtable discussions on the two hot topic areas. After discussing the topics in small groups, the top best practice takeaways from the discussions were shared with the entire group.
Dashboard Job/Financial Reporting Best Practices
- Less Is More – While it may seem obvious, eliminating reports that don’t generate valuable information allows key data to be provided in a more concise and timely fashion. Participants also find that using reports that highlight changes in information from prior to current are more valuable to the user.
- Leverage Technology – The ultimate goal of streamlining information is to get to a dashboard of real-time data. This is becoming easier to achieve with the increasing ability to collect current data from mobile devices. Successful companies are using their information to make forward-looking decisions.
- Cash Is King – Most attendees still struggle with putting together a workable cash flow report. Those that do it well stressed keeping it simple, working first from a longer term outlook at a more summarized level, and then dialing in the near term.
- Watch Your Jobs – Although the frequency and detail of job forecasting varies greatly, the group acknowledges the great importance of having a team that is committed to minding the shop and avoiding surprises when it comes to job performance and profitability.
- Help Others Help You – By providing high-level training for your PMs on how their job forecasts impact revenue recognition, you will enable them to make better decisions in developing their forecasts.
Right Size/Right Fit – Creating the Right Risk Management Program for Your Company
- Assign Responsibility – In companies of our size, risk management responsibilities can fall under several team members. It is important to identify who is responsible for what elements and for there to be accountability measures in place.
- Know Thy Contract – Whether relying on your attorney for this or developing a solid in-house contract review process, this is a critical area that successful companies do well. Attendees are using boiler plate contracts that incorporate their standard review when they are generating contracts and extensive review checklists when reviewing a client contract prepared by a client. One participant stressed that by incorporating a preliminary contract review at the bid stage, they have been able to walk away from unfavorable opportunities before wasting the expense of bidding the job.
- Divide and Conquer – Many participants are taking a multi-tiered approach to risk management by using short form contracts and lower requirement prequalification programs for contracts that fall under a lower risk threshold. Efficiencies are also being found through the use of master/blanket agreements for repeat subcontractors that have already been prequalified.
- A Little Help, Please – The group identified the relationship with your insurance broker as a key opportunity in developing a solid risk management processes. Agencies are providing support services that are either part of their package or an add-on service in such areas as contractual insurance review, certificate of insurance management, safety training/support, and jobsite visits.
- Commit to Safety – Having standard procedures for job hazard analysis enables a thorough and consistent evaluation of jobsite risk up front. This creates the opportunity to appropriately manage those risks throughout the life of the project.
CFMA’s Connection Café is a great way to continue the roundtable discussion. If you are not already signed up, you should give it a try. The topics are relevant, and you can post issues or questions you might have to get opinions and advices with other CFMA members. It’s a great place to post best practices, ideas, and lessons learned as well as network with your peers from across the nation.
If you missed this year’s roundtable discussion, mark your calendar for next year. CFMA’s 2015 Annual Conference will be in Chicago on June 27-July 1 – it’s a discussion you don’t want to miss!