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The construction industry operates differently from retail, healthcare, and tech. There are so many unique intricacies to this business, like project timelines that are long, costs that shift daily, and the labor and material needs are complex. That’s why the role of the Chief Financial Officer (CFO) in a construction company requires more than just financial expertise. A construction CFO needs to have a deep understanding of the industry and be prepared to adapt to constant change.
What Makes the Construction CFO Different from Other CFOs
CFO meaning in construction is vastly different from how these executives are defined in other industries. They’re not just number crunchers. Rather, they are strategic leaders who help the company plan for risk, control costs, and stay competitive in a volatile industry. Unlike financial executives in more stable sectors, construction CFOs must manage a business where revenue is often unpredictable, project delays are common, and margins are tight.
They work closely with project managers, estimators, vendors, and field teams to ensure the business remains financially healthy while taking on new work. Their job is to help the company grow without overextending or taking on more risk than it can handle.
Key Responsibilities of a Construction CFO
Hiring the right candidate takes much more than simply responding to construction CFO job listings. Be prepared by following these tips to onboard the ideal professional.
Managing Project-Based Finances
Construction businesses run on projects, not products. Each job has its own budget, timeline, and set of challenges. A CFO of a construction company monitors the financial performance of every job, ensuring the company earns what it expects and that costs remain under control.
They also ensure job costing is accurate and consistent. Poor job costing can result in underbidding, which erodes profits, or overbidding, which can lead to losing work to competitors.
Cash Flow Planning and Forecasting
Cash flow in construction is complex. Payments come in chunks, often delayed or tied to progress milestones. Subcontractors, materials, and equipment must be paid before the project is finished, which can put a serious strain on cash reserves.
A strong CFO construction professional should forecast cash needs months in advance and build contingency plans. They also manage relationships with lenders and bonding agencies to ensure the company has access to credit when needed.
Budgeting and Financial Planning
Construction CFOs build company-wide budgets that reflect real-time costs, backlog, and pipeline. They help leadership plan for growth, scale operations, and invest in tools or people as needed. Budgets in construction are not static; they must adapt to changing market conditions and project updates.
This role also involves scenario planning. What happens if a major project falls through? What if material costs rise sharply? The CFO creates financial models to help leadership make smart, informed decisions.
Risk Management and Compliance
Construction projects involve numerous risks, including weather delays, safety issues, lawsuits, and more. A construction company CFO assesses these risks financially and ensures the company is adequately covered through insurance, proper contracts, and thorough legal review. They also handle financial compliance and make sure taxes, audits, and financial reporting are up to date.
Working with Project Teams and Job Sites
CFOs in the construction industry are not confined to the office. They often work with operations teams to understand how job sites are run. This insight helps them identify inefficiencies, improve project margins, and forecast more accurately.
The role of a CFO in a construction company is also involved with the preconstruction phase. To explain, they review job bids, assess potential returns, and help determine whether a job aligns with the company’s goals. This partnership between finance and field teams builds a stronger, more agile organization.
Financial Tools and Technology in Construction
Chief financial officers in the construction industry rely heavily on software and tools that track project costs, labor, and materials in real-time. Some of the most common tools used include:
- Construction-specific ERPs for budgeting and job costing.
- Project management systems for tracking progress and productivity.
- Forecasting models for cash flow and backlog.
- Payroll systems for job site workers and subcontractors.
Utilizing these tools effectively can enhance reporting, minimize errors, and provide leadership with a clear understanding of the company’s financial health.
Why Growing Construction Firms Need a CFO Early
Many small construction companies delay hiring a CFO until they reach a certain level of growth. That could be a big mistake. Waiting too long can lead to missed opportunities or financial trouble. A chief financial executive can help establish robust financial systems early, enabling the business to scale in a healthy and sustainable manner.
Outsourcing a fractional CFO for construction firms is also an option. This enables smaller firms to secure strategic financial support without incurring the expense of a full-time executive. Fractional CFOs can offer forecasting, job costing support, budgeting help, and more.
Frequently Asked Questions About the Role of the Construction CFO
How do construction CFOs handle seasonality and downtime?
Many construction companies experience slow periods during winter or between large projects. A construction company’s CFO helps plan for these gaps by forecasting cash needs, managing reserves, and adjusting spending accordingly. This ensures the company stays financially stable even when work temporarily slows down.
What should a CFO evaluate before taking on a new construction project?
Before a project begins, the CFO reviews bid accuracy, profit potential, contract terms, and payment timelines to ensure they align with the project’s objectives. They also assess risks such as material volatility or unreliable suppliers. This upfront analysis helps protect the company from financial surprises down the line.
How does a construction CFO support bonding and lending relationships?
Chief financial officers make sure financial reports meet the standards required by lenders and surety companies. They maintain clean books, prepare documentation for bonding applications, and keep key ratios healthy, making it easier for the business to qualify for financing or surety bonds.
What role does a CFO play in preconstruction planning?
During preconstruction, the CFO provides financial input on whether to pursue a project, helps set pricing strategies, and ensures estimates align with overhead and capacity. Their insight helps avoid underbidding and ensures the project fits into the broader financial plan.
How can a construction CFO help improve profit margins?
When your construction company needs to identify cost drivers that erode margins, such as inconsistent estimating, delays, or excessive labor spending, the right CFO can manage this expertly. They collaborate with operations to identify and correct inefficiencies, and with leadership to establish pricing that accurately reflects true costs and profit goals.
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Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
