When it comes to construction, the one thing that sets this industry apart from most other industries is that most companies seem to be small to medium sized businesses lacking the budget larger corporations often have. Due to the nature of what they do, and all the big machinery involved in their day-to-day work, it is unlikely that you will see very many construction companies operating far afield from their home office and equipment yard. Financially, it just wouldn’t be feasible in many cases.
Because of this, most construction companies aren’t equipped to handle strategic financial planning like corporations that can afford to have a degreed CFO on salary. It makes strategic financial planning no less important, just more difficult without a qualified Chief Financial Officer on payroll. There are solutions available to help you plan strategically job by job or within the company financial structure as a whole. Let’s look a little closer at the importance of strategic financial planning and a few solutions available.
Going from Reactive to Proactive Financial Structuring
One of the most important aspects of strategic financial planning is in having the ability to set clear-cut goals and budgets so that a company’s profitability doesn’t suffer. What tends to happen more often than not in the construction industry is that we’ve come to rely a bit too heavily on project management which deals with contracts one job at a time. With no degreed CFO within the corporate structure, financial planning begins and ends with each job being contracted.
It is possible to solve this issue by outsourcing the duties of a CFO to a company like Newlyfekc.com that has a team of well-qualified professional Chief Financial Officers working with their own accountants and bookkeepers who aid in analyzing data. This helps them to set proactive company-wide financial strategies based on data analysis, not on resolving one financial crisis at a time.
Does This Sound Like What You Are Up Against?
To make it a bit clearer, it’s all about the way in which the industry operates. For example, each job they end up being contracted to do is the result of being awarded the winning bid. Typically, foremen and company owners put together figures based on previous jobs, many of which went off without a serious hitch. There is no room left for machinery that breaks down and is taken offline for repairs. These can result in workers being left idle but on the clock.
You can probably bet that the client for which you are working has gone over their budget with a fine-tooth comb when allocating what they can, and are willing, to pay. They may even be a national corporation with branches being built in several states. It’s almost guaranteed that they will be working with a team of corporate financial advisors and a CFO at their home office. They like your figures because you’ve set the bar way too low. You may not have worked downtime into your bid!
Your Key Takeaway
In other words, while it is not bad to bid on jobs within a project management strategy, there are other allowances that need to be factored in. Without an experienced and well-qualified financial planning team, you will almost always be dealing with workarounds not planned for, and extremely inefficient ways of operating.
How many jobs have you made significantly less profit than anticipated because of financial strategies that didn’t factor in contingencies like downtime and the rising cost of materials and equipment? This wouldn’t be the case with a strong financial team leading the way. Your key takeaway is to rely more on company-wide financial strategies and less on getting through one job at a time.