CFO Cashflow Assistance

Need help organizing the accounting data and reporting processes used in your construction business? You are not alone. Many managers and general contractors struggle with building a workable chart of accounts. Yet, the chart of accounts is a foundational tool from which all your financial activities flow. Getting this right, putting all the expenses and revenue into the proper buckets consistently, is a core competency every organization must develop.

If you’re wondering if an outsourced CFO might be the solution, continue reading, or find out how a Fractional CFO can help you by taking advantage of our free Financial Health Assessment. This article explains how partnering with an out-of-house partner can get your ledgers in line with Generally Accepted Accounting Policies and improve cash flow along the way.

What to expect in this article

When you reach the end of this post, you should know:

  • What a chart of accounts is and why it is important for your construction company
  • Why outsourcing can help you take control of your business’ financial health
  • How outsourcing can improve communications and technology utilization
  • Five ways a fractional CFO can increase cash flow

What is a chart of accounts and why is it important for your construction company?

A chart of accounts is an accounting tool that lets you organize all financial transactions in a way that you truly understand how your projects are progressing. The reports generated from the chart of accounts help you monitor performance metrics. It helps you determine if your project is on budget, if expenses align with expectations and whether or not your cash flow supports growth or is holding you back. It is an essential guide for investing, financing and decision-making.

How hiring a fractional CFO can help you take control of your business’ financial health, from project management to improving cash flow

An experienced fractional CFO helps construction firms maximize cash by properly categorizing each transaction into relevant buckets. He (or she) develops a coding system that ensures assets, expenses, revenue, equity and liabilities are allocated to the proper project or organizational category. This means you track every penny spent and every penny collected while operating your business. With a chart of accounts structured around your business, you can quickly determine which projects are making a profit and which ones are in the red.

How a fractional CFO helps you improve cash flow

On-demand accounting professionals do more than simply code your transactions and organize your accounting data. Cash provides an excellent example.

Managing the Supply Chain

Ensuring the company has positive cash flow- that simply means you’re taking in more than you’re spending – is vital for a construction business to grow and prosper. A fractional CFO examines internal and external factors in the value chain that may be keeping a company in a negative cash flow condition. To improve cash flow, the professional partner may review supply chain parties that are over-charging and negotiate better terms, or advise their client how to effectively negotiate discounts, early payment credits and bulk order pricing to lower material and supply costs.

Planning for Smooth Transition Throughout the Project

Another way that an on-demand CFO helps subcontractors, contractors and project account managers is creating a workable plan to ensure cash is available when needed. Typically, every project follows the same cash flow management trajectory. First, there is a substantial spend to get a project started. Then, during the build-out, the majority of a project’s expenses arise here. Finally, closeout expenses come due. Most of the money is spent on the second phase. Negative cash flow problems show up in the final stage – budgets are busted, human assets jump ship and finish materials get stuck in transport. Expert planning can eliminate the need for extra financing to close the deal.

Supporting Prompt Process Change & Project Modifications

Every contractor knows the frustration that comes when, after hours of consultation and review, the client makes a last-minute change – adding another bathroom or changing the countertop material are two common changes requested in mid-flight. A fractional CFO leverages the power of advanced technology designed to implement those changes, and make appropriate billing faster.

Reviewing Internal Workflow & Systems

Outdated or generic technology and poor communication are often the drivers of negative cash flow. With a construction industry expert by your side, you’ll gain valuable insights into the technology you need to expedite billing and collections, as well as enhance communication with internal and external partners. A review of your workflow patterns may also reveal simple changes you can make to reduce man hours spent collecting, organizing and sharing information.

Leveraging the Power of Tracking

It’s easy to lose track of the day-to-day expenses when you’re working from your truck or a mobile office. Developing a system that tracks supplies, payments, labor costs and everything that happens on your project ensures there are no surprises. Many contract CFOs use performance software and methods to keep your project cash flow positive. Some call this method “earned value management.”

In conclusion:

Partnering with a professional, on-demand fractional CFO team, such as Daaxit, helps improve cash flow with:

  • Improved communication and workflow patterns
  • Tracking solutions that deliver valuable insights
  • Project planning advice and support
  • Change processing for better outcomes
  • Supply chain management strategies

Contact us to learn more about adding a fractional CFO to your team today, or take advantage of our Free Financial Health Assessment