Construction Financial Managers

The Construction Financial Management Association (CFMA) is the only professional association providing education and resources for construction financial managers (CFMs). Recently, a group of CFMA members was asked about the financial challenges they face in today’s economic environment and how they are meeting these challenges.

By Nancy E. Lambertson, Managing Editor, CFMA Building Profits

What, specifically, are some of the financial challenges facing construction companies today?

Participants: D.K. Creager, Controller, Chambers Construction, Eugene, OR W.T. Laxton, CFO, Tyler 2 Construction, Inc., Charlotte, NC J.A. Milligan, Controller, Gaylor Group, Inc., Carmel, IN G.M. Parrott, Manager, Finance/Adm., RCR Building Corp., Nashville, TN K.C. Schlueter, Controller, Taylor Construction Group, Des Moines, IA V.L. Spotts, CFO, Zartman Construction, Inc., Northumberland, PA

GP: Risk management. Increasing premiums in workers’ compensation, bond premiums and liability. Also, more and more insurance companies are starting to put exclusions into their policies, limiting our coverage and exposing contractors to greater financial risk.

VS: Health insurance is also a big challenge—plus, the additional review and audit requirements.

WL: For us, it’s cash management—proactively managing our subcontractors and our clients to maximize cash flow.

DC: My greatest challenge is wearing so many different hats. My job as controller includes managing the office as well as the accounting department, being the resource person for HR and IT issues, working with our attorneys when legal matters arise, and preparing the financial statements. I’m also our loss prevention manager. I serve on the safety committee and work closely with field supervisors. Plus, I’m on the Board of Directors of our company. And, I don’t think I’m that different than other controllers in the construction industry.

JM: The way we do business today is so much more complex than 10 years ago. The requirements that owners have these days, the volume of paperwork, and the nuances in our industry have just gotten a lot more complex.

VS: Today, CEOs need their CFMs to be proactive—to not only report the numbers but also to have a positive effect on the financial results. The key role of CFMs is to be the company’s liaison to the banking and the bonding industries. In this role, you must not only be an advocate for your company, you must also be in tune to industry trends and the resources available to you.

Where do you find the resources to help you meet these challenges?

GP: Being a CFM is just so different than being a CPA. To actually be involved in helping to structure your construction company’s growth, to help it become stronger, and to help you take a leadership role in your company—you just don’t find these construction-related resources in other accounting organizations. CFMA is the only organization I’ve found that provides this information, the support, and everything that’s necessary for CFMs to succeed in all these areas.

WL: What CFMA does for me is help to find best practices. What are other people doing to deal with a particular issue? How do they balance maximizing cash while treating their subcontractors fairly and paying them in a timely manner for good work?

KS: CFMA helps keep our ear to the ground on issues so we can understand what’s happening in the industry—what’s coming down the road.

VS: More than that, it’s the networking that’s available. For example: My previous company had the opportunity to open a division in Canada. I contacted CFMA headquarters, and they directed me to a fellow member in Michigan who was already doing business in Canada. With one phone call, I was able to speak with a CFO who provided me with valuable insight about what I needed to do and what was required.

JM: Two years ago we were looking for an assistant controller. A CFMA member in my local chapter said he knew someone who was looking for a job and who had construction experience. We were able to fill that position without going to a headhunter, without any fees, and it was a good fit.

KS: The networking and person-to-person contact—being able to call and ask questions of a non-competitor contractor and get information—is tremendously helpful.

DC: Part of the reason I go to CFMA’s national conference is to talk to other CFMs that are not our competitors. It’s great to share ideas about what works, what doesn’t, and the things we’re all trying.

Get all this: Networking • Education • Leadership Skills • National & Regional Conferences • Industry Surveys & Benchmarking Tools • CFMA Building Profits • Professional Certification . . . & more from CFMA— The Source & Resource for Construction Financial Professionals The Construction Financial Management Association 29 Emmons Drive, Ste. F-50, Princeton, NJ 08540 www.cfma.org 609-452-8000 info@cfma.org

GP: The conference in Nashville was the first one I ever attended. It was like somebody turned a light on as far as the actual role of a financial manager in a construction company. Often, owners assume that if you’ve got some accounting background, you can do construction—it’s no big deal. But, it is—because construction accounting is different. With CFMA, I can call people all over the country and ask, “How did you handle this situation, or that situation? Have you ever had this happen to you?”

DC: You know, another challenge not mentioned earlier is staying competitive. To do that you need to understand your market. CFMA’s Annual Financial Survey provides excellent benchmarking data because it accurately reflects the general climate in the construction industry.

GP: You’ve got to have those benchmarking tools. You may think you’re doing great, but when you put your results up against the benchmarks, you see either we’re best in class or we’ve got a long way to go to even come close to being best in class. CFMA’s benchmarking tools are invaluable.

JM: We use the financial survey for communication to senior management, to give us an idea of what we should be expecting in terms of profitability and costs compared to the rest of the industry.

How else does CFMA help you and your company?

GP: Well, there’s the magazine, CFMA Building Profits. It’s the best as far as the “nuts and bolts” of how accounting issues are handled in the construction industry.

VS: It gets outside the financial area and into other areas of the business. I keep my back issues and pass them on to others in my firm.

JM: It’s also a great tool to train new staff.

WL: We use the IT Survey, too. We’re about to embark on a complete system review, so I pull that out to see what most contractors are using.

JM: We just did a software conversion and used the IT Survey extensively in the selection process.

KS: I circulate both surveys to our division presidents. They both provide historical insight for when we’re making decisions regarding products or financial situations.

GP: Again, there’s the networking, the knowledge, and the support members receive. Being a member of CFMA—and the leadership skills I’ve acquired as a result—has enabled me to do a lot more than just “crunch the numbers.”

VS: CFMA just makes it a lot easier to be effective because it pulls the resources we need together in one place. I know where to go when I need some expertise.

For more information about CFMA, visit the Member Center at www.cfma.org or call Susan Dunham, CFMA’s Director, Member Services, at 609-452-8000.

As one of the Midwest’s largest full-service mechanical contractors, Iowa-based Baker Group is best known for its expert approach to designing, installing and maintaining complete mechanical systems for a wide range of facilities including highly technical specialty-use buildings such as hospitals, educational facilities, corporate office buildings, data centers, industrial facilities and research laboratories.

Unfortunately, the company’s technology wasn’t keeping up with them. Explains Kathy Ladd, CFO, Baker Group, and founding member of the CFMA Iowa chapter: “For years, we’ve made do with disconnected systems that performed single operations such as accounting or project management. In today’s competitive environment, it’s not enough.”

Ladd and her team looked for one integrated software solution that could handle enterprise-wide activities including accounting, project management, document imaging, service work orders and dispatch.

With help from an independent consulting firm, Burger Consulting Group, Baker Group went through an extensive selection process, finally choosing Dexter + Chaney’s Forefront Construction Management Software.

Implemented in August 2003, Forefront has become the company’s primary information base. Ladd says the most notable differences have been the document imaging capabilities, putting timecards, invoices, purchase orders and packing slips at their fingertips—not in a job file.

This ready access has given project managers a hands-on approach to the division financial activities. Project managers can approve invoices electronically and manage job costs in virtually real time.

The new system has also helped improve customer service. With minimal information, Baker Group customer service representatives or project managers can review, retrieve and print an invoice. Similarly, the company’s service dispatcher is able to manage and research work orders, thus allowing him to quickly and easily pull up a mechanical system’s service history.