In my work with construction companies, I find many have been overlooking financial details that, while they seem minor today, can snowball into bigger problems if they’re not addressed.

Take, for instance, a few problem areas I see most commonly when I start an engagement with a construction company. No matter how small they might seem, letting them slide will show up down the line.

Not collecting on accounts receivable fast enough

Being slow to collect the payments you’re owed is hurting your business. I see too many construction firms without a rigorous accounts receivable process that take on or increase lines of credit to cover their costs, ultimately increasing the interest costs unnecessarily.

If this sounds familiar, you’re not alone. In one industry study, 52% of contractors said they used lines of credit to cover their payments when they were short on funds in 2024 — up from 30% in 2023. 

This is a cash flow issue — one that can affect your company’s future growth and reputation if you don’t manage it carefully. Keeping a healthy cash flow with timely accounts receivable collection requires looking forward at the big picture of your finances, not backward at last quarter’s numbers. Without a CFO on board, this is where many construction firms get stuck.

Not understanding the Work-In-Progress report thoroughly

The WIP report is a crucial part of understanding your profitability, yet many contractors and subcontractors don’t give it enough attention. The WIP report helps you understand the progress of a project relative to the amount you’ve billed and often reveals nuanced financial details you might overlook on your own. 

If you don’t take the WIP report into account in your forecasts, you run the risk of over- or under-spending on labor and materials you need to get the job across the finish line, further endangering your cash flow — and the health of your business. A CFO can help you use this report to your advantage as a part of your larger financial strategy.

Not updating labor and equipment costing often enough

Too many construction business owners don’t know exactly what their labor and equipment costs are. This data should be updated at least once a year and more often if there are dramatic shifts, such as when the pandemic made it more difficult and expensive to get equipment parts. 

I’ve seen some companies make annual updates with arbitrary percentages while their actual costs have risen much more, causing them to miss out on profitability. Particularly with labor, owners often don’t factor in every component of the real cost per hour for each employee. 

Equipment costs can be just as complex — from fuel burn to depreciation per hour, there are a lot of details to build into the total cost. Without understanding how to cost each job per hour to not only make money but also get new equipment in the future, you could severely underbid new projects. 

Experienced financial leadership makes a difference

With everything you’re juggling as a construction business owner, creating a long-range financial strategy and honing the finer points of your finances might feel like too much to take on. But for the health and success of your business, you have to tackle these tasks.

That’s the advantage of a Fractional CFO, who will have the deep, diverse experience that brings new perspectives to your business. And when you work with a firm like Crown CFO, your Fractional CFO can tap into the rest of our experienced team at any time to make sure every base is covered. 

Need some help turning the little financial details into big wins for your construction company here in Kansas City? Contact Kerry George at [email protected] to bring a trusted, expert Fractional CFO to your business.