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The economic landscape in which construction businesses work today is more complex and dynamic than ever, and with that, the role of the CFO has become all the more strategic.
The world of construction finance is unique, to say the least. Revenue recognition in construction — prolonged sometimes across years-long projects — is like no other sector, complicating budgets and forecasting. Estimates come in from hundreds of different suppliers and subcontractors for each of dozens of projects.
Changes come fast and frequently. Seemingly constant market fluctuations result in delays, overruns, disputes, or worse. New and escalating regulations, especially around sustainability and green building, only add further to complexity and cost.
Labor and supply chain struggles have compounded these economic challenges and persist into 2023. Salaries have climbed to combat resource shortages, while many contractors suffer operational waste, profit loss, and high inflation from material and equipment scarcities.
With the evolution of construction finance as a function, so too has the role of technology and the CFO.
Digital transformation for the win
In preparing for what the future holds, construction can learn a lot from the transformation that has already happened in the manufacturing industry. Entering what has been widely dubbed the Fourth Industrial Revolution (or Industry 4.0), manufacturers have been increasing efficiency and performance through their digital transformation efforts for years.
Savvy construction businesses have too, by taking advantage of technology advancements such as building information modeling (BIM), drones, automation, and cloud-based project management tools. Even small and mid-sized players are seeing how technology is helping them find new ways to work, and changing the way projects are planned, executed, and monitored. But experts suggest it’s been done in a piecemeal and siloed way.1 That must change.
The evolution of the CFO
In today’s digital age, CFOs are tasked with a whole lot more.
A survey by McKinsey says in addition to their regular functions, CFOs are responsible for “a raft of new duties.”2 A few of those duties: overseeing corporate strategy in technology investment, building supply chain resilience, and even company culture.3
While being asked to delve deep into non-traditional areas, the CFO must, of course, keep an ever-watchful eye on their usual responsibilities like risk management.
Construction company CFOs today are not only financial leaders but are called on to participate in strategic decision-making, provide financial insights, and contribute to overall business strategy.
It’s a lot, and EY Global says many CFOs believe their current finance function isn’t equipped to meet the demands the future will place on it.4
Adapting to change
As the economic landscape and their roles evolve, CFOs must adapt their strategies and consider more than the traditional financial metrics.
Projects and the business can’t be viewed through silos as it has in the past. As construction businesses try to improve efficiency and eke out every profit, some CFOs are turning to new reporting models like xP&A (extended planning & analysis) or connected planning to consider data from across the business.
This is overcoming the traditional absence of departmental visibility found in traditional FP&A, giving a broader perspective and understanding of operations. With a more collaborative approach and transparency across the business, contractors can increase agility and react faster to change.
Data and the new CFO
It all comes down to data, collaboration, and new ways of working.
Contractors have a wealth of data collected across the lifecycle of projects, in disparate systems and by many departments. That data is how CFOs make better-informed decisions to optimize project performance, improve cost control and enhance risk management.
Of course, that data can’t be trapped in traditional silos; it must be looked at holistically. To be more strategic, data must be shared between teams, and CFOs themselves must collaborate and communicate with other stakeholders such as project managers.
For many, this is going to require that CFOs and finance teams develop or acquire new skill sets and competencies. As construction CFOs take on more for the business, they need to mix technological literacy and strategic thinking with their traditionally strong financial acumen and risk management insights.
Fortunately, they aren’t alone.
Construction CFOs are well-equipped to meet the changes in their role and happening in the industry, just as many of them adapted well to the unique nuances of the industry. Armed with the right technology and a platform to act as a single source of truth, CFOs can break down the departmental silos that act as obstacles to getting the most out of their data.
Briq helps with this, providing CFOs and other construction leaders with access to cross-departmental financial data for the deeper insights, greater accuracy, and big-picture visibility needed to make better, faster decisions. Talk to our team to learn more.
1 "Embracing technology critical for construction industry’s survival", accessed June 2023 | constructconnect.com
2 "The CFO’s role: Prioritize, transform, repeat", accessed June 2023| McKinsey
3 "The CFO’s Gambit: A Multidimensional Strategic Role", accessed June 2023 | forbes.com
4 "DNA of the CFO: Is the future of finance new technology or new people?", accessed June 2023 | EY - Global
