How the Construction Accounting Function Can Earn a Seat at the Table
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Accounting is more than just tracking numbers and compiling reports. In the construction industry, the folks that run accounting departments can help make smarter decisions in less time, to make as much money as possible or avoid projects that don’t make sense. But, this can only happen if accounting earns a seat at the big table. In this article, we’ll discuss why accounting should be part of every major decision and how to make sure that happens.
What Accounting Brings to the Table
With all of the materials and manpower it takes to run a project, money is the number one resource companies need to continue. Despite this fact, many companies don’t bring their CFO or controller into their most important decision-making sessions. These folks are just expected to work in the background, keep the books balanced, and count the beans.
But, they have so much more potential. The following are some of the biggest benefits of bringing the accounting department into the decision-making process.
Smarter Risk Management
Risk mitigation is an important aspect of construction planning. Worker safety, materials availability, and weather are often necessary risks. But financial risks aren’t always necessary, and the accounting department might be able to help a firm avoid them. These folks perform financial analyses regularly, allowing them to spot financial risks at a much higher viewpoint than the rest of the company.
Compliance
When it comes to compliance, CFOs, controllers, and accounting staff are often stuck cleaning up rather than consulting. Operations, project management, and design might have an idea or plan, but if they consult the construction accounting department before any decisions are made, costly mistakes and violations can be avoided.
Cash Flow Management
Cash is king in construction, and no one has a better grasp on cash flow than the construction accounting department. Controllers and construction accountants understand projections, the implications decisions have on cash flow, and strategies to increase it. These professionals can even offer insight when developing a contract to ensure that cash flow remains steady throughout the project.
How to Earn a Spot
As many good reasons as there may be, the construction industry is not one to simply change its ways. In most cases, accounting has never been part of the major decision-making processes, so it has to earn a spot at the table.
We asked experts at Forvis—one of the largest accounting firms in the US—what construction accountants, CFOs, and controllers can do to take a leadership role in their firms.
Look Forward, Not Just Behind
Traditionally, construction accountants, controllers, and accounting managers are focused on what has happened or is happening. They look at data and create reports with known factors. “True CFOs,” as Mike Trammell of Fortis refers to them, do more than simply compile data and reports.
“A construction controller is going to tell me what I should see in the rearview mirror. A good CFO is going to tell me what my headlights are going to see when we get there,” Mike says.
Essentially, this means using data, trends, and insights to identify opportunities, risks, and other possibilities on the horizon at each step of the process. Having the foresight to somewhat predict potential events with a reasonable degree of accuracy will help construction accounting solidify its value at construction executive tables.
Get Out of Debits and Credits and Help Develop Long-Term Strategies
While the primary function of accounting for construction is to manage debits and credits, Mike says the construction executive table needs more from a CFO. According to Mike, to earn their spot, it requires a person or team “that thinks about how to get outside of the accounting, finance, or treasury functions and start thinking about where the company is going from a long-term strategy standpoint.”
Many times, it’s actually the accounting department that is in a unique position to propose initiatives. These individuals work in a field that stretches beyond the confines of strictly construction, meaning they’re exposed to new technologies, practices, regulations, and even opportunities that folks rooted in project management and operations aren’t.
Identifying and proposing these new ideas are good ways to “springboard” their way to the table, as Mike puts it. It also helps these construction firms stand apart from their competitors, which might not be willing to have the conversations required to grow and expand.
Find That Special Person or Team
Part of clawing the way out of the cubicle and into the executive meetings requires the right person. Even with an armful of strategies and a future full of bright possibilities, folks who work in the financial world are conditioned to avoid risk. Finding team members with the insight required and openness to change is the secret sauce.
For CFOs, controllers, and accounting managers, this means taking the time to find those people on their teams. As Forvis’ Kathryn Schneider puts it, “Connect with your team, find what motivates them, find that person who wants to build a better mousetrap. Lean on them and trust them to do that.” This might involve creating a platform for engagement, a retreat, a round table, or another collaborative setting to find the people to move the accounting department from the back office to center stage.
Speak the Contractor Language
The rest of the executive board must take the accounting representative seriously. Otherwise, it doesn’t matter if they’re present, their opinions and insights might not land.
One of the most important aspects of being taken seriously at a round table with construction executives is to speak the language. According to Jamie Tancos of Forvis, “You have to speak their language—they don’t want to talk debits and credits. They want to talk operations and how that applies to the financial side.” Otherwise, a disconnect can exist between the financial team and the rest of the executives.
Gaining the experience to overcome this disconnect doesn’t have to be complicated.
One way to get more familiar with contractors and how they think and speak is to get out of the office. Grab a hard hat and some boots and head to the job site. Jamie says, “Get out of the box at your office, get off your computer, and sit in a plant tower. Watch a concrete paver. Watch the dump truck dump it out.” Experiencing how the cake is made gives accounting staff insight they might be missing and the ability to shift somewhere between speaking like an accountant and speaking like a contractor.
Be Innovative, But Take Your Time
There’s a difference between earning a seat at the table and barging in and taking one. It’s important to be innovative, but it’s also important to do it in pieces.
Jamie believes that taking it slow and partnering with the right people is key. “Find your champions—someone in operations will carry more clout. Finding the balance and allies who can cross the bridge together is crucial. You’re going to get the best buy-in when you’re not shoving it down someone’s throat,” she told us.
Increasing your role and the executive team’s awareness of your capabilities is a process. Yes, new solutions are incredible, but it’s important to implement these solutions as chapters.
Rather than changing the role of the accounting division all at once, let each chapter build on the one before it. Start by automating simple processes like schedules. Then, move to digital timekeeping. Build steam until you’re implementing game-changing software. By the end of the story, the CFO’s role may look entirely different—earning them that coveted spot at the construction executive table.
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