From understanding compensation challenges to implementing robust business intelligence, construction companies must navigate a complex landscape to ensure success.
This issue of CFMA Building Profits explores key aspects of managing a construction business, including financial health, compensation challenges, and the critical interplay between work and money. And at the center of all of those is the construction financial professional!
Attracting & Retaining Talent
The construction industry faces unique compensation challenges in today’s labor market. Issues such as rising labor costs, skilled labor shortages, and increased competition make it increasingly difficult to attract and retain talent.
Flexible compensation structures, comprehensive benefits packages, and an investment in employee development can help companies address these challenges. By staying informed about industry trends and adjusting compensation strategies accordingly, companies can maintain a competitive edge.
Measuring Key Metrics
Monitoring key financial metrics is essential for assessing a construction company’s health. Keeping a close eye on these vital signs can help a company maintain financial health and operational efficiency.
Key metrics such as cash flow, profit margins, debt-to-equity ratio, and backlog provide insights into profitability, liquidity, and long-term viability.
Additionally, implementing project management software and financial reporting tools allow for real-time monitoring, enabling proactive interventions.
Investing in heavy equipment is a significant decision for construction executives, requiring data to make informed decisions. The Heavy Equipment Comparator (HEC), which was developed by CFMA and the Association of Equipment Management Professionals (AEMP) offers a comprehensive analysis comparing data across various equipment types.
CFMA’s data-driven solutions, including the Construction Financial Benchmarker and HEC, can help you better understand your company’s vital signs.
Business Intelligence
Whether becoming more competitive in recruiting, managing your company’s performance, or protecting it from downside risk, an organization’s ability to leverage business intelligence (BI) to monitor internal and external risks is critical.
Building a robust BI infrastructure requires investing in advanced analytics tools, training employees, and fostering a data-driven culture. With actionable insights, construction companies can optimize operations, reduce costs, and improve project outcomes.
Work & Money
In construction, the relationship between work and money is intricate and cyclical. Adequate funding is needed to start projects, while successful project completion generates revenue for future work.
Managing this interplay involves careful financial planning, maintaining healthy cash reserves, and securing reliable funding sources. Contractors must ensure they have the financial resources to sustain operations as well as the financial professionals to manage results. Understanding this interconnectedness is key to long-term success in the construction industry.
We invite you to identify key vital signs within your company and use the insights and strategies presented in this issue to strengthen your approaches and decision-making!
Copyright © 2024 by the Construction Financial Management Association (CFMA). All rights reserved. This article first appeared in May/June 2024 CFMA Building Profits magazine.