Role of CFO in the Construction Industry

Posted by CJCPA on January 27th, 2023

The construction industry is one of the most dynamic and fast-paced sectors in the world. With multiple large and small-scale businesses competing for limited resources entwined with a constantly changing work environment, construction companies often face numerous financial challenges. Some of these problems include misallocating costs, insufficient cash reserves, dealing with tax issues, and late payments. Therefore, to avoid such issues, land developers and contractors are now putting sophisticated financial management at the forefront of their business model.From ensuring quality materials and payment collection to verifying vendors, not to mention all the safety management and project planning that goes behind the scenes––running a construction business is a lot of work. Due to these multifaceted tasks, construction companies are left with no time to keep an eye on their finances. Therefore, they are always on the lookout for an experienced financial professional like a Chief Financial Officer (CFO) to manage and oversee all the financial aspects of their business. A CFO in the construction industry acts as a custodian of a company’s revenue and expenses and prepares financial projections in support of the organization’s overall business plan. Furthermore, they interpret complex financial statements and ensure compliance with all applicable laws and regulations. In this article, we have highlighted what a Chief Financial Officer does and why they should be involved with the day–to–day operations of a construction company. Risk Management Oftentimes, construction firms face a variety of risks, like safety, supplier performance issues, client default or bankruptcy, financiers, contract constraints, and interest rate volatility. However, a CFO establishes and maintains an adequate risk management process to identify, evaluate and manage these critical risks. Moreover, they assist in

• Reducing the impact of risks that are inevitable and nontransferable 
• Ensuring a complete execution of risk plans 
• Keeping a rigorous check if the corrective actions are taken as per the requirement or not 
• Identifying areas of improvement  
• Verifying appropriate controls 

Compliance Management  One of the most important aspects of managing fluid construction

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