The best financial practices for construction contractors

Construction finance is complicated. Virtually every company is on the same page about this fact. From managing cash flow to labor forecasting, there are many different variables to keep track of. It can be hard for even the most experienced professionals to identify priorities, get accurate reports and find the best strategic positions for their business to take. 

Fortunately, Briq and Marcum LLP are here to help. We recently hosted a webinar with Chuck Schwartz and Dan Mauriello from Marcum LLP. They joined Briq CEO and Co-founder Bassem Hamdy in a panel discussion on better budgeting, tax planning, and forecasting in construction. We’ve put together a list of some of the highlights from that discussion. Let’s go over some of the best practices contractors can use to improve their business.

Your WIP is your secret weapon 

One thing that each of the panelists noted was how often companies overlook the WIP. Most contractors aren’t making the most out of this important financial tool. In the worst case, some companies may not even regularly use WIPs. This is a serious oversight that leaves behind one of the best strategic tools for your business on the table.

Your WIP could be a history lesson…or a forward-thinking, business planning tool to maximize cash flow.
Chuck Schwartz, Director, Construction Software Specialist, Marcum LLP

Contractors can improve strategic decision-making by focusing on their WIP. The information the WIP reveals about project and business health can be leveraged to plan for the future instead of reflecting on the past. Additionally, Bassem Hamdy notes that the state of your WIP is an indicator of the state of your financial systems. He notes that since the WIP draws from every financial process, it reveals how well-coordinated your reporting is in general. If your business has trouble creating these reports, it could be a sign that your financial processes aren’t as robust as they could be. By analyzing the WIP, your company can create a map of its past, present, and future while also identifying areas of improvement in your financial processes.

Make organized workflows a priority

When it comes to best practices, companies are action-oriented. Contractors want to know about the next step they can take to enhance profitability. However, our panelists noted it was more complicated than that. Each one pointed out that without ready available information, your options to create change are limited. Business initiatives need to be guided by a roadmap of financial data.

It’s a real challenge to get companies to understand that their money workflow is even more important than their document workflow on a project.
Bassem Hamdy, CEO and Co-founder, Briq

Contractors looking to enhance profitability need organized financial workflows to see the best results. Without a continuous stream of up-to-date, reliable data, you’ll only be able to address the past, not the present. Bassem Hamdy pointed out that some contractors are only closing out the books from August two months later in October. By that time, the fee erosion has already occurred and policies can’t be executed effectively. On the other hand, a continuous close keeps companies informed and ready to take action at a moment's notice. 

The more accurate the information we can look at, the better we can plan for not only the end of the year but maybe three or four years down the road.
Dan Mauriello, Partner, Construction Tax Specialist, Marcum LLP

Adopt a forward-thinking approach

Many contractors can find themselves spending more time catching up than they are going forward. This presents a challenge, especially in an industry that’s already somewhat resistant to change. Our panelists extensively covered the many reasons why a forward-thinking approach should be preferred and why change is necessary for success.

If you don’t know your yesterdays and are challenged in understanding your tomorrows, you can’t run your business effectively…that’s the difference we need to make in this industry.
Bassem Hamdy

The team at Marcum LLP discussed how a change in mindset across the company sets everyone up for success. In particular, Chuck Schwartz mentioned that willingness to adopt new tools can supercharge a company's profitability. It allows a contractor to do much more with the resources they have and even gives CPAs more tools and insights they can use to help their clients. Overall, simply embracing change and looking to the future can set a contractor leagues ahead of competitors when it comes to their business initiatives.

Choose improvements over replacements

In construction, there’s a pervasive “if it ain’t broke, don’t fix it” mindset. When issues arise, companies may be inclined to treat the problem as an isolated incident. It’s an attitude that leans towards only replacing broken things instead of improving older ones. For many contractors, this may mean passing up fantastic business development opportunities in favor of the tried and true. Our panelists suggest investing in improvements that support the whole business, such as Briq. 

Briq is a financial automation platform built to help construction companies run a better business. Our platform is made to help construction companies analyze and improve their financial processes at every level. If you’d like to learn more about what Briq can achieve for your business, speak with our experts and get a live Briq demo at briq.com/demo. 

For those who want to know more about budgeting, tax planning, and forecasting, we recommend watching the full on-demand webinar here.