Business Development

Key metrics construction CFOs should be tracking in 2023

Focus your efforts in the right direction. Learn what metrics construction CFOs need to be tracking for their business.

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The construction industry faces a swarm of complex economic and social circumstances. It seems like the unpredictable is always just around the corner, hiding behind a mountain of paperwork and approvals. That’s why companies rely on their CFOs to keep tabs on financial affairs and guide the business through this maze of an industry. Although most CFOs have excellent business acumen, outdated information and a surge of changes in the industry have put them in a reactive position. In particular, there’s a reliance on working capital that needs to change.

Many CFOs use working capital to judge the state of their company's financials. But this kind of analysis doesn't tell the whole story: it only reveals a financial position during a single point in time. Fluctuating costs, market adjustments, and business complications can change working capital conditions in as little as a few days. Your business may have to suddenly spend a significant amount of capital to deal with unforeseen circumstances, such as rising labor, equipment, and material costs. On the flip side, the start of a new project or the continuation of a previously halted one can create a flood of revenue for a business that had very little spare capital the month prior. 

It’s time for CFOs to gain a more comprehensive understanding of their business and invest in additional analysis. Let’s go over key metrics CFOs should be tracking in 2023 and how improving them can generate success for your business.

Understand the scalability of your business

The construction industry is facing many challenges when it comes to labor. Not only is it one of the biggest costs for most businesses, but also the labor pool is diminishing in size. While the reasons for this and the long-term market conditions are up for debate, the diminishing availability and rising costs of labor are a reality today. CFOs need to equip themselves with the right tools to confront this challenge head-on. The key isn’t to fixate on generating more capital. Instead, you need to track scalability.

Spending more money whenever labor costs rise isn’t a long-term solution. Construction companies also can’t change market conditions or predict the future. What they can do is increase the value, output, and reliability of each employee that they already have. Whether through company-sponsored training programs or financial automation tools, strategic investments in your staff can give them the power to do more with less while reducing the burden on their shoulders. When you’re trying to dig a hole, a single worker with an excavator is worth more than 15 workers using their bare hands. CFOs that understand the scalability of their teams are positioned to make excellent business decisions for the company. They can avoid staff bloat, weather market conditions, and improve employee retention by understanding when their teams need more hands on deck versus when they need better tools to get the job done.

Track your financial performance

When CFOs hear the phrase “financial performance”, they’re thinking in terms of profitability and billing. After all, it’s essential to know whether or not your projects are generating the revenue you need them to. Despite the importance of this perspective, it’s not the only way to measure financial performance. There’s an additional way to track and contextualize performance that offers equally essential insight and operational benefits.

Construction companies need to begin tracking the speed at which their business can react to changing conditions. While proactive and versatile financial policies are always preferable to reactionary ones, reactivity is both inevitable and essential. Unpredictable changes will occur, and when they do, you’ll want to address them the right way. Unfortunately, many construction companies don’t prioritize this perspective. Some businesses don’t even know a significant shift has occurred until months later due to delays in accounting and slow forecasts. It’s how bankruptcy can sneak up on construction companies out of seemingly nowhere. 

CFOs can change this paradigm by understanding how their business is currently reacting to change. They need to track the accuracy of their forecasts, how often they’re being generated, and what systems are in place to detect sudden market shifts. Additionally, it’s important to know how fast you can act on new information by understanding your workflows and the barriers to implementing a decision once it’s made. By aggregating this information, a CFO can prepare the business for anything and understand risks better than anyone else. This allows your business to capitalize on profitability and adopt exemplary risk mitigation practices.

Unite your data on a single platform

In construction, cash is king. That said, the factors that keep cash flow moving and generate revenue are more than just billing cycles. Construction profitability is only going to improve when CFOs can merge their sharp business intuition with hard data. In an industry with razor-thin profit margins, every KPI counts towards evolving your business and staying profitable. That’s why construction companies are trusting Briq to help them understand and track all their relevant information.

Briq corrals data from across your construction business to deliver financial forecasts and project insights that are accurate, current, and agile. We don't just help you understand your cash; we help you understand your business. Our platform allows you to use all of the data and people you have to dig deep and think about your financials holistically. Hundreds of companies rely on Briq to manage their budget, forecast, and spend. Speak with our experts and find out how Briq can help you track your way to success today.