Growth is usually a good problem to have. More projects, larger contracts, new markets and additional employees can all point to a construction company moving in the right direction.
But growth also creates complexity.
Processes that worked when a company was smaller can become harder to manage as project volume rises, operations expand and more people become involved in financial decisions. Eventually, the accounting and finance function that supported yesterday’s business may no longer provide the information management needs to run today’s.
There is no specific revenue threshold at which a construction company suddenly needs a larger finance department, a controller or CFO-level support. The better question is whether finance can still produce timely, reliable and forward-looking information as the business becomes more complex.
A growing contractor may have more project managers, vendors, employees, purchase commitments, locations and reporting requirements—all while leadership is making larger and more consequential decisions.
Management still needs timely answers to questions such as:
When finance spends most of its time recording transactions, reconciling accounts and closing the books, there may be little capacity left to answer those questions. That is when growth can begin exposing weaknesses in financial processes, reporting and leadership.
An occasional accounting delay does not necessarily indicate a larger problem. An audit, system conversion, major project closeout or employee absence can temporarily create additional work.
The concern is when the same problems appear month after month.
Financial reporting keeps getting later.
Month-end reporting may become increasingly dependent on manual reconciliations, spreadsheets and information gathered from multiple departments. When reports continually arrive later, management may not receive important information soon enough to act on it.
Project managers and accounting are working from different numbers.
Different reporting timelines can create reasonable short-term differences between field estimates and accounting records. The greater concern is when those differences cannot be easily explained or reconciled, or when permanent spreadsheet workarounds are needed to connect the information.
WIP reviews regularly produce surprises.
Unexpected changes in estimated costs or projected margins may indicate that project information is reaching accounting too late, forecasting practices are inconsistent or responsibility for updating estimates is unclear.
The owner or controller has become a bottleneck.
When one person must solve every reporting problem, review unusual transactions, prepare forecasts and answer financial questions, growth can become dependent on that individual’s availability. What once provided strong oversight can eventually slow decisions and create key-person risk.
The bank balance is management’s primary measure of performance.
Cash on hand matters, but it does not provide a complete picture of earned profitability, project commitments, WIP or future obligations. If ownership lacks better financial visibility, the bank account can become a substitute for information the finance function should be providing.
Forecasting keeps getting pushed aside.
Perhaps the clearest warning sign is when finance can explain what happened last month but has little capacity to evaluate what could happen next. A contractor making larger decisions about hiring, equipment, financing, projects or expansion needs more than historical accounting.
Before adding employees or changing systems, contractors should determine whether the strain is temporary or structural.
A temporary workload problem usually has an identifiable cause. Once an audit, system implementation, project closeout or other unusual event passes, the finance team returns to a manageable workload.
Structural problems keep returning. Reporting gets later, manual adjustments increase, forecasting is sacrificed to transaction processing and accounting and project teams continue struggling to reconcile job performance.
One question can help clarify the difference:
Does the problem disappear when the extraordinary event ends, or does it return every reporting cycle?
If the same challenges persist—and become more pronounced as the company grows—the issue may involve more than staffing. The underlying constraint could be people, inefficient processes, disconnected technology, unclear responsibilities or a lack of higher-level financial leadership.
A construction company’s financial needs typically become more sophisticated as the organization grows.
Early on, the primary need may be transactional accounting: billing, accounts payable, payroll, reconciliations and accurate job-cost coding.
As complexity increases, the business may require stronger controllership: a disciplined month-end close, reliable financial statements, consistent WIP reviews, stronger internal controls and better coordination between finance and operations.
Eventually, leadership may require more strategic financial support. Forecasting, scenario planning, financing, bonding, capital investments and expansion decisions increasingly require someone who can look beyond historical results.
The progression can be viewed simply:
A growing contractor can have accurate books and still lack the financial capabilities needed to support the decisions the company is now making.
Closing that gap does not automatically mean hiring more accountants or purchasing new software. Depending on the constraint, the answer may be additional capacity, stronger processes, better-integrated technology, higher-level financial guidance or a combination of those approaches.
Contractors do not need to wait until accounting reaches a breaking point to evaluate their financial infrastructure.
Consider asking:
The answers can help identify where the finance function may need to evolve before further growth puts additional pressure on it.
The goal is not to build a larger accounting department simply because revenue is increasing. It is to create a finance function that can support the company’s current complexity and give leadership the visibility needed to make the next set of decisions confidently.
Porte Brown’s construction specialists—including six Certified Construction Industry Financial Professionals (CCIFPs)—and the Elevate365 team can help identify where financial processes, reporting or resources may no longer be keeping pace. Depending on the need, that support can include transactional accounting, controllership, construction project accounting, WIP analysis, financial reporting, forecasting and CFO-level advisory services, as well as assistance supporting financing and bonding requirements.
If your construction company is growing but its accounting processes, reporting or forecasting are struggling to keep up, contact Porte Brown. We can help evaluate where the strain is occurring and develop a financial support structure built for the next stage of your growth.
Get in touch today and find out how we can help you meet your objectives.
