When Should Your Construction Company Hire a CFO? [Expert Guide]

Construction companies lose a median of $203,000 to fraud, which towers over the $117,000 median loss businesses of all types face. These numbers show why a construction CFO must implement proper internal controls to protect finances and stimulate growth.

Small and medium construction businesses rarely prioritize strategic financial planning. This leads to problems with cash flow and equipment costs. A construction CFO’s average salary reaches $350,000 per year – a major investment compared to a controller’s $92,250 or bookkeeper’s $37,107. The real question isn’t about affording a CFO – it’s about the cost of not having one.

Let us help you understand everything about construction financial officers and the right time to make this vital hire. You’ll learn how financial roles change as your company expands, what CFOs actually do, and your hiring options. These range from full-time positions to outsourced services that give you expert knowledge at reduced costs.

Understanding Financial Roles in Construction

Financial management in construction is fundamentally different from other industries because of its project-based nature. Most construction companies start with one person who handles all financial tasks. They add specialized roles as the company grows.

Office manager vs. bookkeeper vs. controller vs. CFO

Many construction businesses rely on an office manager at first. This person wears multiple hats and handles cash management, simple bookkeeping, and project communication. Companies with revenue between $200,000 and $1 million typically employ office managers who earn around $47,548 annually. These managers track lien rights and make sure the company gets paid on time.

Growing companies need a bookkeeper to manage everyday paperwork and create simple financial statements. Bookkeepers serve businesses with $1-5 million in yearly revenue and earn about $37,107 per year. Their main focus stays on accuracy rather than strategy.

The next step brings in a controller to lead the accounting department. Controllers join companies with $5-20 million in revenue and earn around $92,250. They look ahead at cash flow for upcoming projects, create financial reports, and keep the company compliant with regulations. Controllers also review financial data to determine if the company has enough cash for new projects.

A construction CFO creates and implements complex financial strategies. They guide the company’s capital structure and earn an average salary of $133,448. Construction companies that make more than $20 million in revenue usually need a full-time CFO. CFOs work beyond daily operations and secure capital through debt or stock issuance.

How financial responsibilities grow with your company

Construction business owners start by doing basic accounting tasks themselves. They often work from their trucks using simple spreadsheets. When projects start piling up, they bring in a part-time bookkeeper to organize records in accounting software.

Companies then start focusing on what the numbers mean rather than just recording transactions. When accounts receivable reaches six figures, companies usually need a controller to manage accounting operations in multiple states.

Financial needs become more complex as companies expand. The construction CFO’s forward-looking view is vital—they focus on future scenarios while controllers handle present operations. CFOs stand apart from other accounting roles. They develop strategies to secure the company’s financial future instead of managing daily finances.

Your construction company needs to separate financial duties as it grows. Someone who pays bills should never balance bank accounts. People making deposits shouldn’t have the power to write off receivables. These separations create vital checks and balances for growing construction companies.

What a Construction CFO Really Does

A construction CFO lifts financial management beyond simple accounting to become a strategic powerhouse. The CFO shapes your company’s financial future instead of just recording past transactions like other financial roles.

Strategic planning and forecasting

Your company’s CFO creates the financial vision and develops roadmaps to reach specific goals. Financial resources get arranged with business objectives to enable proactive responses to market changes rather than reactive adjustments. Financial forecasting helps companies anticipate future needs, analyze market trends, and spot growth opportunities. Companies can make informed decisions that propel sustainable growth with this strategic guidance.

Cash flow and risk management

Construction businesses deal with unique cash flow challenges because projects often begin with negative cash positions—expenses occur before payments arrive. The CFO creates strategies to maintain sufficient cash reserves throughout project lifecycles and prevents financial disruptions. They also build detailed risk management processes to spot potential threats, including contract risks, supplier performance issues, and interest rate changes. The company stays protected against project failures and unexpected events through surety bonding and proper insurance coverage.

Capital investment and financing decisions

The CFO reviews potential investments in equipment, technology, and business expansion with long-term sustainability in mind. Balanced scorecards help assign value to both quantitative and qualitative metrics, which leads to better investment decisions. Projects get prioritized based on strategic fit rather than just financial returns. Your CFO also looks at potential mergers or acquisitions to expand company capabilities.

Tax planning and compliance

Construction tax planning needs year-round attention and specialized knowledge. The CFO leads tax strategy and implements accounting methods that can substantially reduce tax burdens through options like the 10% method, completed contract method, or cash method based on your situation. Your company benefits from construction-specific tax credits and incentives, such as the R&D tax credit and energy efficiency deductions.

Job costing and profitability analysis

Your CFO puts sophisticated job costing systems in place to track every project expense—including direct costs (labor, materials), indirect costs (project management), and committed costs (unposted payroll, open contracts). Early detection of cost overruns and profit improvement opportunities become possible through this detailed analysis. Accurate work-in-progress (WIP) reporting helps calculate completed work percentages against total spending to predict final project costs.

Signs Your Construction Company Needs a CFO

Your construction business might need a financial leader to avoid devastating setbacks. A recent report shows 100% of construction companies surveyed got late payments from clients. This highlights just one of many financial hurdles these businesses don’t deal very well with.

Rapid growth or expansion into new markets

Simple accounting cannot handle the financial complexity that comes with aggressive expansion. Your company’s growth might outpace your financial infrastructure, which strains your systems and processes. A warning sign appears if you’re winning 50% or more of projects you bid. This usually means you’re underpricing jobs and won’t manage the work to be done effectively.

Construction companies of all sizes need a CFO at the time they enter new markets or scale operations. These professionals create expansion strategies to protect profits and develop financial forecasts for potential projects.

Increased project complexity or multi-state operations

Tax requirements and compliance issues become tricky when you operate in multiple states. Each state follows different rules for sales tax, payroll sourcing, and voluntary withholding. These can create “nexus traps” for contractors who aren’t prepared. Complex construction projects are like “labyrinths with hidden dangers” and need sophisticated financial management systems.

Cash flow issues or inconsistent profitability

Cash flow problems clearly signal the need for a CFO. Contractors typically wait 90 days to receive payment. This makes proper cash management crucial. Watch for signs like delayed payments, payroll difficulties, or late vendor payments.

Construction businesses often pay project costs before they receive their first invoice. This makes them vulnerable to cash shortfalls. A construction financial officer helps improve cash flow throughout project phases and creates strategies to handle seasonal revenue changes.

Need for better financial reporting and insights

Companies without proper financial reporting operate blindly. You might overbid or underbid projects because you lack evidence-based data about money management.

The right time to bring in a CFO is when you need industry standards to spot financial weaknesses early. On top of that, it helps if reviewing work-in-progress schedules shows consistent profit fade—where gross profits drop during projects. A construction CFO can help turn this trend around.

Hiring Options: Full-Time vs. Outsourced CFO

Choosing the right construction financial officer can shape your company’s financial future and growth path. Let’s head over to the available options.

Pros and cons of hiring in-house

An in-house construction CFO brings several advantages to the table. Your CFO’s deep organizational insight enables quick decisions and smooth integration with your executive team. This dedicated professional becomes part of your company’s culture and leads financial planning consistently.

Notwithstanding that, this choice has major drawbacks. The median annual wage for full-time CFOs reaches approximately $397,887. You must also factor in benefits, recruitment costs, and long-term commitments like severance packages. Your in-house CFO’s industry exposure might not match their outsourced counterparts.

Benefits of fractional or virtual CFO services

Fractional CFOs deliver high-level financial expertise without full-time salary commitments. These experts work part-time or as needed. They offer strategic insights while becoming an extension of your business team.

Virtual CFOs bring experience from multiple industries. This broad exposure helps them create innovative financial solutions that specialized CFOs might overlook. Their services scale up or down based on your financial needs throughout the year.

Cost comparison and scalability

The numbers tell a clear story. A full-time construction CFO costs $180,000+ yearly plus benefits. In contrast, fractional CFO services cost between $1,500-$3,000 monthly. Highly experienced professionals might charge $5,000-$7,500 monthly.

Construction firms in growth phases or handling large projects can start with project-based collaboration before expanding. This strategy helps businesses direct resources toward financial health and eco-friendly growth.

How to choose the right CFO support model

Small to mid-sized construction companies with 1-2 simple projects might find a bookkeeper and CPA enough. Companies managing multiple projects, complex financing, or rapid growth can benefit from fractional CFO expertise affordably.

Your company’s size, financial complexity, and strategic needs should drive this decision. Large companies with intricate financial operations need a full-time CFO. Startups and growing businesses get more value from flexible outsourced services.

Conclusion

Your construction company’s specific business needs should drive the decision to hire a CFO, not just industry averages. Many construction businesses start with simple bookkeeping and reach a point where strategic financial leadership becomes vital to grow sustainably.

Your company might have outgrown its current financial structure if you face cash flow issues, complex projects, and operations in multiple states. A need for advanced financial expertise becomes clear when you see consistent profit fade or struggle to secure project financing.

Here’s the upside – you don’t need to spend $350,000 yearly to get CFO-level guidance. Fractional CFO services provide a practical alternative that offers sophisticated financial strategies without a full-time executive’s cost. These experts work with construction companies of all sizes and often spot opportunities your internal team might miss.

Financial leadership goes beyond record keeping – it positions your construction company to succeed in the long run. The right financial structure helps prevent fraud, boosts project profits, and gives you capital to grab growth opportunities. Your company’s financial leadership should grow as your business evolves, building a foundation that supports your future goals.