In the early phases of a construction business, the business owner likely handles the construction accounting. They manage their own books, take care of accounts receivable (A/R) and payable (A/P), and oversee payroll. As a construction business and list of projects grows, however, making financial decisions will reach beyond the role of a single person. You may find yourself wondering: Do I need an office manager, bookkeeper, controller, or CFO? And what’s the difference between all of them?
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Growth of a contractor’s accounting department
If there were such a thing as a typical construction company, it would likely start with a single person: The company founder, Bob. For several months, or even a couple of years, Bob performs all of the essential accounting tasks, many from the cab of his truck. He manages the cash flow, gets new lines of credit, chases down unpaid invoices, and puts it all into a single Excel spreadsheet.
As time goes on, they realize that they barely have time to take on new projects. They hire a friend-of-a-friend to manage the office. Let’s call him Sam. Sam starts out making coffee as well as making sense of the owner’s messy spreadsheets. After a couple of years, Sam finds himself reading up on tax deferral under the completed contract accounting method at midnight, and realizes he’s in over his head.
So Bob hires Sally, a part-time bookkeeper. She moves the spreadsheet over to Quickbooks. Soon, Sally becomes the full-time bookkeeper. When accounts receivable hits six figures, Sally realizes she can’t keep up. Stephanie joins the accounting team as the controller, making sure they’re able to keep up with the construction projects in six different states…
Figuring out when your construction company is ready for each role isn’t cut-and-dry. It depends on your circumstances, and your company’s goals for growth. You’ll need to determine which role(s) your business requires, depending on financial needs and company breadth. Here’s a breakdown of the typical duties for each role in a construction company, and how they can improve your payment process.
Office Manager: Keeping the contractor house in order
Office managers wear A LOT of hats, especially in a small or mid-sized construction company. They are responsible for important business functions, often ones they don’t have a lot of training or experience in.
The office manager may handle:
- Cash management (money coming in and going out the door)
- Human Resources
- Project Management
- Customer Relationship Management (and employee relationship management)
Office managers typically process paperwork, handle project communication, and generate weekly or monthly reports. Perhaps one of the least understood roles of the office manager is managing the company’s lien rights. This is typically the person who makes sure the company gets paid on time for every project. They track state deadlines for notice on each job, send invoice reminders, and file mechanics liens when necessary.
Office managers keep the headquarters organized and running smoothly. They track and organize job information sheets, accounting statements, joint check agreements, or copies of lien documents such as waivers, notices, and claims. Not only are office managers involved in these processes but can also be closely involved with the interactions between the main company office and all of the job sites, keeping track of project deadlines, project progress, and much more.
- Average Office Manager salary: $47,548
- Company size estimate: $200,000 – $1m in annual revenue
Bookkeeper: Balancing a contractor’s books
Bookkeepers are in charge of the basic transactional paperwork for a small to mid-sized business. If you’re working for a small business, bookkeepers could only process one type of account, such as accounts payable. Also in small businesses, bookkeepers can produce basic income statements or other financial statements. They may be able to solve some of the cash flow problems that a growing construction company faces.
Accuracy is a key trait of any successful bookkeeper, along with an understanding of various accounting ledgers and double-entry books. Bookkeepers present an accurate accounting of a business’s activity. For tax strategies or help with structuring your business or your financing, you might need to bring in the help of a CFO.
- Average bookkeeper salary: $37,107 per year, or $17.84 per hour.
- Company size estimate: $1m – $5m in annual revenue
Controller: Captain of a contractor’s financial ship
A controller is typically in charge of the accounting department. (You’ll also see this position spelled “comptroller.”) A controller may set up the accounting department. In a small company they may be doing the bookkeeping themselves. In larger companies, controllers are more likely to supervise accounting staff. An experienced controller may be most valuable for their ability to interpret and analyze financial data to determine whether the company has enough cash to take on a new project.
For a construction company, the role of a controller is to forecast cash flow based on upcoming projects, equipment expenditures, investments, and tax liabilities. A controller’s main responsibilities include preparing financial reports and statements when requested by senior management. The reports lay out the construction company’s financial situation in anticipation of an upcoming project.
As the chief accountant for a company, the controller oversees the work of the company’s accounts receivable and accounts payable departments. The construction controller is in charge of creating accurate job-cost accounting reports, participating in audits and preparing reports for regulators. Additionally, the controller is responsible for ensuring your company complies with financial reporting rules and laws. They’re also needed for budgeting and monitoring annual performance in relation to the annual budget.
- Average controller salary: $92,250 per year or $47.31 per hour.
- Company size estimate: $5m – $20m in annual revenue
CFO: Ruler of the contractor’s financial empire
Typically only necessary for the largest construction company, a Chief Financial Officer (CFO) develops and implements complex financial strategy. The CFO typically works with the chief executive officer to guide the company’s capital structure. For example, a CFO may sound the alarm when the company’s finances are stretched thin across too many projects. CFO’s can also help their business obtain capital through stock insurance or debt sales.
A CFO represents the company’s finances, and they are responsible for gathering information and data that some publicly owned companies need to publish. The CFO also must communicate with investors and potential lenders when they’re trying to secure a new line of credit or a business loan.
CFO’s can help make the payment process easier because they’re responsible for monitoring and adjusting cash flows. Along with other key components of a business’s financial makeup, a CFO must bring new ideas to the table to suggest changes in operations that lead to more capital for the business.
In terms of a company’s overall strategy, the CFO is responsible for guiding the company to meet financial goals. Some of these strategies could involve the company being acquired or acquisitions going forward.
- Average CFO salary: $133,448 per year or $64.16 per hour.
- Average company size: $20m+ in annual revenue
Choosing the right construction accounting role
Contractors have evolving needs for office managers, controllers, bookkeepers and CFOs. When a construction business is first getting off the ground, owners or designated team members often handle the accounting. As a business grows, bookkeepers can free up more staff for other business duties. This could eventually lead to enhanced oversight, greater accuracy, and better compliance. With more resources following the trail of money, a contractor is much more likely to get paid accurately and on time.
As a construction company grows, it will demand the aid of a full-time financial staff that’s managed by a controller or a CFO to handle the company’s finances. All of these roles can vastly improve a contractor’s ability to take on larger construction projects. While large businesses might have full-time financial support teams, small-to-mid-sized businesses can hire part-time bookkeepers, accountants, or financial advisors as needed.