Financial managers in particular have had an unpredictable year, trying to forecast and maintain profits in an ever-changing environment. The Briq team was lucky enough to sit down with Carl Oliveri- Construction Practice Leader at Grassi- for a quick chat about the state of construction financials in today’s market. In this article, Carl provides us with insight into:
- Prominent changes in construction and risk in the past year
- New strategies financial managers are using to mitigate financial risk
- Best practices for CFOs who are trying to stay afloat or get ahead
- Words of wisdom for financial managers
Let’s dig in.
Carl, thank you for joining us. Will you please give us a brief introduction to you and your history in the industry, as well as an intro to Grassi?
“I am the construction practice leader at Grassi, which is an NY-based CPA firm. My role within the construction industry is to help contractors navigate the ever changing landscape out there, from a client standpoint, operation standpoint. When people think of an accountant they think of financial statements, taxation, debits and credits, and those are big parts of what we do. But I look at myself more as an advisor to contractors, trying to get them away from their balance sheet and into their operational issues, solving the problems that are keeping them up at night. At Grassi, construction is our largest niche and I have the honor and privilege of leading that. We also work in manufacturing, healthcare, and financial services. We really lead with the hallmark that we’re accountants and we’re advisors. We want to meet (with clients) quarterly. We're business partners.”
This year has been unpredictable to say the least. What is the most prominent change you have seen in the last 6-12 months in regard to construction risk or financials?
“Everything. On a local level, for example, coming into this year, there were changes to certain laws here in New York City. Local law 193 stated that every contractor in NYC had to employ workers with a certain amount of OSHA training hours for safety. That was the focus. Contractors embraced it and they began to build more safely. Then COVID happened, and now we have to figure out how to work more safely and more healthily. That has been the biggest change operationally; how contractors had to get creative in redesigning job sites to accommodate PPE, sanitizing stations, staggering in smaller shifts, building screening points on the job site. This has given contractors an opportunity to flex their creativity in terms of how they build- both from a logistics standpoint, and how they can leverage technology more.”
Have you seen any new strategies that financial managers are adopting to help mitigate financial risk? Or maybe new risks that haven’t really been considered until now?
Believe it or not, the emphasis really went back to the tried and true financial management tools, which is project central cash flows. Most contractors, while they know cash is king, I feel like they really realized the value of cash flow analysis. When the shutdown happened, for example, contractors found themselves sitting on stacks of cash. They weren’t having to pay payroll, many of them got PPP loans. Then remobilization happened, and they had to really start writing checks to get people back on the job. And the cash started flying out as quickly as it came in. They realized they really need to model out their cash flow to identify peaks and valleys in certain jobs. They got back to the basics.
Some would say we are living in an extremely volatile market. What steps would you recommend for CFOs who are trying to stay afloat or maybe even trying to get ahead in a time like this?
It’s so easy for any company to scale down and look to cut costs. I think the fiscally prudent financial managers should be doing that. Look at excess and overhead. But they always say, penny wise, dollar foolish. I think it’s not necessarily about budgeting or cutting costs, it's about keeping your eyes open for opportunities that are going to emerge after the pandemic. People will be going out of business and closing their doors. You have an opportunity to pick up those pieces and fill that need. The key to survival is cash flow, budgeting, it’s having the right work in place. But it’s also about being an entrepreneur. Be an entrepreneur and take the opportunity.
And finally, can you offer us some general words of wisdom to contractors and financial managers who want to keep a better handle on their cash?
“Well I’m preaching to the choir here but obviously, cash is king. We live and die by cash flow in this industry. I think if you haven’t started to employ those tried and true financial management tools of job-by-job cash flow analysis, please do so. Once you start doing that and pushing the need for proactive cash flow management down into the project people and into the field, you'll change the culture into a “cash is king” culture. Accounting can model anything and everything until the cows come home, but everyone needs to understand. If the rest of the organization doesn’t buy in, it doesn’t take. The mentality needs to be ‘no one is bigger than the mothership, we have to get paid for what we’re doing, and don’t be penny-wise dollar-foolish.’ While you’re controlling your cash flow, be mindful of opportunities to pounce on.”
The Briq Team would like to thank Carl Oliveri for chatting with us. Briq is a financial intelligence and forecasting platform built specifically for construction.
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