Build a stronger financial foundation

By Jesse Sanchez. 

Hurley Fox explains how accurate financial data, disciplined planning for cash flow and effective technology can help contractors grow profitably. 

Contractors may be skilled at delivering quality work, but sustainable growth also requires a clear understanding of where money enters, moves through and leaves a business. In this episode of From the Ground Up™, host Karol Weyman spoke with Hurley Fox, owner of Fox & Partners, about the financial challenges and opportunities contractors face as their companies grow. Fox & Partners provides outsourced accounting, controller and chief financial officer services to small businesses across the country. 

One of the most common mistakes Hurley sees is a failure to understand gross margin. Contractors need to track the labor and material costs associated with each project rather than focusing solely on revenue. Hurley emphasized, “If you don't understand your gross margin, you don't understand if you are pricing correctly.” 

Accurate job costing can also help contractors determine which services, projects and customers are most profitable. Hurley recommended tracking employee time by job and customer, reviewing timesheets consistently and recording material purchases for specific projects. 

Cash flow requires equal attention because reported income does not always reflect the amount of money available in the bank. Customer payment schedules, debt payments, owner distributions, taxes and asset purchases can all affect available cash. A cash flow forecast can help business owners anticipate upcoming obligations and prepare for seasonal fluctuations. 

Contractors should also examine whether their financial statements are accurate before relying on them to make decisions. Hurley explained that each balance sheet item should be supported by documentation, such as a bank statement, loan agreement or asset purchase record.  

Technology can make these processes easier, but Hurley cautioned against adopting software simply because a newer option is available. He advised, “The best software is the software that works for you and your team.” The most effective system is one employees understand and use consistently. 

By developing reliable processes and reviewing financial results regularly, contractors can identify problems, test potential solutions and make decisions based on meaningful data. 

Listen to the podcast or Watch the conversation to learn more about strengthening your company’s financial foundation with accurate data, disciplined cash flow planning and effective technology!