From Field to Finance: Joe Harper’s Journey as a Construction CFO

Rishi Srivastava (00:00)
Welcome to the construction CFO podcast. I’m your host Rishi Sivastava from Being Human. Today our guest is Joe Harper from Kelly Brothers Roofing. Joe, welcome.

Joe Harper (00:12)
Thank you, Rishi. A pleasure to be here.

Rishi Srivastava (00:14)
I’m glad too. We have a series of interview questions for Joe. So the first section in this interview is on your background and career journey. Can you walk us through your career path? What led you to become a construction CFO?

Joe Harper (00:31)
That’s an easy question. When I was going to Ohio State, I wanted to become either an archaeologist or an attorney. So that’s the normal path of most CPAs. But I read an on-campus article that

attorneys weren’t really getting jobs back then so I said I need to change my major and ⁓ Chose accounting and really fell in love with accounting my first job was with a little company in Dublin, Ohio called Beale and Rose who later merged with with rain associates that did a lot of construction contractors, and I just kind of morphed into that that niche and Took off with it, so I I became a member of the CFMA I became a member of the builder exchange

and started teaching and just really falling in love with construction finance.

Rishi Srivastava (01:16)
Cool. Was finance always your plan?

Joe Harper (01:18)
No, no, no, no, no, no, no. Again, I wanted to be an attorney or an archaeologist, one of the two. And I figured out that I was going to make more money in accounting, so that’s what I went to in college.

Rishi Srivastava (01:24)
Yeah.

Cool, cool. Next question, Joe, is what was your first job in the construction industry and what surprised you most about it?

Joe Harper (01:40)
So my first job in the construction industry, I did an internship with Beal and Rose in college.

And then my first job out of college was actually with a company in Reynoldsburg called Ziney Construction and Development, Z-E-U-N-E. And we built 84 lumber companies on the East Coast. So Maryland, upstate New York, New Jersey, we would get the contracts for 84 lumber companies and go up there and build them. And the deal that I had was

I was two weeks in the office doing everything. All the accounting, all the payroll, all the books, all the job costing. And then I was two weeks out in the field with the crew working on the construction. So I was, we did the site work. So I, I,

ran equipment. did for the concrete pad. So I built forms and raked concrete. We erected the steel and put the roof on. So I did the steel erection. And it was interesting because I come from ⁓ a blue collar background. I always like, you know, have the strong work ethic in our family. And this really appealed to me, this, you know, part in the office and part in the field.

The guy they hired before me showed up on the job site with Gucci boots and didn’t really work out with the crew. So I kind of came into a climate that no one had faith in me on the job site. They didn’t think I could do anything. They thought I was going to be a pain in the butt and just be a hindrance to them.

And it took, after you form concrete, you pour the concrete, you have to break the forms off. So it’s a sledgehammer and ⁓ breaking the two by fours that hold the forms.

going through and removing that so you have the concrete pad. And I was assigned to do that as a 100 foot by 200 foot pad and two people start in the middle and then you work around the outside and you try to beat the other guy. And the guy I was going up against was, he looked like the brawny man. I he was just a huge guy and had been a construction worker his whole life. And right before then, I cut the heck out of my hand. So my hand was bleeding and I didn’t cry.

or anything. just duct taped it up and put a glove on and to town on the forums. Well, I ended up beating the guy with blood streaming down my arm and after that I was like, you know, accepted on the construction crew. So that was my first experience in construction and probably why I fell in love with it because I really enjoy working out on the job sites. Even when I was in…

residential building I would take a couple weeks out of the year and go do what’s called punch on jobs where I would go out and all the little imperfections on the house I would go through and fix it and it got my mind off of accounting. I I love computer screens but you know I really love taking a break from computer screens too and actually going out in the field and doing some physical work.

Rishi Srivastava (04:37)
Yeah, very interesting. So has your view of the CFO role changed since you first stepped into it?

Joe Harper (04:45)
The biggest thing that I see that has caused the CFO role to change is technology.

Now we have to be versed in all things technology because we’re risk managers. First and foremost, a CFO, and quite frankly, first and foremost, a construction company is a risk manager. And our job centers around risk management. And now the risks that we see are from technology, either buying technology that we can’t use or shouldn’t use or choose not to use, or

from the other side of it, the cyber threats side of it. So I think that’s the biggest way the CFO role has changed in the 30 years or 30 plus years I’ve been in business.

Rishi Srivastava (05:26)
Yeah. Who had the biggest influence on your approach to leadership and financial strategy?

Joe Harper (05:33)
There’s probably too many to list. I’ve been really blessed with a lot of mentors in my life. The first accounting partners that I worked with at Beale & Rose, Lee Beale and Clay Rose, were huge influences on my formative years in really learning counting and how to treat people. My time at De’Anie Homes was started by five Christian brothers.

one of them left to become a minister and then four brothers carried on and I worked with them for quite a while and they really taught me that

do the right thing, do the right thing even when it’s hard. And I would see each of them backed up against the wall and they always came out and did the right thing. And I said, that’s who I want to be. I want to be that. So I would say that. And I would also say that I’ve really been shaped by the ⁓ seven habits, Stephen Covey, because I do believe his principles are lighthouse principles. We can argue against them all we want to, but they’re really principles

that we follow or should follow in business.

Rishi Srivastava (06:33)
Next section I have is on cash flow and financial strategy. What’s the hardest part about managing cash flow in construction today?

Joe Harper (06:38)
Mm-hmm.

I would say nothing. If anybody wants to argue that cash flow management is difficult, then they’re already defeated, quite frankly. Cash flow management is relationships. So it’s the relationships that we have with our customers and that we have with our vendors. Cash flow management is really understanding your company and your company’s cycles.

And then there’s the tried and true methods. Cash flow management boils down to two things, cash inflow and cash outflow. How do you maximize cash inflow and how do you slow down or minimize cash outflow? That’s a very simple formula. But within that are baked in everything that I just mentioned, the relationships, the cycle of your company.

seasons of your company, the terms, all that’s baked in there. And all that is available for the construction financial manager to manage and

really maximize. And one of the.

kind of the old guard of the CFMA used to teach a cash flow class and he said something very important he said that a CFO cannot manage cash by sitting behind a computer and that is so critical because we are not the ones who directly spend the money and we don’t have the relationships that directly generate the money

So it’s our job, understanding the systems and understanding the cycles and understanding the relationships, it’s our job to communicate that to the various people in the organization in operations and in sales who control those relationships and show them the benefit of this is why you want to do this. This is why you want to

do a job cost cash flow before you agree to the schedule of values on a large project with a lot of materials. So show them the benefit and then teach them how to do that and then they’re the ones who actually will be the frontline managers of the cash flow management of the organization. you can’t do it from behind your computer screen, you can’t do it from a desk. You have to be out there, you have to be a teacher. You really have to be a teacher.

Rishi Srivastava (08:48)
and

Yeah,

I really like the relationship management with your operations and sales aspect. So has that evolved in the last three to five years?

Joe Harper (09:05)
The tools have gotten better. you know, 100 years ago we had green bar paper, then we evolved to Excel, and now we have systems out there that can overlay on top of your ERP system and extract all the data, and then we can make some assumptions and changes to that and get a meaningful report. So the tools have increased, the principles have not.

Rishi Srivastava (09:10)
Mm-hmm.

Joe Harper (09:29)
changed. They have not changed. It’s cash inflow, cash outflow. It’s relationships with your customers. It’s relationships with your vendors. Some of its circumstances, again, but it’s being ahead of those circumstances as managing the risk on the projects.

Rishi Srivastava (09:44)
How do you approach the balance between paying subcontractors promptly and protecting your company’s cash position?

Joe Harper (09:52)
Well, I think you need to protect your company’s cash position first, and then you’re in the position to pay your subcontractors and vendors promptly. So I think it’s always being cash focused. The first thing that we teach in the basics of construction and accounting at the CFMA is that cash is king. The first thing that I learned in ⁓ the construction niche at Beal and Rose now

now rating associates is cash is king so in construction cash is king so recognizing that and protecting that and maximizing that is your job when you’ve done that then you’re in the position to pay your subs and vendors we pay our subcontractors weekly we pay our like the rental companies weekly

we pay them ahead of terms because when we need a crane for example in our business, when we need a crane on a job on next Tuesday, we want to be able to call that vendor and that vendor is going to do everything that they can for KBR to get the crane on Tuesday because we pay well. we have lunch with our

material suppliers. Those lunches need to be very positive because they know that KVR pays their bills ahead of schedule.

that protects, that helps protect our margins because when we call those vendors and we ask to get the best prices, maybe on a tough job, they’re going to be more willing to talk to us because they know that we have that long payment history than maybe talk to another company, one of our competitors. So again, that protects your margin. It all wraps into the relationships.

Rishi Srivastava (11:30)
Hmm relationship. What’s your take on pay when paid causes? Do they actually help contractors or create more friction?

Joe Harper (11:40)
You know, we wish we see pay when paid right now. What we’re seeing, we do work with a lot of large general contractors and we’re seeing pay if paid clauses. So pay when paid is a concept that’s been around since I’ve been in the construction industry. And that simply means that the…

general contractor receives the money from the owner and then pays the subcontractors and then the subcontractors pay their vendors and typically you have a period of time usually it’s within 10 days or a reasonable period of time to pay your subcontractors after you’ve been paid and I mean that concept has worked very well

we typically work with general contractors who have good relationships with their owners so that there aren’t hiccups and there aren’t major delays on them getting paid and then us getting paid. Again, I mentioned now that

You know, we’re not seeing pay when paid anymore. We’re seeing pay if paid. We’re a specialty contractor, so we’re down on the food chain a bit. And now it’s if I get paid, I will pay. And the difference is, and again, I’m not an attorney, I’m a CPA. The difference is when you have pay when paid, that doesn’t mean that you can’t pay.

you still have a reasonable time to pay that subcontractor for their service whether or not you’ve been paid or not. pay if paid, if there’s a problem on the job, if there’s a problem on the job that KBR had nothing to do with and the owner doesn’t pay the general contractor, then Kelly Brothers does not have to get paid on that job. So that’s what we’re seeing now.

Rishi Srivastava (13:16)
What do you think about financial risk, whether it’s tied to project delays, retainage, or bond?

Joe Harper (13:18)
of nature.

⁓ So

you know, everything on the project boils down to financial risk. Those are just some causes or areas of concern. So project delays, you know, we’re facing one right now. They happen. I mean, they do happen. And we could cause a project delay.

you know, we’re all human. We could make a mistake and cause a project delay. We could order materials from ⁓ a, let’s say a metal vendor and not receive those materials so therefore we can’t build that wall. So they do happen on the job.

What we see on project delays is that, at least in our world, the contractors really try to work with each other to mitigate those delays. So we had a recent project, pretty large project in Cincinnati that was running behind schedule. And we met with the general contractor and the other contractors to develop a plan. Again, we’re working together. We want to bring this across the goal line together.

and made some changes and ended up bringing that project in on time. But again, most of the times contractors and the general contractor will work together to try to achieve the goal. Retainage is, you know, it’s a financial risk, but you know, it’s just a delay in receiving the money. What we do is we

Typically we’ll work in

climates that reduce that retainage over time. example, retainage could be 8 % until 50 % of the job is complete and then after 50 % it drops in half. So our numbers go down over time. And that’s just to satisfy the owner that if there’s a problem on the job that doesn’t raise its head immediately, that there’s a bucket of money to make sure there’s a bucket of leverage

to make sure that the the contractors perform. Now, Kelly Brothers, I mean, if we make a mistake on a job, we’re gonna fix it. If…

So the contractor, the general contractor and the owner don’t need that leverage. We’re going to make sure that we do what we said we were going to do to begin with. But again, they’re using the retainage as financial leverage to make sure the contractors perform. And then you mentioned bonding. We actually like bonding on jobs because it basically ensures that we get paid. So when we have a bonded job, we’re fairly

Certain that if there’s a problem on the job and we’ve had bonded jobs where there have been problems on the jobs that haven’t been are doing that eventually and I say eventually because Whenever anything goes to the the to the bonding company to finish the project There’s a delay and there’s there’s all sorts of things that happen. There’s also you know, you didn’t do this right You didn’t do this right? So there’s all that that goes on but eventually we get paid so bonding is actually not

risk for us.

Rishi Srivastava (16:16)
My insightful planning is not a risk for you. So the next section we have for you Joe, it’s on technology and automation. So the first question is, can you walk us through the key software tools your finance and accounting team uses daily?

Joe Harper (16:35)
So daily we use our ERP system, is Delta Computer Ease. We basically have everything in there. We also use whatever tools the general contractor.

requires for communication and a column of communication tools are the warehouse of the project information for a job. So could be Procore, could be Rakin, it could be you know something like that. And then each general contractor too is going to have a like an automated bill payment system that we have to upload our bills or AIA documents into

upload our lien waivers and all that stuff in order for us to get paid. We use those every day. We also use Excel as an analytical tool and we’re looking at using a system called ProNovos because that’s one of the systems that kind of overlay your data and allow you to do more analysis without re-keying data. So we’re going look at ProNovos as well.

Rishi Srivastava (17:35)
make sense. Which tools are indispensable and which ones do you tolerate?

Joe Harper (17:39)
Richie, I’m ready to go off the grid. I don’t even think of phones indispensable. You could take these computer. We did really fine with green bar paper back in the day. I don’t know that everyone would agree with me on that. So I think that what normal people would describe as indispensable is your ERP system Excel, the billing platforms that the general contractors use, and…

Rishi Srivastava (17:49)
Hehehe

Joe Harper (18:04)
whatever communication would pro-system rake in that type of thing. I would argue that they’re all indispensable today.

Rishi Srivastava (18:11)
So what’s one technology investment that paid off and one that didn’t?

Joe Harper (18:16)
good question. The one that will pay off is we’re looking to automate our accounts payable. That’s the easiest ROI that that anyone can do is to automate accounts payable. There is no value to keying data, none. You’re taking a PDF invoice and you’re entering that in the system and there’s just no value added there. So being able to

process those invoices in an automated method, me as a CFO, I can look at the AP process and how long it takes and do my measurements there and how much how much bills are coming in and how much are out for approval all that to be able to track that is is really in my mind a must. What didn’t work out?

I don’t know that we have any at KBR that didn’t work out. We’re pretty conservative on our technology spend.

We only buy things that we use and we only use or we use things until we break them or they break and then we get new ones but I’ve seen so many different companies buy ERP systems and have no idea what what it was going to do or whether it really met their needs and then they get frustrated with it and they blame the IT solution instead of blaming themselves and end up scrapping it and getting a new one. So I’ve seen plenty of

of construction companies who invest in technology that they never really master and they never really use. My solution to that is I bring the team who

will use whatever product or tool it is all together to make the decision to buy the tool and then invest in the training. So everyone’s trained and everybody has bought in and invested in the product and knows their role and knows what it’s supposed to do. Companies that I’ve seen fail, somebody decides that this is a great tool and they buy it and then it’s kind of forced on everybody else and they never really adopt it.

Rishi Srivastava (20:13)
The next question is, what would it take for you to fully trust AI in your financial workforce?

Joe Harper (20:20)
I don’t know that I would ever fully trust AI. I really believe and you know we were at a construction CFO roundtable yesterday in Cincinnati and the common consensus was

the end of every AI process needs to be a human. So there needs to be that set of eyes on whatever it is, that before it gets published, before it gets used, before it goes into production, there needs to be that human set of eyes who looks at it says, this reasonable? Is this right? And that kind of goes back to when I was learning forecast.

the last step of forecasting is always a gut check. just sit back, you don’t do it on the same day you do the forecast, you let some time pass, you have a cold set of eyes that looks at this forecast and says, this reasonable? Yes or no? So I think the same principle applies with AI.

Rishi Srivastava (21:11)
That’s really insightful, actually. So the next question is, if you could wave a magic wand and build the perfect construction finance tool, what would it do?

Joe Harper (21:24)
It would have to do the blocking and tackling. It would have to do the…

the general edger processing APAAR. We have inventory, we have a manufacturing shop, metal manufacturing shop, so we have inventory so we don’t have to do the inventory part. We have a fleet, so we use our system for the fleet maintenance and upkeep.

fixed assets we actually farm out but I mean some systems would do fixed assets but I think the waving the magic wand is

And nobody’s done this well and I’ve been around for like I said over 30 years and nobody really has done this well in my opinion But I don’t understand why these forecasting tools like a pro novas can’t be baked into your software

So if I had a magic wand, those types of tools would be baked into the ERP. And I suppose if you’re a billion dollar contractor, they probably are. They’re custom built. But for the mid-size specialty contractors, they certainly aren’t.

and most of the contractors that I’ve had contact with over 30 years, they’re not.

Rishi Srivastava (22:30)
I think one problem is data security and data segmentation. If everything starts talking to everything, Joe, suddenly there’s going to be all kind of. You know data lineage and data. Protection and rights issues.

Joe Harper (22:46)
Mm-hmm.

Well, you asked me to wave the magic wand, so that would be on my wish list. There’s none of that in a magic wand.

Rishi Srivastava (22:47)
yeah, so let’s wave the magic wand.

All the issues disappear with a magic wand, right? So the next section is on reporting, job casting, and ops. What’s the one report you pull every week without fail? And what are you scanning for?

Joe Harper (22:55)
Mm-hmm.

We pull our jobs and process report every week. We look at the changes on the jobs. We look at the amount of production that we’ve had on those jobs, so the cost that we’ve spent on those jobs. We look at the hours spent compared to budget on those jobs. it’s really the…

Rishi Srivastava (23:09)
Bye.

Joe Harper (23:25)
core of what we do centers around the job schedule. And quite frankly, a review or audit, they spend 90 % of their time on the job schedule. That’s where all the risk is in the contractor.

Rishi Srivastava (23:30)
Mm-hmm.

to the stage that we are.

How do you ensure your project managers or field teams actually understand and use the financial data you give them?

Joe Harper (23:48)
we have a the answer to question is you have to build trust with them they have to know that rowing the boat in the same direction they are you’re not there to be a thorn in their side and you’re not there to catch them in doing something wrong the fact of the matter is they’re going to do things that are wrong so are you

The question is how do you fix them as a team and how do you catch them early enough so they can catch them as a team and actually have an impact? But we have, so build that trust over time, but we have a monthly job meeting where we have the project managers and estimators and sales folks in a room and we go active project by active project and we talk about them. And then from that meeting,

we can do our accounting part. We also have expectations of what’s going to happen in the field with hours produced and material and are we going to buy more material. All those things are discussed and noted so we can do their job and then they have a clear direction of where they’re going to go as well. It’s imperative that finance and ops are on the same page.

Rishi Srivastava (24:46)
Hmm.

Joe Harper (24:52)
We are not opposed to each other. We are not there to be.

one be better than the other and one be, you know, one catch the you know, the other in something that they’re doing wrong. We are all on the same team. We have to be on the same team.

Rishi Srivastava (25:06)
Yeah, communication and trust.

Joe Harper (25:08)
Communication and trust, absolutely.

Rishi Srivastava (25:11)
The next question is, how do you handle cost overruns when a job starts drifting off track? What’s your process for course correction?

Joe Harper (25:20)
We bring the whole team together and talk about it openly because we have that trust. And then we decide what we’re going to do about it. And then once we decide what we’re going to do about it, we can put numbers to that and cost to that. And we change our cost to complete and move forward.

So it’s a very transparent system at KBR because we do have that trust and we built that over 40 years rather than a reactionary environment where people point fingers at each other. Pointing fingers doesn’t do anything. I mean, at the end of the day, you want to fix the problem in the best manner possible.

Rishi Srivastava (26:00)
Mm-hmm.

Joe Harper (26:01)
fastest manner possible and in the least costly manner possible and to do that you have all the team has to be ⁓ open and transparent and we have the great thing about KBR is

Rishi Srivastava (26:10)
totally.

Joe Harper (26:14)
We have people who will raise their hand and say, need help. I need help on this job. I’ve heard that 100 times in our job cost meeting. I need help on this job. OK, what do you need? And then we pitch in and figure it out.

Rishi Srivastava (26:18)
Hmm, well. ⁓

Does your ERP setup support the way your team actually works or do you feel like you work around the system?

Joe Harper (26:35)
No, we work around the system. Delftech is a very fine ERP system. It’s not what I would call a super sophisticated ERP system. So we work around their processes.

Rishi Srivastava (26:48)
Are you looking to move out of Dell Tech in next five years?

Joe Harper (26:51)
It depends on how much we grow. If we grow to 45 or 50 million bucks, then that would be a natural time to look at moving beyond. But really, it’s a fine system until we hit that point or beyond.

Rishi Srivastava (27:01)
Thanks.

So the last section I have here, is on leadership, people, and the future.

What’s the most underrated skill a construction CFO needs to have and why?

Joe Harper (27:16)
I think there needs to be a couple of those. I don’t know that I can answer one. First of all, think a construction CFO needs to be humble.

Because you’re the model. I mean, you’re really the model of the department. You have to be honest. You have to be kind. I mean, in the end, we’re dealing with people. So all people deserve respect. So even in tough times, we need to be kind. And quite frankly, we need to know what we’re doing.

We need to have the skills and experience to be able to perform the management of the position. I mean, if I’m teaching people and I don’t know what I’m doing, it’s like the blind leading the blind. I don’t want to do that. So we need to be competent as well.

Rishi Srivastava (27:57)
So what’s the biggest misconception people have about the CFO role in construction?

Joe Harper (28:03)
think the biggest misconception that people have is you’re good at math. being good at math is great, but the biggest skill that you need to have as a CFO is the communication and the people skills. Because at the end, you’re managing people.

Rishi Srivastava (28:18)
Definitely. Yeah, math is just not the top skill.

Joe Harper (28:20)
And you know as well as

I do, you can pay people all you want to, but if you’re a tyrant, they’re going to leave. And they should leave. And it’s just not right. I mean, it’s just not right to mistreat people. No matter the circumstances.

Rishi Srivastava (28:26)
Yeah, ⁓ be nice.

Yeah.

Definitely. So this is the last question for you Joe. Looking ahead five years, how do you see the role of a construction CFO evolving?

Joe Harper (28:44)
That’s a good question. think technology is advancing now with AI and our world will be different.

I believe that the construction CFO of the future, and quite frankly they’re born for this, is going to be far more technologically competent than I am.

but they’re still going to need the people skills. I think technology is the biggest driver of the future for construction CFOs. I said that they’re born for this. The folks that are going to step into the construction CFOs have never known a time when there wasn’t a computer, when there wasn’t a cell phone that’s basically a computer. So they’re just born.

naturally geared towards technology. Technology does not scare them. There is no fear of technology. It should be easy. That’s, mean, that’s, well this should be easy, you know, and they do it in three seconds. So I think you’re going to see more of that. I also believe, like I said, I believe the successful CFOs of the future are going to temper that with excellent communication and people skills.

Rishi Srivastava (29:50)
As a follow up to that, Joe, what will separate top performers from the rest?

Joe Harper (29:57)
I think, quite frankly, think time and chance is going to play a lot. I mean, it just does. Recognizing that is important that you could be the best performing CFO in the world and time and chance could lead you down a path that’s not as successful as somebody else. That’s just the way it is. But I think that the

top performers will. ⁓

be able to smartly use the technology will be able to be great with people and will be that this is really a key of a CFO role will be able to look really three to five years down the road understands ramifications decision this decision is going to yield this down the road

so that they’ll be able to make or influence better decisions in the long term. think that’s what’s going to separate the top performers from the average performers.

Rishi Srivastava (30:50)
Yeah, the forecasting of the future.

Joe Harper (30:52)
or just having an inane sense of, know guys, if we do this, it’s not really going to pan out down the road. Or this may be a great short-term solution, but in the long run, it’s not going to pay off. Just having that sense about you to recognize the long-term ramifications of decisions is very important.

Rishi Srivastava (30:59)
and

completely Joe thank you go ahead. Vision. I’m having the right vision too.

Joe Harper (31:15)
It’s forecasting, but it’s vision. I think it’s really vision.

Having the right vision or being right in your vision is important.

Rishi Srivastava (31:26)
Yeah,

you think about it most of time when we are making a decision, we are forecasting some right. Okay, this decision is going to be good for us, you know, and just down.

Joe Harper (31:34)
Absolutely.

Or,

I know this is a horrible decision, but I’m going to make it anyway. I mean, we do that too. So, yeah, but again, we need to own that. We need to own that as an individual. We need to own that as a company. We need to own those decisions. And we will live with the consequences. But understanding what the consequences probably are before you make those decisions is very valuable.

Rishi Srivastava (32:04)
Joe, it’s always phenomenal chatting with you. Thank you so much for coming to the show.

Joe Harper (32:09)
Well thank you Rish, I appreciate you inviting me on, I had a good time.

Rishi Srivastava (32:12)
I’m glad.