Why Financial Management is Critical in Construction – Insights from Jordan Anderson

Rishi Srivastava (00:00)
Hello, everyone. Welcome to the construction CFO podcast. I’m your host Rishi Srivastava from Being Human. Our guest today is Jordan Anderson from ACFM TX. Is that right, Jordan,

Jordan Anderson (00:15)
yeah, Anderson Construction Financial Management. A lot of work.

Rishi Srivastava (00:17)
you. Anderson Construction, Financial

Management. Jordan and I are going to go through an interview. Now without further ado, Jordan, my first section is on your background and career journey. So can you walk us through your career path? What led you to become a CFO in construction?

Jordan Anderson (00:34)
Yeah, absolutely. Thanks for having me, Anri. my goal wasn’t to work in accounting in construction. I really did not know about construction. You kind of see an empty lot one day getting cleared out and then the next day you drive by and there’s a building there. Didn’t really think about it too much. Really had no idea all the moving parts that went into.

construction. My goal was to work in public accounting and I assumed I’d be doing taxes and that was the goal and I was in school getting my degree in accounting and a job opportunity came up for a general contractor that built elementary schools, junior high schools, mostly just school district and municipality work.

right, all requiring bonding, which is something, you know, at that time I did not know about. And I interviewed, and again, I had no experience in accounting. I did not have a degree in accounting. And for some reason, they offered me the job. So that was the tail end of 2007. And as you all know, what happened in 2008, the Great Recession, the housing market crash.

Rishi Srivastava (01:32)
Thank you.

Mm-hmm.

Jordan Anderson (01:42)
We went from having three to five general contractors bidding a project and being awarded maybe one in three, one in five, to having 15 general contractors show up bidding on small projects and maybe a bid ratio rate of maybe one in 30. So things slowed down tremendously. I stayed on until the end of 2010.

Rishi Srivastava (02:02)
Mm-hmm.

Jordan Anderson (02:05)
And that’s when I made the leap to go work in public accounting, which was the goal all along. This was just, you know, a job to get out of what I was doing previously. So I worked in public accounting and we were doing a lot of taxes and we had a handful of clients that were construction clients and we did reviews on those. And because I knew percentage of completion and WIP schedules, I was assigned to those clients.

After the second tax season, I was just thinking like, is not how I want to spend the rest of my life doing taxes. And you just kind of feel like you’re cleaning up the mess every year just for them to mess it all up again and having to go back in and fix it. And you talk to them, you know, once a year and it just didn’t seem like you were adding value. You were more of a

cog in the wheel this is just required because I have to have a review I have to follow my taxes you didn’t really feel that value that you were adding it was just more of a compliance standpoint so an opportunity came up for a CFO position for an electrical contractor and a commercial electrical contractor so I took that and I’ve stayed in construction you ever since

Rishi Srivastava (03:20)
That’s great. So Jordan, what was your first job in the construction industry and what surprised you most about it?

Jordan Anderson (03:21)
to.

Well, the first job was my first job also in accounting. So, what, I didn’t have any background experience from working at other companies or in public accounting yet. But what surprised me is how you would have to have 16 different companies working together to build this new school. And how all these people are able to come together from different companies.

I mean, it would be hard to tackle a project just within a company. And now you’re expecting 16 other companies to all work together with all of their various employees and trades and complete the structure. So it’s just really surprising the level of planning and then communication and then just learning. mean, you have architects and then you have engineers and then you have all the different 16, 20 different trades.

out on the project and then a general contractor who’s trying to organize everyone. It’s just the level of communication and everybody coming together at end of the day and getting the job done. And that was just really surprising how that’s even possible, you know, with all that communication that happens. I think that’s why I really ended up wanting to go back to construction because of

that communication and you might have an expert journeyman electrician, a master plumber, and they’re both masters of their craft and they come together and they have to communicate to each other and the communication, mean maybe not always, but at some level there is a respect for what I know and what you know. It’s not one of those things where I know what to do in every situation. They understand the limitations of what they don’t know.

I think that’s probably the most important thing, I mean, for anyone to really learn is to understand what it is that you don’t know or that you think you know that just isn’t so.

Rishi Srivastava (05:12)
and

That’s interesting 16 different trades. So how is your view of the CFO role changed since you first step into it?

Jordan Anderson (05:33)
well…

I would say definitely more on technology. I wouldn’t have thought that was what a CFO would handle as any kind of IT or technology or software, things of that nature. I mean, I’ll have to admit growing up, my older sister was the one who programmed the VHS system. So I was not technical.

Savvy in any which way possible and to this day, know my wife is the one that usually sets up the iCloud and the phones and things like that so not I wouldn’t call myself in that respect but For the most part the accounting ERP system is the number one system that construction companies are using so you have to have some kind of Capability to communicate with

Rishi Srivastava (06:01)
Mm-hmm.

Jordan Anderson (06:24)
you know, expert IT person and try to understand what they’re telling you and try to communicate back to them, you know, issues that are coming up or going on and then allowing them to kind of process that and their judgment. So I think there was definitely a lot more involvement on technology and I think that will, I mean, continue to be the case, especially in construction, unless you’re having, you know, a full-time IT person.

But then again, that full-time IT person also doesn’t understand, let’s say, construction project management or construction accounting, so being able to communicate with people. yeah, communication and IT related items as well.

Rishi Srivastava (07:08)
Yeah, I’m a CFO. I still know so much about IT too nowadays. ⁓ Who had the biggest influence on your approach to leadership and financial strategy?

Jordan Anderson (07:12)
We

I would have to say that the CFMA, Construction and Management Association, was the biggest. Working at a company, was usually, I was the top level, you know, accounting person, so there really wasn’t anybody above me I could go to. The CPAs I worked with.

Rishi Srivastava (07:24)
Okay.

Jordan Anderson (07:38)
lot of times they had a hard time understanding, like, tell me again about this percentage completion adjustment, you know, that’s happening, you know, with the WIP schedule. So there wasn’t, you know, a whole lot of guidance was kind of figured out. So the CFMA was a great resource attending every monthly webinar, reading, building profits, taking a deeper dive into that with leadership and then just.

books. Philip Campbell has a great book on cash flow forecasting for contractors. Susan Scott, Communicate on Communications, I think it was Communicate This, was great for leadership because I mean leadership along with construction all kind of relates back to communication.

Rishi Srivastava (08:21)
Makes sense. CFMA is a strong pillar for construction finance. So the next section we have Jordan is on cash flow and financial strategy. So what’s the hardest part about managing cash flow in construction today?

Jordan Anderson (08:35)
The hardest part is getting started.

Rishi Srivastava (08:38)
Okay.

Jordan Anderson (08:39)
That would probably be the hardest part. mean, you have to get started. just have to… Anything worth doing is worth doing wrong at first. And if you don’t get started, you’re never gonna do it. And you can get started on it and everything’s gonna be wrong initially. And all the project managers are going to complain, say, that’s not accurate, that’s not how it is. And this is the day, and the owner’s like, well, that doesn’t make sense. But you keep at it and…

Rishi Srivastava (08:47)
Hmm.

Jordan Anderson (09:05)
you keep refining that craft and you’re going to land yourself in some sort of relevance. And it of takes me back to my first job in construction, first job in construction and in accounting for the general contractor. I was there for maybe about six months and I told him how much money he was gonna make next year at the end of the year, which was a year from now.

And he gave me a look, like, there’s no way, how could you know? I was like, well, I mean, I have the WIP schedule here. I know where we’re to build. I know where our completion dates are. I know which ones will not be built out based on the percentage of completion. And as a result, I know what our overhead is and the profit margins, and this is where it’s going to be. a year later, I was pretty darn close.

And that’s what I realized, like, I just, it’s fun to do. Figuring out, you know, forecasting where something’s going to end up. And it can also be, you know, very insightful, especially if you’re forecasting that you’re going to lose money. You can take steps today to lessen the hit 12 months from now. But if you don’t know and you haven’t gotten started, well, then it’s just going to creep up on you. You know, what do they say about bankruptcy? How does that happen?

slowly at first, then all of sudden.

Rishi Srivastava (10:23)
Yeah, yeah. So I mean, you’re not just like a storyteller. Your role probably is also like a forecaster here too, in some ways.

Jordan Anderson (10:32)
Yeah, absolutely. ⁓ I mean, the WIP schedule is great to use that for, you know, figuring out billings and what your monthly billings will look like based on, you know, billing schedules and percent completion and then analyzing, you know, average AR days and AP days and, you know, looking at those profit margins and, but yeah, it’s just a matter of, you know, getting started. There’s a lot of resources out there that can help you, especially the CFMA.

They had several webinars on cash flow forecasting for construction that have been very helpful to kind of sharpen my knife, so to speak.

Rishi Srivastava (11:08)
Hmm,

okay, makes sense. So cash flow and financial strategy has that you know, the managing cash flow and has that evolved in the last five to three to five years?

Jordan Anderson (11:18)
⁓ There’s a lot more, you know, software’s available to manage that and I think a lot of even the ERP systems, they have built in cash flow forecasts and, you know, they’re canned out of the system. So it’s not…

I wouldn’t want to 100 % rely on it, but it could be useful as you know to double check and to help you create your own forecast.

And then you know Excel is then kind of a primary go-to for forecasting there are softwares now that That can do that without the limitations of Excel because you know Excel sometimes you you kind of fat-thumb something you mess up a formula you don’t realize you did it and You can avoid all that you know with the software but like with anything you know that takes time to put in to build it and continue to update it you don’t want to

something that takes you you know two days to update you want to be able to update that within you know a couple hours every month.

Rishi Srivastava (12:23)
Yeah, so how do you approach the balance between paying subcontractors promptly and protecting your company’s cash position?

Jordan Anderson (12:32)
Well, I work for two general contractors and…

Most subcontractors understand that the general contractor is not the bank and the general contractor really is a fiduciary of the funds for the project and receiving the funds and then dispersing it to the subcontractors and Ensuring that you’re paying people In a timely manner from once you receive payment and usually you know a contract will stipulate seven days You know the last thing you want to do is remind the subcontractor

contractors

about the contract. You know, it’s like we don’t pay until we get paid. But them understand like, hey, we’ve submitted it. I’m doing everything I can following up with the architect to making sure that they sign the pay application, the engineers signed off on everything, they signed it. It’s been sent to the owner at that point in time. The owner may have certain cut off dates, you know, so I think the biggest thing is advocating for the subs and making sure the architect doesn’t sit on the

application for two weeks and then you miss the owner’s cutoff deadline. It doesn’t go into their next payables check run or ACH run until a few more weeks. Now everyone is out 90 days until they get paid. And that’s what it turns to. in some cases, you do need to understand there are some subcontractors. And part of the bidding process, there may be some subs that you’ll know that will probably have

to advance them payroll at certain times throughout the project and understand that you probably are making money off that contract as well because you could have gone with the highest bid for that trade that has the working capital and cash flow already in place. Well, you took a risk, you went with a lower bid, and now as a result, if you don’t pay them, you know, they might fall off the job site and then you’ll be stuck trying to hire that.

Talk to your subcontractor to finish the work. So I mean it really is a balance. It’s just about communicating Most subs understand that the GC is not the bank but letting them know that you’re doing everything and letting them know what it is that you’re doing specifically on that project Following up with architect and letting them know what the owners pay deadlines are and everything else and just being as open and transparent as possible Just you know makes them feel better that they know

Okay, once you get paid, I’m gonna turn around and we’re gonna submit the ACH and cut that check next day. We’re not gonna sit on it for two more weeks.

Rishi Srivastava (15:05)
Yeah, communication. So what’s your take on pay when paid clauses? Do they actually help contractors or create more friction?

Jordan Anderson (15:14)
paid when paid, paid if paid, which I guess is not legal in all states, but you know, would you pay for something that you don’t have? mean, would you, you know, like who would say, I want to pay you for this item?

and you’re never going to send it to me, you know. And I think individually we understand that, but at the same time, the general contractor is not the beneficiary or the owner of that project. If they’re building, ⁓ let’s say, a hotel, once that hotel is complete, the general contractor is not receiving revenue from people booking those rooms, right? So the idea that the general contractor would have to pay the subcontractor

Contractor if the owner hasn’t paid them You know doesn’t make any sense and imagine a world if you didn’t have that cause Or people didn’t understand. I think the cause is just really more so people understand that they have to get paid This is not their project. They’re being paid by somebody else so that way the subcontractors understand that they’re not the owner of that project You know to receive payments It’s just really I think a communication tool

You know if anything Now it’s different scenario if you know the owner doesn’t pay there wasn’t bonding Then everybody really kind of loses out at that point But I think you would need to have it otherwise general contractors would have to be the bank and then the price would probably increase 20 or 30 percent and Then both general contractors wouldn’t be able to bid it unless they were sitting on piles of cash and they owned a bank themselves

you

Rishi Srivastava (16:50)
Yeah, makes sense. Yeah, so next question is, how do you think about financial risk, whether it’s tied to project delays, retainage or bonding?

Jordan Anderson (17:01)
What was that first part again?

Rishi Srivastava (17:03)
How do you think about financial risks, whether it’s side to project delays, retainage, or bonding?

Jordan Anderson (17:10)
Yeah, I mean those are all definitely, you know, financial risks on a project.

Delays especially for a general contractor where you have your general conditions and the project was supposed be completed in 12 months and now it’s 18 months and you’re carrying those general conditions for another six months and yeah, good luck getting the owner to pay you for that even though it was the architect or the owners themselves taking too long on making selections, right? So yeah, that’s real ⁓ risk.

And, you know, what do you do about it? As a general contractor, you could maybe add in extra three months as a safety net on general conditions just in case. But then you might out-price yourself, you know, with that bid as well. So if anything, I would say that there needs to be clauses in the contract if the time goes over as no fault of the general contractor or subcontractors, but they should be paid.

general conditions and then retainage that’s a big risk for the subcontractors. You know if you have it’s a big difference between 10 % and 5 % and if you’re holding 10 % on subcontractors and the subcontractor has to pay out labor every week they have to buy the materials and as a result that net amount that they receive needs to cover all of their expenses and their overhead.

So the more retainage you have, the more profit margins that the subcontractors would need to have because that’s going to be cash they don’t receive. So I think paying out retainage halfway through a project is a good idea to kind of help that or include those pauses if possible if the owners are available to that. And obviously the subcontractors are doing a stellar job and they’re always out there on schedule doing their work.

Also, yeah, that definitely is a risk and it drives up the price as well. And what was the third option?

Rishi Srivastava (19:07)
The last one is bonding.

Jordan Anderson (19:09)
Bonding you know bonding is Sometimes as long as a subcontractor Has a bond program and even though they’re not necessarily bond on that project if they have a bond program Set up that means that somebody else has vetted those financials

looks at it and they’re ready to bond them. And yeah, maybe the price does go up, you know, 3%, but the general contractor is bonded and all the MEP trades are bonded. That would reduce the risk, but you know, it comes with a cost.

Because I mean, no one’s actually planning on having to settle up with the bonding company and they fail because that would cost time and money also, you know, to replace that subcontractor. But yeah, all of those, yeah, absolutely, all of those things can increase the price for sure. know, retainage, bonding, but for that peace of mind, you know, it does cost, it will cost more.

Rishi Srivastava (20:07)
Next section is on technology and automation. Can you walk us through the key software tools your finance and accounting team uses daily?

Jordan Anderson (20:16)
Well, when I worked in industry, it would be mostly the accounting software.

And Excel would be used maybe more as like a sandbox to plan. And I believe if you’re using the right construction accounting ERP system, you will not be relying on Excel. And if you have the right project management system in place, hopefully maybe it’s included with your ERP accounting system, you wouldn’t have to rely on Excel as much either. know, so having the right software I think really

is key. I’ve always, I’ve enjoyed Procore. I think Procore is an amazing software. The biggest concern is the price. You know, the price of Procore, it’s expensive and each year it goes up and it’s also based on a percentage of revenue. So I think it kind of gets people upset. They don’t want to use Procore as a result, but that is a great tool. I’ve always liked Sage 300 for construction and real estate.

Sage intact is it’s good also, you know, it’s cloud-based Acumatica foundation, you know all great softwares to use And some of them even just use QuickBooks or QuickBooks online or or zero and those could be used to A lot of cases you find yourself getting a software with all of these great options But you know, nobody knows how to use all these options and so they’re still using Excel

they’re trying to do things themselves, so they’re not really fully utilizing the capabilities. I myself, I use an advisory software called Fathom, and I’m able to take in, import all the client’s data after everything is reconciled, WIP schedules are created, balance sheet accounts are reconciled. I’ll put it into Fathom, and that will help me save a lot of time with creating forecasts and management reports.

you

Rishi Srivastava (22:07)
So which tools are indispensable and which ones do you tolerate?

Jordan Anderson (22:11)
I mean Excel for both. You both tolerate it and it’s indispensable.

Rishi Srivastava (22:16)
Okay. So what’s one technology investment that paid off and one that didn’t?

Jordan Anderson (22:23)
I guess, you going back into industry, I would say most things that were implemented, thankfully they did work out. We didn’t have any issues and it remained to be that same way. We didn’t have to revert to something else. The only thing could say is…

You know, once you make a decision on a software, you need to stick with it. Because if you decide like after a year or two, it’s like, know what? It’s too much, we don’t like it, and then you switch to another software, you’re gonna find yourself.

in a spiral, it’s kind of like the logic used if there’s three lines and you get in line one time, then you notice your line’s moving slower. If you change line the second time, that might be optimal, but if you were to change lines a third time, you probably would have been best just staying in that first line. So I think just whatever technology you do adapt, stick with it. Make sure you really understand from users of that.

software

and find out what it is that didn’t work the way they were hoping it would work and finding that out first. You don’t go in blind thinking this is going to be a magic wand answer to all of our problems if we get the software because that is never the case. You’re living a fairy tale dreamland. If you think there’s going to be one software out there that’s going to solve all your problems, that’s just not the case.

Rishi Srivastava (23:51)
So have you started using any AI based tools for invoice processing, forecasting or reconciliation? Why or why not?

Jordan Anderson (23:52)
Thank you.

There has been, I’ve had a client who used chat GBT to analyze six years worth of invoices from a vendor.

And that was interesting to see how they charge different prices on the same day in different branches throughout the United States. So that was interesting to kind of analyze that information. As far as actual AP, I’ve used the Sage product before with Sage 300, Sage paperless, it kind of had like a, I guess it’s called an OCR, and it kind of recognized PDFs. And that was okay, but my main experience has been

with being human and automating invoice processes with being human. And I had a client sign up with that and that seemed to really streamline the AP process and automatically fill in. And you have a lot less errors when a machine is typing a number because, you know.

As humans, we’re not perfect. We sometimes miss a digit or mistype something. And if you have 10 pieces of data you have to manually enter in. There’s also that redundancy. And that kind of leads me back also to Procore. Procore, if you’re a general contractor, your subcontractors can be entering in their invoice and all you have to do is approve it and then submit it to your ERP system. You don’t have that double entry. Even though you may not think it’s double entry with

in your company it is double-entered because somebody else had to enter it in, the subcontractor, and then you had to enter it in again. So Procore can also bridge that gap if you’re a general contractor and you have mostly subcontractors that perform the work. But as a subcontractor, think, yeah, an AP automation tool that uses AI is definitely something to look into to kind of gain some efficiency

efficiency and accuracy with the system.

Rishi Srivastava (25:52)
What would it take for you to fully trust AI in your financial workflows?

Jordan Anderson (25:59)
fully trust AI. You know, if I pull money out of an ATM, I’m going to count that money right there. So, I mean, which I guess is kind of funny because obviously the ATM never makes a mistake spitting out cash, right?

Rishi Srivastava (26:05)
Hmm?

Jordan Anderson (26:14)
But I still don’t trust it. I’ll still count it right there to make sure I got my money. Before I put it in my pocket. So fully trust. Probably, you know, never. I think you always need to double check. If you’re not double checking, you’re just.

Rishi Srivastava (26:19)
Hehehehe

Jordan Anderson (26:30)
assuming things are correct. And I mean, even chat dbt tells you double check this information and maybe incorrect, right. And that happens all the time. And I think there’s always going to be something that needs to be checked. But yeah, do I use

You know different AI like yeah copilot and chat GBT Absolutely hundred percent and do I plan on using it more? Absolutely a hundred percent, you know, I’m hoping that manual entry and bookkeeping is a fig of the past You know, gotta understand that 30 40 years ago before computers You probably had ten accountants in a room one of them writing down with a pencil in the AR journal and then writing the sales journal

and all, and at end of the month closing it out, computer comes along. It goes from 10 people to one person using a construction ERP system and a computer, and they can handle everything with just a couple of keystrokes, right? So even more so now, I think this will be the next great leap. Well, it will eliminate humans doing data entry.

Rishi Srivastava (27:38)
Yeah, that makes sense. If you could wave a magic wand and build the perfect construction finance tool, what would it do?

Jordan Anderson (27:47)
Magic one, glad you brought that up again because as we know that doesn’t exist. But let’s say it did exist. And if I could dump a Gantt chart which is, know, the project schedule into that tool along with our schedule values.

the subcontractor’s schedule values, and if it could create a billing schedule and then analyze that contract with that owner to see how fast they pay on that project, taking into account that maybe that owner pays faster for hotel projects than they do on…

another type of project or depending on what region or area they’re in, if you can somehow figure all that out and then create a cash forecast for that project and then do that, you know, 100, 1000 more times depending on how many projects you have and creating a master schedule with the cash flow, I think that would be the key because there would be, and then it could also integrate with the

and then make real-time decisions like well, they actually paid this one slow, but then they paid this one Sooner and they got caught up and they can make real-time predictions For you know future ones and also taking consideration that retainage takes six months to pay up You know and if you’re a subcontractor You know thinking about that that if you were the concrete and foundation person

and that project had the 18-month schedule, you may not get paid retainage for two and a half years, right? So something they can just drag and drop into the system, create it, and then replicate it, and then summarize it onto a master budget with cash flow. That would be ideal. If anyone’s listening and you’re tech savvy, please make it happen.

Rishi Srivastava (29:38)
It must be a powerful magic wand. So the next section in Jordan is on reporting, job casting, and ops. What’s the one report you pull every week without fail? And what are you scanning for?

Jordan Anderson (29:51)
So when I worked in industry, would have to, I’m probably thinking of working for a subcontractor. The one report is the job cost detail report looking at number of hours put in that week on that job site and looking also at any expendable tools and supplies purchased, rental equipment.

and any materials are coming on to that job. And with that report, you can identify a lot of things, especially if materials are showing up charged with the job, but they haven’t received any materials yet, and there was a large increase in the materials in that week. That would be a good question of maybe we should hold on paying for that material until we receive it. Also, maybe somebody’s hockeying into the wrong job because there’s a big influx of labor hours.

So, you know, at a granular level, with a subcontractor that has labor on a job site, looking at those labor reports and making sure that, you know, it makes sense and that, you know, that ain’t right meter goes off if something spikes up too much in any given week.

and realizing that. So that’s definitely a report. At this point, since I’m not working in-house and I’m, you consulting and advising subcontractors and general contractors, it’s really more of a monthly thing. It’s really looking at cash flows, working capital ratios, and those would be the biggest things, indicators to look at for me. And of course, any underbillings on their way.

Rishi Srivastava (31:24)
How do you ensure your project managers or field teams actually understand and use the financial data you give them?

Jordan Anderson (31:34)
Well, I guess the first thing is understand that they’re not using it.

at all, you know, and they don’t really understand what it is you’re giving them or why this is the case and why I need to know that. So it kind of goes back to really communicating and so they understand why it’s important and positioning on how does this add value to the project manager. Are we just doing this because accounting is telling us to? How is this adding value to my project? What is this information

telling me that I don’t know, I’m just going to show up, manage the project, do what I know, how are these numbers helping me? So positioning the numbers in a way that they want to see, maybe asking them also. If you ever try to implement a new software and if you don’t get buy-in from everybody who’s going to be using that software, expect for the implementation to be the roughest ride of your life.

because you’re trying to tell somebody, you have to do it this way from now on.

they’re not going to be on board. So the same approach with project managers, ask them what is it that you think is important that you’d want to see on these reports and try to incorporate some of the information they’re looking for along with the information you know that’s being monitored and measured, you know, each week and each month and kind of put that together for them and that will help kind of create buy-in with the information that you’re trying to. Don’t force feed anybody, you know.

to pick up the spoon and feed themselves. You’re just going to put it in there, but don’t feed them steak and lobster or something they like. Don’t give them mush, you know. They’re not going to want to eat it, right? So just present it in a way that they want to understand. So they want to, and they’re looking forward to those reports.

Rishi Srivastava (33:14)
Yeah.

Yeah, the value communication. So how do you handle cost overruns when a job starts drifting off track? What’s your process for course correction?

Jordan Anderson (33:32)
Well, the first thing, you know, some cost overruns. So you’d want to go back and look at your bid, the estimate, you know, depending on your general contractor or subcontractor. Let’s pretend this scenario that you’re a subcontractor, you’re having some cost overruns, you’re looking at your whip, your under builds, you know, what’s going on. It’s showing that you’re 80 % complete, but you’re only 50 % build out, let’s say, right?

So you’re underbilled and you’re looking at it, you’re like, well, cost-wise, mean, there’s no way we’re 80 % complete, right? And they know that from a job site, a walkthrough, that they’re not. So going through at a high level initially and looking at your bid.

and looking at what you had in there for materials, what you had in there for equipment, what you had there for expendable tools and supplies, what you had in there for labor, right? And then go through and identify based on those budgets and where you think you’re at and, you know, working with the project managers, figure out is the cost overrun because of material. And just kind of start whittling it down to a granular level on the material if you have to. Look through every single material invoice

to that job, you know, may invoice that was supposed job that somebody fat thum right? Easy fix. Maybe you what happened? We couldn’t from that supplier uh becau because during covid rig we had to go buy it from a rates increased. And so li

the material and so we do a post project, you know review at the end of the project too There’s anything that went over during the post project review and every single project I recommend to do that figure out what went wrong things that went right and try to apply that retroactively in your estimating right because maybe there’s experimental tools and supplies it just not really accounted for on You know this certain type of projects or vids so then going forward the future estimating knows about it

You have to communicate project management has to communicate this information Somebody has to identify it right and flag it and somebody has to go and find it You have to communicate from project management beyond so maybe you informants on the job and then back to estimating also To make sure everyone’s on the same page. So again communication communication communication and Yeah, look at everything Hopefully before you know, it’s too late if you’re purchasing

manager sees that the bid is for this much and this was the quote and they’re buying it for a larger price they should be jumping up and down on the project manager and maybe you know we can wait 24 hours and try to find a better price with another supplier somewhere else or maybe you know you could lean on your supplier a little bit and try to negotiate a better price as well but yeah if you’re just if you’re always just in a position of

up and get it done, you’re going to run into problems, guaranteed.

Rishi Srivastava (36:43)
Very insightful. Does your ERP setup support the way your team actually works, or do you feel like your work around the system?

Jordan Anderson (36:44)
Thank

Yes, I would say it definitely works in-house.

Previously working inside, you know, construction company, our ERP system was a construction specific ERP system and we were able to use that and work with it and even, you know, make additions to that software. I wouldn’t say we had to work around, you know, again, is there one system that encompasses everything? No, you know, so yeah, is there.

things that you might have to still kind of work through or work with in Excel? It’s like yes, but that’s only because you’re going above and beyond of the basic day-to-day things. So you’re going to use Excel as a tool and now hopefully with a little bit of help of AI as well.

Rishi Srivastava (37:38)
sense. So the last section here is leadership, people and the future. What’s the most underrated skill a construction CFO needs to have and why?

Jordan Anderson (37:49)
Communication, being able to communicate effectively. Because you can be some kind of financial wizard or genius, But if you can’t communicate and tell the story to other non-financial people, what good is that information? Right? Because…

you’re not the only person running that company. You need to communicate to others what things maybe are going well, and especially what things are not working well, and being able to communicate that. And not just be an observer. There was something about, I think, a project management course. And it mentioned, are you a project manager or a project witness?

There’s a big difference. I think there’s a lot of project witnesses out there. like, well, are you a financial manager? Are you a financial witness? Are you just witnessing the transactions? Or are you taking this information?

and telling the story and understanding the story that this information is telling you and then are you extrapolating that information to kind of figure out where things will be because that is ultimately what you’re trying to do and I think in our very nature we have a hard time figuring out what the future is going to look like. Just look at a video from the 1980s they’re to be like in the future that you’re

2020, this is what the world’s gonna look like. It’s comical, it’s ridiculous. They’re completely off point. We don’t understand what the future looks like from the present. We just don’t, you know? So just taking a stab at that, focusing on that forecast. I mean, especially when it comes to financial, you’re gonna do the best you can with what you know now in the present, right?

Rishi Srivastava (39:17)
Thank you.

Yeah,

yeah. What’s the biggest misconception people have about the CFO role in construction?

Jordan Anderson (39:47)
they just, I mean, we don’t need to involve them with project manager meetings. We don’t need to involve them with estimating. No, they just, they stick over there, you know, in accounting. Leave them out of it. We don’t want them there. They always say no to everything. We can never spend any money. We can’t do anything. You know, they’re the bad cop. They’re the mean parents, you know. So not involving the CFO is…

That’s probably the biggest issue, just not involving the CFO. Whether, you know, it has to do with human resources, warehouse, project management, estimating, you know, whatever it is, whatever area, department you have in your business.

the CFO, it would be good for that person to have relationships with all those people and communicate about what’s going on. And that’s the biggest thing right there, just involving the CFO in every aspect of the business if you want. Think of them as operations manager just with the folks on account.

Rishi Srivastava (40:54)
Hmm. Well, one thing is ⁓ you as a CFO are a lot of time writing the report cards of these project managers, right? Hey, you are bad project manager. You are a good project manager. So, you know, people are nervous with you.

Jordan Anderson (41:09)
Right? I mean, that’s true. They can be nervous.

Because of the the numbers, you know, they’re being told but if those numbers repeat in a bad way from project to project With a specific project manager. Well, I think well I understand why they’re probably cautious because they’re being a project witness and they’re not managing the project, right? And so it doesn’t want to be called off. But then also maybe You know what were they saying? What what’s measured gets done, right? So

what if it’s being measured incorrectly?

And that’s when it goes back to the buy-in, where the project managers need to buy in also about how they’re being measured on their tasks. And if they’re not buying in also and they didn’t help, you know, let’s say you get 10 project managers and you said, let’s create some KPIs to see how well we’re managing things. Well, a project manager that was just given a really low bid from estimating that it had only a 5 % profit margin, you know, is overheating.

Are

saying well, I only have a five percent profit margin This is going to skew all my other projects is going to come out bad. Well, we probably should measure that one You know differently because that one started off at a five percent margin or when you find out that Estimating that thumb the number and they left out a zero You know somewhere in that number and all their quantities are off or you know, the pricing is off and things like that Well, they shouldn’t be held accountable for that right there should be

be exceptions made. I think just getting their buy-in and how they’re being measured and what stick they’re being measured with would go a long way. So it just really goes back to, again, communication and getting that buy-in from everybody involved. they’re not, CFOs are not there to harm the project manager. I’m sure every project manager wants to manage their projects effectively. But if there is a project witness, you know, if you have them buy-in to how it’s measured, you’ll be able to identify

that project witness very quickly.

Rishi Srivastava (43:11)
So last question here is looking ahead five years, how do you see the role of a construction CFO evolving?

Jordan Anderson (43:20)
I think it will kind of continue the way it probably has been in last five years, which is involved more in operations, more with IT, more with human resources, more in really all aspects of the company. I think that will continue. I’m hoping that it won’t be just seen as the bean counters keeping track of the costs and telling us that we’re doing a bad job.

job

type of situation, but a strategic partner. I think it’s already changed in the last five years. I think we’ll just kind of continue to change. Like, you know what? That is insightful having the CFO being a part of these conversations that normally maybe wouldn’t be, you know, invited to.

Rishi Srivastava (44:03)
So a follow up to that Jordan is what will separate up performers from the rest?

Jordan Anderson (44:09)
top performers, top performing CFO in accounting, maybe in construction altogether. I think there’s a mindset that somebody has. And there’s a lot of very competent accountants.

who are controllers and they keep track of all the numbers and everything’s in the right place. And they’re very good at that. They make sure every penny is accounted for and everything reconciles to the penny. And that is, you know, what they’re good at and that is what they’re focused on. And everything that they do is based off of their experience and what’s worked in the past. The difference that separates

you know, controller from a CFO or, you know, exceptional. But I don’t know, I mean, I think it could be an exceptional controller doing that, but it’s the mindset that you’re thinking strategically. You’re not thinking…

Well, based on my experience and how I’ve done things, I’m going to apply that knowledge into this problem, this scenario. You’re going to think, what is that magic wand tool? I wish I had. And you’re going to think, well, if I have that magic wand tool, what questions can I ask it? Or how would I set up the parameters for it in order to get the answers that I want? And so kind of thinking in those terms, because,

eventually we will only be limited by the questions we ask, right? So asking the right question, figuring out those questions, and then being able to, you know, arrive to the answer. So not necessarily, it’s not about knowing everything, it’s about knowing what questions to ask and how to articulate, you know, asking those questions and thinking strategically. And that is really what makes a CFO.

And that’s probably also what would make a great operations manager as well that’s thinking strategically or a CEO. For that example, the operations manager would be more like the controller who’s just making sure the operations are working, right, and making sure the machine is oiled and greased and the gears keep turning. But it’s the CEO who thinks about purchasing that new machine and how would that look like and what can we do or what can we make.

Where is the supply and the demand and where are those things, things that are kind of outside the box. So yeah, just a strategic mindset really with everything you do because it’s not just limited to accounting, right?

Rishi Srivastava (46:41)
Jordan, thank you so much for your time.

Jordan Anderson (46:44)
Rishi, thanks for having me on. Appreciate it.