How Construction CFOs Can Lead Through Risk, Data, and AI – with Neil Shah (CFMA)

(00:00) Welcome to Finance at the Job Site, the podcast where construction finance meets the field. I’m your host, Rishi Srivastava, founder of Being Human. In each episode, I sit down with construction CFOs, controllers, owners, project managers, IT leaders, ERP consultants, and industry experts to uncover how they connect the back office with the field, choose and implement technology, manage cash flow, and drive profitable projects.
(00:28) Whether you’re running the numbers, leading the team, or designing the systems that keep projects moving, this is your place to learn what’s working, what’s broken, and what’s next in construction finance. Today, our guest is Neil Shah from CFMA. Neil, welcome. Rishi, thank you for having me. The first section here, Neil, is on your background and career journey.
(00:49) You have had a fascinating background, aerospace engineering, real estate services, technology, and now construction finance. Can you walk us through that journey and what ultimately drew you to lead CFMA? Yeah, I mean, it’s interesting how an aerospace engineer joins a construction financial management association. So I began life, I wanted to fly airplanes.
(01:11) Airplanes, I thought, were the sexiest business known to man. I was going to join the Air Force and was in the ROTC, accepted a reserve commission coming out of college, so I didn’t go active duty. But I worked for an aircraft engine company for the first 10 years of my career and was managing a fleet of aircraft and was recruited to kind of an intrapreneurship, a startup within an insurance company to put together a facility management outsource company as part of their insurance business. So managing a fleet of aircraft to
(01:43) a portfolio of buildings was a very easy transition for me and I never left. So over my career, I’ve worked on various different outsourcing and kind of fleet or portfolio related services. out of the UK, which is a global professional body. We needed somebody to run the Americas, and that’s how I got into the association world, was 13, almost 14 years at RICS, and here I am at CFMA.
(02:14) What is RICS? RICS is the Royal Institution of Chartered Surveyors. It’s about a 155-year-old professional body. They offer qualifications in everything from dirt to disposition, land surveyors, cost consultants in construction, project managers, brokers, appraisers, investors. So everything throughout the life cycle of the built environment.
(02:38) And we’re obviously at CFMA a very important part of that because construction is where we live, work, and play. And it’s contributing to building cities and economies. And ultimately, what we’re trying to do at CFMA related to what I did at RICS is really build recognition for the role of the CFO, controller, accounting professional in the industry. Yeah, they are related in a lot of ways.
(03:02) What lessons from your time in aerospace and technology have you brought at the buildings that we build. There’s some very similarities in terms of the science and the way that you look at life cycles. So a lot of what I learned in managing a fleet of aircraft comes into the construction finance world because what we’re doing is really building something to last.
(03:43) As it relates to construction finance and CFMA specifically, all of these businesses that I’ve been a part of, although they’ve been capital intensive or high-tech organizations, they’re all about people and they’re all about communicating. And it’s all about modifying behavior to get to the right outcome and ensuring that your team is aligned to those outcomes.
(04:02) Yeah. The physical world that we live in, that is tough to build outcomes. Yeah. The physical world that we live in, that is, you know, it’s tough to build that physical world. You’ve held roles in strategic partnerships and market engagement at RICS before CFMA. How has that global perspective influenced the way you think about construction finance in the US? Well, you know, the old adage, if you want to go somewhere fast, go alone. If you want to go somewhere far, go together.
(04:30) Part of market engagement and part of developing partnerships is about going somewhere far, right? So there’s two aspects to that, actually three. One is having the right member-staff partnership so that we can engage our members where they are, what segment they work in, what geographies they work in, what part of the construction ecosystem they’re a part of so that we can develop their unique value proposition.
(04:55) Number two is bringing partners in the ecosystem, associate member firms as we call them, to be able to contribute to that enabling infrastructure that we’re creating. And then the third is we’re not alone at CFMA in facing the war for talent or the advent of AI and infusing it or mental health and suicide prevention or any of the things that are about cultivating the next generation. And the more I talk to other associations, the more I see that their challenges and opportunities are similar to ours.
(05:27) So we can work on those together. The next section here, Nils, on construction finance and industry trends. From your vantage point at CFMA, what are the biggest financial challenges facing contractors today? Wow.
(05:50) You know, there’s a lot of uncertainty in the market, you know, where interest rates are and where they’re going, the impact of tariffs on material prices, scarcity of labor, skilled workforce, and potentially labor costs rising. So those are all pressures on what’s already a high risk, low margin business. And, you know, one of the interesting things that somebody told me last week is contractors take a lot of risk on, but they may not appropriately price for that risk and the kinds of margins that they’re getting.
(06:11) So one of those big challenges is ensuring that they’re in a position where they can mitigate risk and protect that margin that they’ve gotten and not have compression of that margin. And what’s interesting for us as CFMA is the role of the CFO is an imperative to making sure that we’re not only managing those financial challenges, but putting risk mitigation aspects in place as well.
(06:36) Yeah. And a lot of these contracting firms, the CFO is the CTO, they are the CRO, you know, they’ve got so many hats, the chief legal too. You know, they’ve got so many hats. They’re chief legal too. You know, what is your take on that? Yeah, well, you know, we believe that the body of knowledge requires not only debits and credits and financial reporting and budgeting and planning, but HR is an increasingly important component because the CFO is getting involved in talent decisions.
(07:03) IT and investment are increasingly important. Risk management, as you said, for sure, but also things like contractual review and making sure that the contractual commitments a contractor is making are clear. Even equipment, for that matter, right? And some contractors, in fact, many have heavy equipment or a fleet of trucks and ensuring that the life cycle of those assets flow appropriately into the risk mitigation scenarios that they’ve got in place is an important part of the puzzle.
(07:33) How do you see the role of the CFO and controller evolving over the next three to five years, especially with the rise of data-driven decision making? Well, I think, you know, our goal is to really build recognition for what they do today, as well as what they’re going to impact in the future. And, you know, being human, your firm is in the AI business.
(07:55) And obviously, being able to take large bodies of data and being able to convert that into information, knowledge, and ultimately decision-making is critical. So I see the CFO and controller being much more, if they’re not AI natives, much more adept at using artificial intelligence to get through the lots of data that they have in order to get to that point where they’re making decisions that’s data-driven.
(08:20) Now, the role of the CFO is, as I said just now, is more than just budgeting and planning and financial reporting. So that to me is going to be critical to continue evolving that role. What sense are you seeing around construction company growth? Are members more focused on scaling, risk management, or margin preservation right now? You know, a lot of that’s a function of the economic cycle as well.
(08:47) And, you know, you can get 10 economists and you’ll get 10 different opinions on where we are in the cycle. But if we are seeing inflationary effects on material pricing and labor, as I said before, or uncertainty on interest rates where developers may not be starting projects, new projects where there’s more competition, I think there’s going to be continued pressure on margins and continued risk mitigation that’s going to be necessary in order to protect those margins.
(09:17) Again, I’m one that thinks we’re at the end of the cycle, maybe not the beginning of the cycle, but you might ask another economist and they may feel differently. A lot of it depends on what that contractor does in their specialty. If they’re building data centers in the Southwest, they’re in a very strong phase of their cycle.
(09:35) If they’re building office buildings in the Northeast, they’re in a downward trend in their cycle. So the asset class that they work on, the geography that they’re in has a lot to do with what macro exposure they have and where they are in the cycle. And then ultimately that defines what their focus is, whether they’re taking advantage of scaling because they’re building all of those hyperscaling data centers.
(09:59) They’re trying to preserve margin because the competition is so tough for the asset class or the geography that they’re in. Yeah, that’s such a good point. Actually, when I think about it as not an expert on construction industry, you know, I don’t think that all these contractors, they’re so different from each other.
(10:20) You know, they’re like this segments like you were mentioning too, you know. You know, like the segments like you were mentioning too, you know, and there’s very kind of different groups of contractors living in the same umbrella under CFMA. They are. And actually, you know, up until recently, we looked at construction as a homogenous group and maybe general members and associate members, general being contractors and associates being the enabling infrastructure of associate member firms. But even in the general world, we’ve got GCs that are doing commercial
(10:51) non-residential work. And in that commercial work, there’s different asset classes, whether you go from data centers to office to warehouse. And then you’ve got residential contractors who are building single family detached. You’ve got heavy construction contractors that are building the infrastructure, the roads, the bridges, the airports.
(11:10) And then underneath all of them, you’ve got a whole cadre of specialty trade contractors without whom the industry doesn’t function because they’re the craftsmen, right? They’re the ones that specialize in all of the special trades that enable us to package these assets together. Yeah, it’s a very complicated industry we are in.
(11:33) CFMA has been a strong voice in benchmarking and best practices. What KPIs do you think construction finance leaders should be watching most closely right now? Well, we’ve talked a lot about margin. We’ve talked a lot about the value at risk relative to those margins. You know, backlog certainly is an important metric, but also cash, right? There’s also the sense that, you know, contractors don’t run out of work, they run out of cash.
(12:05) your financial position is where you’re managing cash effectively, that you have a clear understanding of your AP and AR processes, and that you have a clear path towards how that growth is coming is critically important. So those are some of the KPIs that I would say that construction finance leaders and contractors are watching. We do something called a financial benchmarker, contractors are watching. We do something called a financial benchmarker.
(12:32) And our financial benchmarker captures data from financial statements and allows a contractor to see what good looks like. And that good is, you know, a mechanical contractor in the Midwest. What should my debt ratio be? What should my capital ratio be? What should my margins look like? Allows them to actually benchmark what they’re doing. So KPIs in this world of data-driven decision-making are critically important.
(12:50) The next section here kneels on leadership and strategic planning. CFMA is unique in its blend of education, peer networking, and industry advocacy. How do you balance those three pillars in your strategy as CEO? Well, I mean, we were formed in 1981 by a gentleman who was our first chair and who was the first president of CFMA, David Casey. His focus was construction financial education.
(13:19) They were CPAs or CFOs or contractors who weren’t necessarily finding in the marketplace education that’s specific to the concepts in construction finance that we all deal with, whether it’s retainage or percentage of completion accounting or how to generate a WIP report. So that’s a cornerstone of why we exist.
(13:44) From that, we grew different chapters across the country and learned the community that’s created as a result of the country and learned the community that’s created as a result of it is one of the reasons that people stay. So they come for the education, the cornerstone, and they stay because of the chapters, the lifeblood of the organization. The third pillar that we’re increasingly focusing on, this whole notion of advancing the industry and being in a position where we can speak on the issues that matter to construction as an ecosystem, as an industry, and not just the construction finance ends.
(14:11) Things like suicide prevention and mental health, things like looking at technology and how it impacts what we’re doing, things like fighting the war for talent and attracting new talent into the construction sector. An example of how we’ve done that over the years is the Construction Industry Alliance for Suicide Prevention.
(14:29) It’s now probably 40 or 50 different organizations, but CFMA was instrumental in driving awareness around the fact that, you know, suicide, death by suicide is five times more prevalent than death by safety issues on a construction site. So we’re really proud of that work and we want to build on that for other industry-related topics.
(14:52) In the annual CFMA conference, I met a controller and one of her people died on the job site. I could see the kind of despair she had in her eyes. And this industry where we operate in, you know, stress is tremendous on at least the field operators. Yeah. Yeah, it’s hard enough to get talent into the construction industries, thus the war for talent.
(15:21) We need to make them feel welcome and we need to take care of them when they’re here. And I think it’s a holistic approach to bringing people into the industry. It’s not just about bringing them in, but it’s about keeping them here and keeping them safe. What advice would you give to finance leaders who want to become more strategic partners in their organizations rather than just the numbers people? I think a lot of our members are not just the numbers people by recognition.
(15:47) The core of CFMA membership, the general members come from middle market firms, right? They come from $50 million mechanical contractors to $750 million general contractors and everything in between. They already do quite a bit within their organizations. You talked about it before. So they are already being asked to do these things.
(16:10) What I would say is that some of the strategic questions that are evolving in this industry need their intellect and need their experience. But as numbers people, right, you’re very much into the detail and you need to be able to see the forest from the trees. So being in a position where you can work the detail with your controller to drive the outcomes that you need on a financial statement basis, but also be able to pull back in altitude and kind of see the horizon of risk and see the horizon of talent and see the horizon of a technology investment project that allows
(16:45) them to actually be the strategic leaders that I know they are. Well, I was working for a boss in commodities trading world, and he used to call finance people historians and report writers. Yeah. So I was in the risk business. So we were calculating risk every day, like value at risk alone. But he used to make a lot of fun of our contents.
(17:07) What is your take on that? Well, I mean, increasingly, if all you’re doing is looking in the rearview mirror, you are a historian and you’re writing books about history. Call them balance sheet or cash flow statements or income statements. statements or income statements.
(17:29) But I think increasingly when you incorporate all of those other domains and functions, you just need to start looking through the windshield about where the business is going. And by having that strategic partner, that strategic finance leader, you can make better decisions on what projects you’re going to take and which projects you’re not going to take, on what kind of capacity you’re going to pursue, both from a talent and a bonding standpoint or a working capital standpoint, whether or not there’s going to be strategic acquisitions that are going to help you grow the footprint as opposed to organic growth.
(17:54) You know, as succession planning takes hold in your organization, whether an ESOP or private equity or some management buyout or options that are more viable, the CFO is at the center of all of those conversations. Yeah. Now, it’s not just a rear view mirror. You’ve also got to look to the windshield too, yeah.
(18:13) It’s absolutely the windshield. Can you share an example of how CFMA’s strategic initiatives have helped shape industry best practices or standards? have hugs shape industry best practices or standards? Well, I think I already spoke to the suicide prevention and leading into CISP. You know, we’re trying to do more work, not only in suicide prevention and mental health, but in other areas with other organizations as an intentional strategy to amplify our voice throughout the construction industry, but also to build recognition for our members.
(18:45) One of the things that I think, you know, as we think about the future, looking through the windshield again, as we modernize our financial benchmarker, I increasingly see that as being a CFMA benchmarker that sets the standard for what good looks like in the industry, what good looks like from a financial perspective, what good looks like from an equipment perspective, maybe even what good looks like view themselves and maybe even give them the means to appropriately price risk, increase their margins,
(19:31) have a true impact on pricing predictability in the marketplace. The question is, the data going into Benchmarker, how do we ensure the quality of that data? It’s a great question. And yes, an audited financial statement ensures that you’ve had a third party CPA firm look at it. But also, you know, we’ve certified individuals with our CCIFP certification that covers all of the domains in our body of knowledge.
(20:01) And I think the trust and confidence that you can have in that data and in those statements is strong if you’ve got a CCIFP that’s actually been the one that’s producing it. So our belief is that, you know, no matter whether you’re, what’s part of the cycle you’re in, what your year-end close is, whether your CPA firm’s signed off on it or not, you can trust in the data that’s coming out of an organization who’s being led by a CCIFP. Point about CCIFP. The next section here is on technology, data,
(20:33) and innovation. You’ve spent much of your career in roles that leveraged data and insights of decision-making. How is CFMA helping members use data more effectively in their businesses? You know, you called our accounting members historians and book writers and numbers people, right? They’re already keen to the notion that data drives KPIs, right? When you’re looking at liquidity or you’re looking at your capital stack or you’re looking at your debt ratio, those are all data-driven decisions that are being made. The important thing that we’re doing, and obviously the benchmark or
(21:10) modernization helps you look at it at the firm level, is to blend that with all of the other domains and the holistic skills to be a strategic partner. And yes, using data to make decisions is something the CFO has traditionally done. The controller’s driven that. But using all of the information that they have available, some of it qualitative, not necessarily quantitative, allows them to be that strategic leader that we talked about previously.
(21:39) It’s like the counting and measuring what you’re doing. The qualitative aspect is so important, you know? Yeah, Yeah. So the next question is, what’s your view on AI and automation and construction finance? Hype or game changer? It’s already here. So, you know, it’s not as if, you know, it’s hype and it is starting to affect how people view their workflows from a construction finance standpoint, from data entry standpoint, from even an audit and red flagging perspective.
(22:11) Those are all things that repeatable processes that an agent or a bot could do in a way that, in a much more efficient way than a human could do. And I know your firm is being human. So your AI agents are being human in that process as they do that.
(22:32) I also see not only in the back office where a lot of our members are working, but out in the field, the use of AI, whether it’s through a dog or a drone, being able to do site inspections and being able to provide insight into the percentage of completion and what kind of work is done and validate what happens on the web. Those are all ways of actually integrating field AI and new technologies with AI that’s being implemented in the finance ERP as well.
(23:00) So I don’t think it’s a hype. I don’t think it’s already here. And I think it’s already changing the game in terms of a lot of organizations that are becoming more efficient as a result of it. Yeah. And the models are improving every day, you know, some of these modalities like voice to text, they used to be very weak like last year.
(23:19) Now the performance is like so much better. Even these modalities where the performance was not there last year. Many construction finance teams struggle with systems integration. What role do you see CFMA playing in helping members adopt and implement technology more effectively? Not only construction finance teams, but construction finance associations struggle with systems integration. We’ve gone through a whole technology evolution ourselves.
(23:50) And my peers at other organizations feel that as well. But specifically for our members, there’s a lot of choices out there for project management tools, financial ERPs, payment systems, payroll, HRIS systems, you name it. Whether it’s a platform to address waivers, whether it’s built into Procore or separate, there’s a whole host of those challenges.
(24:13) And being able to build the right technology stack is a challenge for construction finance teams. One of the ways that we’re helping support that. And obviously, a lot of those organizations that I talked about are sponsors, exhibitors, supporters, stakeholders in this ecosystem. And they do a very good job of creating awareness about what’s available out there.
(24:38) But selection and making sure that you’ve got the right stack is critically important. There might be an opportunity to benchmark that in the future. But we’re starting out in partnership with Big Blue Innovations and Jay Snyder, providing software roundtables. We’re in a non-salesy environment, a very comfortable setting for those construction finance teams that are looking at making decisions on new systems, being able to see demonstrations, being able to ask questions in a very comfortable environment without any pressure to say, okay, I need to take the next step.
(25:07) That allows them to actually get a little bit more intelligence around what that system could look like, what that stack could look like, what the integration challenges are. Yeah, it’s also helpful to, you know, the associate members like ourselves to have an opportunity to come and be able to showcase our solution without being pressured into like selling. Yeah, absolutely. Absolutely.
(25:30) Because you get to talk about the value of what you’re bringing to the ecosystem through your technology and the construction finance team at the contractor is able to absorb that knowledge and make intelligent decisions about their technology systems future.
(25:50) The last section here, Nils, on community and future outlook. CFMA has a vibrant chapter network. How do you see chapters evolving in the next decade, especially with more hybrid and remote work in the industry? That’s a great question. So I’ve used the phrase chapters are the lifeblood of the organization. It’s where people join. It’s where people find engagement.
(26:10) It’s where people stay members of CFMA. So for us, that chapter network is very, very critical to our future and our success. We see it evolving in a number of different ways going forward. And the hybrid remote aspect is important, which, you know, you think about it, if you’re working from home on your own, maybe connected to each other virtually, there’s a need, humans have a need for connection.
(26:35) And I think we provide that additional outlet for that connection. We find that third space or whatever you want to call it, where they can go and share best practices, learn from each other, maybe even share a cocktail or a meal and just kind of get to know humans at that level so that we can continue to build relationships and work together.
(26:56) I think it’s more important now than ever from where we’re going in terms of how people work to have that outlet. And it’s something that an organization like CFMA and our chapters provide. We are fully committed to helping support that, whether it’s in person or virtually, and being able to drive relevance locally as well for our members.
(27:17) And that’s just continued to grow over the past 10 years, and I can see it continue to evolve in the next 10 years. You mentioned something really great here, Neil. We are a completely remote company and organization like CFMA, you guys, you have helped us, you know, be more in connect with our customers and our peers, you know, and like industry leaders like yourself, you know, so thank you for that. Well, I appreciate it. Appreciate it.
(27:43) And last question here, Nilsa. Finally, if you could leave construction finance leaders with one piece of advice about preparing for the future of the industry, what would it be? Wow, that’s a heavy question to end on.
(28:08) us from a technology perspective, from a global geopolitics, macroeconomic perspective, as well as, you know, as new generations come into the workplace and they have different ways of actually addressing work. I think being open-minded and curious about that future and agile enough to make the changes that are necessary, those are the things that I would say are qualities that we need as leaders in construction to ensure the future viability of this great industry.
(28:32) And I think that’s the piece of advice I would have is continue to be curious, continue to be open-minded, continue to be agile. Thank you so much for your time. This was a lot of fun, Rishi. Let’s do it again. Yep, for sure. Thank you. Thanks for listening to Finance at the Rishi. Let’s do it again. Yep, for sure. Thank you.
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