Building a Financial Foundation (Sponsored Content)

Jennifer Agnew: Progressive billing is key to managing contractor cash flow.

In the 2023 Springfield Business Journal Economic Growth Survey, 11% of responders were associated with the construction industry, making it the largest sector represented. And it’s big business throughout the region. According to SBJ’s Summer 2023 Construction in the Ozarks report, area contractors submitted well over $155 million among 22 project investments and tallying 1.7 million square feet of new construction, additions and renovations.

That’s a lot of money and schedules to manage. With 39% of SBJ survey respondents believing that a recession is looming by year-end, the construction industry has the added pressure of carefully managing its finances.

KPM CPAs & Advisors recognizes the need to specialize in the sector and serves over 120 clients in the construction industry. Jennifer Agnew, a shareholder and certified public accountant at KPM, works closely with contractors. She knows how important it is for them to set up accounting processes and communicate early.

“The key to a successful project is communication throughout the entire project,” she says. Before a project begins, Agnew recommends contractors work with their customers to set up clear milestones for progressive billings. This approach helps to make sure that cash flow remains steady and predictable, especially in the face of rising inflation and supply chain challenges.

“The project manager will work directly with purchasing, accounting and customers,” she says. “Planning ahead will keep the project on time and on budget.”

Because the cost of goods is recognized in the Economic Growth Survey as a leading driver of rising business costs, Agnew says that capturing costs for a project is crucial for budgeting and future bids. This process, which necessitates meticulous documentation and categorization of every financial transaction in a project, helps the financial managers with auditing, cost control and financial reporting needs.

“Everything needs to be captured for a job,” she says, “from supplies and labor, to meals and travel.”

This can be an overwhelming process, but one that is extremely important, she says. In addition, setting up these detailed accounts will prove invaluable for bidding on future projects.

“It’s better to capture the costs on each previous job to get a history for bidding future jobs, especially in these times of rising costs and inflation,” she adds.

Agnew says in addition to the cost of goods being higher, the supply chain for most projects has been disrupted.

“This can affect overall budgets and timelines. It’s so difficult to control inventory right now,” she says, noting working closely with an accounting firm and setting up clear billing processes and policies is one way to stay on top of it.

A working relationship with an accounting firm usually starts with a sit-down meeting to understand the unique needs of the client’s business, Agnew says. Whether it’s managing accounts for a small-scale operation or enhancing sophisticated software systems, Agnew says KPM can provide valuable insights and education on tracking costs, calculating overhead and interpreting financial data accurately, helping their clients understand what their numbers generally mean.

“We’re here to help come up with a process to capture the costs and to assist with proper accounting and reporting,” Agnew says.