The Construction Financial Management Association (CFMA) survey, released annually, provides construction companies and their financial professionals with real data that is compiled with the intent to provide benchmarks and industry standards for comparison and discussion purposes. Using benchmarking can be misleading for a variety of reasons, but reviewing industry standards and common practices can be very informative.
The most recently published CFMA survey discussed “Effective P&L Budgeting and Cash Management in a Recovering Economy” in the Hot Topic section. Among other items, survey respondents were asked to identify:
- P&L and cash budgeting policies and procedures
- Preparation, review, and distribution frequency and methods
- Methods used to improve cash inflows and decrease cash outflows
The Hot Topic results show that:
- A large majority of companies employed methods for budgeting their P&Ls, while a lesser majority employed methods for cash flow budgeting.
- P&L budgets were most often prepared annually and reviewed monthly.
- Many different methods were used to accelerate cash inflows. In addition to front loading the schedule of values, taking advantage of ACH payments, utilizing current technology to e-mail invoices, scanning checks received, and negotiating lower retention rates were very popular.
- A large majority of respondents used pay-when-paid clauses in contracts with subcontractors and paid retentions to subcontractors that corresponded with their retention schedules to decelerate cash outflow.
If your company is not already utilizing some form of budgeting and/or cash management, you could be losing out on money now and in the future. Please contact your Anders’ advisor to discuss these topics or other findings from the CFMA annual survey in more detail.
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