BOTTOM L INE

BY A A RON FAULK

CEOs AND OWNERS

Top leaders establish the corporate culture. In addition to focusing on timely billings and collections and the resolution of change orders, claims and disputes, CEOs and owners should consider the following to improve the companys cash position. Major asset acquisitions. Is it better to lease or buy? Are long-term assets 58

acquired with long-term debt or are current assets used? Treasury management. Is cash retained in the business to support long-term operations? Is it invested to increase returns or decrease risk? Is cash retained that will not be needed in the short term; if so, can it be invested to generate

returns? Inflation is at about 2 percent, so if cash isnt being used to generate a higher return, organizations are losing money. Capital structure. How much capital should be maintained in the business, and what types of pay or distribution should owners take?

| Construction EXECUTIVE October 2013

GARRY NICHOLS/ILLUSTRATION SOURCE

or people working on the accounting and finance side of a construction business, managing cash flow is one of the most important aspects of the job because it directly affects performance and the bottom linefueling growth, facilitating asset acquisitions, and enabling the organization to withstand job losses and delays in cash collections. Third parties also closely monitor cash management to determine covenant calculations and ratios, as well as gauge the health of the organization. In fact, because cash flow is so important to users of financial statements, a statement of cash flow is required to be included in financial statements under U.S. GAAP and international financial reporting standards. Because cash management is so critical to an organizations success, staff members outside the accounting and finance department must understand their role in influencing and managing cash.

Every Employee Is Responsible for Cash Management

serving those who serve.

Nothing embodies the hard-working, genuine spirit of this great nation like the service of the men and women who serve it in the American military. Join our involvement in these two worthy causes, and learn how the rental of select equipment can help support these organizations. Visit www.volvorents.com/colorforacause

The Folds of Honor Foundation provides educational scholarships to the children & spouses of military men & women who were disabled or killed during service.

Homes for Our Troops raises donations of money, building materials, equipment & labor to build specially adapted homes for severely injured veterans & their families.

Volvo Rents is licensed to use the Folds of Honor Foundations trademarks and logos. The Folds of Honor Foundation does not endorse products. Visit www.foldsofhonor.org or contact your state attorney general for nancial information about the Folds of Honor Foundation. Volvo Rents is approved to use Homes for Our Troops trademarks and logos. Homes for Our Troops does not endorse products. Visit www.homesforourtroops.org or contact your state attorney general for nancial information about the Homes for Our Troops organization.

BOT TOM LINE Pricing and job selection. What types of projects should the firm pursue, and what risk and return is acceptable on jobs?
CFOs AND FINANCIAL MANAGERS

Superintendents can make an impact by how they manage labor and equipment.

These employees are chiefly responsible for managing and monitoring cash flow, the timing and amount of expenditures, and billings and collections, as well as ensuring vendor discounts are taken. They develop and monitor internal controls related to cash, such as the segregation of duties, timely reconciliations, maintenance

of approved vendor listings and the review of expense reports. Theyre also responsible for treasury management and investment selection, forecasting for future cash needs (for distributions, tax payments and sizeable jobs starting up) while monitoring the

availability of cash and lines of credit. Other responsibilities include creating buy-versus-lease models and evaluating contract terms, such as billing and collection provisions, the timing of major expenditures and onerous provisions.
ESTIMATORS

DIVER SITY
Excellence Awards
The ABC National Diversity Excellence Awards recognize members that display exemplary diversity leadership in their company, workforce, supply chain and community with best-in-class recruitment policies, retention practices, and training and mentoring programs.
Winners of the National Diversity Excellence Awards will be recognized at the ABC National Excellence in Construction Awards celebration on February 11, 2014 at the Grand Wailea, in Maui, Hawaii. Submissions are due by November 15, 2013. To receive an application, contact diversity@abc.org or call 703.812.2033.

2013 ABC National

Just like members of upper management, these individuals can profoundly impact an organizations cash flow. They help identify whether jobs can be performed profitably and should be bid on. They also can identify poor designs that might lead to change orders or claims that might impact profitability or timing of cash receipts. The assumptions estimators bring to bids, their choice of vendors and subcontractors, and their schedule of valuesincluding the timing of expenditures and billing terms can significantly impact cash flow over the life of a project.
PROJECT MANAGERS

An organizations cash flow isnt just determined before a project starts. Project managers can make a difference during their day-to-day activities depending on how they schedule tasks, process change orders, estimate costs, collect payments, negotiate with customers and subcontractors, and document job conditions.
SUPERINTENDENTS

For cash flow purposes, superintendents can make an impact by how they manage labor and equipment, request materials, and manage changing job conditions, personnel, safety and risk management issues.
THE BOTTOM LINE

While cash flow isnt always at the top of everyones mind, its management is critical to the success of an organization. Company leaders can elevate the importance of cash flow and make it part of the corporate culture by training and empowering employees to make smart cash management decisions, using dashboard and real-time reports, and instituting compensation plans that reward effective cash management.
Aaron Faulk is a partner at Moss Adams LLP and leads the firms Construction Practice in the Puget Sound region. For more information, call (425) 303-3025 or email aaron.faulk@mossadams.com.

60

| Construction EXECUTIVE October 2013