What a CFO of a Construction Company Should Do to Start the New Year on the Best Possible Path

The start of a new year is a pivotal moment for any construction company. It marks the transition into a new cycle of bidding, planning, staffing, and financial management, and it sets the tone for profitability and stability over the next twelve months. For a construction company, the Chief Financial Officer (CFO) plays a critical role during this period. The CFO’s decisions in the first few weeks of the year can determine whether the company experiences steady growth, chaotic cash flow, or margin erosion.

A construction CFO must blend financial discipline with a deep understanding of field operations, project management, bonding, and compliance. Below is a comprehensive guide outlining what a CFO should do at the start of each year to position the business for success.

1. Close Out the Prior Year with Financial Accuracy

Before focusing on the year ahead, the CFO must ensure the prior year’s financials are accurate, complete, and fully reconciled. Construction accounting is heavily dependent on proper cost allocation and timing, so clean year-end data is essential.

Key year-end tasks include:

• Finalizing all job costing for open and closed projects

• Ensuring WIP (Work-in-Progress) schedules are accurate and tie to financial statements

• Addressing any overbilling/underbilling discrepancies

• Reconciling bank accounts, credit cards, and lines of credit

• Verifying retainage receivable and payable balances

• Reviewing fixed asset depreciation

• Confirming subcontractor 1099 information

• Ensuring insurance audits and workers’ compensation classifications are up to date

Accurate year-end books create a reliable foundation for forecasting, bonding, budgeting, and tax planning in the new year.

2. Conduct a Comprehensive WIP Review for All Active Projects

The Work-in-Progress schedule is one of the most essential tools in construction finance. At the beginning of the year, a CFO should conduct a deep WIP analysis to understand the financial health of each project.

The WIP review should include:

• Updated cost-to-complete estimates

• Margin fade or gain analysis

• Unresolved change orders

• Job billing status (over/under)

• Schedule delays affecting cash flow

• Productivity issues raised by project managers

This review allows the CFO to identify at-risk projects, uncover hidden losses, adjust forecasts, and work with the CEO and operations teams to resolve issues early.

3. Build a Detailed Budget and Financial Forecast for the Year

A construction company without a budget is operating reactively. A new-year budget should incorporate:

Revenue Forecast

• Existing backlog

• Pipeline strength

• Historical win rates

• Target backlog needed to support annual revenue goals

Cost Structure

• Direct labor burden rates

• Material and subcontractor cost inflation

• Overhead and administrative expenses

• Equipment purchases, leases, and depreciation

Cash Flow Forecast

• Expected billing cycles

• Retainage impacts

• Seasonal slowdowns

• Planned investments or financing needs

An annual budget and rolling 12-month forecast allow the CFO to anticipate future cash requirements instead of reacting to shortages.

4. Review Bonding Capacity and Strengthen Relationships with Sureties

Bonding availability can determine how quickly a construction company can grow. At the start of the year, the CFO should:

• Provide sureties with year-end financials

• Review working capital ratios and net worth

• Discuss plans for growth or large upcoming bids

• Highlight improvements to financial systems or internal controls

• Confirm that financials meet bonding requirements

Many contractors are held back every year by insufficient bonding capacity. Strong financial presentation can dramatically increase the limits a company qualifies for.

5. Reassess Cash Flow Strategy and Billing Practices

Cash flow is a constant challenge in construction. The start of the year is the ideal time to optimize billing strategies and reduce cash stress.

Areas a CFO should evaluate:

• Are projects frequently underbilled?

• Are change orders being approved and billed promptly?

• Is retainage being tracked and collected efficiently?

• Do billing formats match contract requirements (AIA, progress billing, T&M)?

• Is the company taking advantage of early pay discounts or prompt payment laws?

The CFO should also review:

• Line of credit usage and renewal

• Cash reserve targets

• Equipment financing structure

• The timing of large capital expenditures

Improving cash flow early in the year sets the tone for stronger financial performance all year long.

6. Evaluate the Prior Year’s Bidding Accuracy

Construction companies often assume they “just need more work,” but not all work is good work. The CFO should evaluate past bid performance:

• Were bids priced correctly based on actual job cost history?

• Did overhead allocation match reality?

• Did certain project types consistently show margin fade?

• Were productivity assumptions realistic?

• Did the company win too many low-margin jobs?

This analysis helps refine the company’s pricing strategy for the new year and ensures that growth leads to profits—not simply more activity.

7. Strengthen Internal Controls and Compliance Systems

The beginning of the year is the ideal time to evaluate and improve financial controls. Construction companies are especially vulnerable to fraud, billing errors, payroll issues, and cost coding problems.

CFO tasks include:

• Reviewing segregation of duties

• Updating procurement and purchasing controls

• Ensuring subcontractor compliance (certificates of insurance, lien waivers, W-9s)

• Testing payroll accuracy and labor burden rates

• Auditing software permissions and access controls

• Updating approval workflows

Better controls reduce risk and build trust with banks, bonding companies, and auditors.

8. Optimize Job Costing and Accounting Systems

No tool is more important to a construction CFO than accurate job costing. The beginning of the year is the perfect time to update or improve systems, including:

• Cost code structures

• Job costing categories

• Labor burden calculations

• Equipment allocation methods

• Field reporting tools

• Integration between accounting and project management systems

The CFO should also evaluate whether the company’s current accounting software (e.g., QuickBooks, Foundation, Viewpoint, Sage 300) still fits its size and complexity.

9. Support Workforce Planning and Compensation Strategy

Labor is the most expensive and scarce resource in construction. A CFO should collaborate with the CEO and operations leaders to plan:

• Field staffing needs

• Merit increases and wage adjustments

• Incentive plans for project managers or estimators

• Updated labor burden rates for budgeting

• Apprenticeship and training cost analysis

Accurate labor forecasting improves bidding accuracy and financial predictability.

10. Align with the CEO on Strategic Priorities for the Year

A construction company performs best when the CEO and CFO operate in alignment. Early in the year, they should review together:

• Revenue and backlog targets

• Growth markets and expansion opportunities

• Equipment strategy (purchase vs lease)

• Organizational structure and staffing goals

• Risk tolerance for certain project types

• Technology investments

• Market conditions and inflation expectations

The CFO must translate the CEO’s strategy into measurable financial plans and support the operational team with clear financial insight.

Conclusion: The CFO Sets the Financial Tone for the Entire Year

In construction, financial success is rarely accidental. It is the result of:

• Accurate financial data

• Strong internal controls

• Strategic planning

• Disciplined forecasting

• Proactive cash flow management

• Effective collaboration with operations and leadership

A construction CFO who begins the year with intentional planning positions the company for better cash flow, higher margins, greater bonding capacity, and more predictable performance.

By taking the steps outlined above, the CFO not only strengthens the financial foundation of the business but also enables the CEO, field teams, estimators, and project managers to operate with confidence, clarity, and strategic direction.