Financial Management for Your Roofing Business, Part One - October 2022

Fri, Oct 21, 2022 at 8:00AM

John Kenney, CPRC, CEO, Cotney Consulting Group

In simplest terms, financial management is using your company’s financial resources. Everyday decisions affect your company’s financial future, including operating cash and other assets such as equipment. Your decision to bid on a large project can significantly impact your company’s finances. As you decide whether to bid on a project, you should address the following questions:

■ Does your company have enough cash resources to perform this work or will you need outside financing?

■ Can your company get bonded for the work?

■ Do you have the employees to perform the work or should you subcontract this labor?

■ Should your company lease or purchase the additional equipment needed for this project? If you buy the equipment, how will it be financed?

■ Will this project require your company to increase staff overhead?

■ What profit and overhead markup should be added to the bid?

The answers to these questions will affect your company’s finances and how you answer one question may limit your options when answering another question. To expand on this, suppose you decide to hire additional employees to perform the work on a project. In that case, it could require more financial resources than if you hired subcontractors to perform the labor. It may leave your company with insufficient cash to purchase additional equipment needed, leaving leasing as the only option.

Why is Financial Management in Construction Different?

Our industry has unique challenges and problems not faced by other industries. Although our industry produces a finished product, installing roofs differs from manufacturing in most other sectors. Because of these unique characteristics, the principles of financial management applied in roofing companies are modified from the standards used in other businesses. Let’s look at the attributes of roofing that are unique to construction.

Project Oriented

It is common for a roofing company to work on multiple projects. You could be working on a tenant finish in a shopping center, reroofing a residence and installing a new school roof simultaneously. Even when a roofing company works on similar projects, they are different due to site conditions and location, affecting labor and material availability. Roofing companies furnish fixed prices to clients for products that your company may have never previously installed or with project owners your company has never worked for. Read more.

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