CPA OR FRACTIONAL CFO. NOT THE SAME JOB.
A construction CPA handles tax preparation and the annual financial statements, usually with once a year involvement. A fractional CFO owns monthly job costing accuracy, cash flow forecasting, and financial strategy on an ongoing basis. Most subcontractors need both, for different reasons, and neither one replaces the other.
Contractors usually ask this because they assume the CPA is already covering the forward looking work, and in most engagements nobody is. A CPA looks backward on purpose, since the job is to get the prior year right and the return filed correctly, and that work isn't optional. A fractional CFO looks forward, forecasting the cash position, correcting the overhead rate before it distorts the next round of bids, and catching a losing job while there's still time to do something about it. Those are two different jobs on two different clocks, and having one of them done well says nothing about the other.
WHAT EACH ONE DOES.
| Capability | CPA | Fractional CFO |
|---|---|---|
| Tax preparation | Yes | No |
| Annual financial statements | Yes | Reviewed sometimes, not produced |
| Monthly job costing | No | Yes |
| Cash flow forecasting | No | Yes |
| Overhead rate calculation | No | Yes |
| Owns the job cost structure | No | Yes, built against your estimating |
| Catches a losing job mid job | No, the return comes long after | Yes, through monthly cost to complete |
| Frequency of involvement | Annual, tax season | Monthly, ongoing |
| What it protects | Your filing position and your tax bill | Your margin and your cash before they're spent |
Nothing in the CPA column is optional and nothing in it's forward looking. That's the whole distinction, and it's why the answer for most subcontractors is both rather than one.
THE TASKS EACH ROLE OWNS.
These are the tasks a construction company assigns to each role, taken from the full chart of who owns each task in a subcontractor. Open a role to see its tasks.
CPA, 1 task
- Review the numbers every month. Hold a tax strategy meeting with the CPA in early November, to work out what the company can do to finish the year under different scenarios.
CFO, 5 tasks
- Set up the system. Set up the chart of accounts, which is the profit and loss statement at the business level.
- Set up the system. Choose the job cost codes, aligned with the business strategy and the work the company performs.
- Review the numbers every month. Build the 13 week cash flow forecast: week by week, with the bank account starting Monday and ending Sunday.
- Review the numbers every month. Build the CEO report: a rolling 12 months from the profit and loss statement and the balance sheet.
- Review the numbers every month. Send the WIP report to the bank or surety.
WHEN THE QUESTION IS WHAT DO WE OWE.
A construction CPA is the right answer for tax preparation, tax planning, the annual financial statements, and audit defense. That work is required, it has real dollar value in what it saves you, and it has to be done by somebody who does it all day. You shouldn't be shopping this out based on price and you shouldn't be trying to replace it.
The involvement is annual by design, concentrated around tax season, and that's what makes it a poor fit for operating questions. A return tells you what the company did last year. It can't tell you which week you'll be short of cash in the next quarter, whether your overhead rate is current, or whether the job your crew is on right now is going to make money.
WHEN THE QUESTION IS WHAT DO WE DO NEXT.
A fractional CFO owns the numbers between filings. That means monthly job costing accuracy against the way your estimator built the bid in the first place, a monthly close somebody signs off on, a 13 week rolling cash flow forecast, an overhead rate recalculated from your trailing twelve months and sent back into bidding, and a monthly working session with the owner that ends in written decisions.
The work is ongoing because the decisions are ongoing. A job going bad doesn't wait for tax season, and an overhead rate that's understated by six points prices every bid you send between now and the next time somebody checks it. This is also why a fractional CFO doesn't produce the annual statements or file the return, since those are the CPA's work and duplicating them would just cost you money twice.
WHERE WE COME OUT.
Keep your CPA. We don't file returns, we don't do tax planning, and we don't want to, because a good construction CPA saves you money in a place we aren't trying to compete. What we do is own the monthly job costing, the close, the WIP, the cash forecast, and the overhead rate, so the numbers your CPA receives at year end are already clean.
That arrangement usually makes the CPA's engagement faster and cheaper rather than more expensive. Most CPAs would rather work from clean job costed books than spend the first six weeks of the year on cleanup, and the planning conversation they have with you gets more substantive when the underlying numbers aren't in question. The two roles are complementary, not competitive, and we have never had a CPA object to the arrangement once they saw the books.
If you only have budget for one right now, the answer is the CPA, because the filing isn't optional and the penalties are real. The fractional CFO is what you add when the return keeps telling you the company made less than you thought it did and you want to know that in month three instead of next March.
FREQUENTLY ASKED.
