In uncertain waters, let strong financial leadership be your north star.
As we look forward into 2025 and beyond, one thing is clear: uncertainty is the new normal. Unlike prior disruptive cycles, there is no clear thesis on whether we face more upside or downside risk – in either the near-term or long-term. Some specific threats for AEC leaders can be imputed:
- Rising material cost and supply chain disruptions make budgets and project timelines unpredictable.
- Labor shortages and wage inflation challenge hiring decisions and constrain production.
- Regulatory and market volatility create new pressure to stay nimble and adapt.
In times like these, CFOs must cultivate the right processes and priorities to ensure their firms remain financially strong:
- Prioritize cash flow forecasting and stability. CFOs need to prioritize cash flow stability amid rising costs and economic uncertainty. Labor shortages, material price volatility, and delayed client payments can create liquidity challenges that disrupt operations. To mitigate risk, CFOs must enhance cash flow forecasting, optimize working capital, and negotiate favorable payment terms with both clients and suppliers. Diversifying revenue streams – balancing public and private sector projects – can also create more predictable cash inflows. By implementing rigorous financial controls and proactive liquidity management, AEC firms can maintain operational flexibility, ensuring they can fund payroll, sustain project momentum, and seize growth opportunities. Thirteen-week cash flow forecasts can be an especially effective tool at highlighting financial turbulence.
- Use real-time job costing and manage to success. Managing costs effectively is crucial for AEC firms facing rising material prices and unpredictable supply chains. Real-time job costing allows CFOs to track expenses as they occur, identifying overruns before they impact margins. Inflation-adjustment clauses in contracts help protect against price volatility, ensuring firms aren’t locked into outdated cost assumptions. Additionally, price discrimination between clients – adjusting pricing based on project complexity, risk exposure, and client payment history – can maximize profitability while maintaining competitiveness. By leveraging accurate cost tracking and strategic pricing models, AEC firms can maintain financial stability and mitigate the risks of inflation and market fluctuations.
- Invest in strategic growth and technology. To remain competitive, AEC firms must invest strategically in technology and innovation that enhance efficiency and profitability. Automation, building information modeling (BIM), and AI-driven project management can streamline workflows, reduce rework, and improve cost predictability. Prefabrication and modular construction offer opportunities to cut labor costs and mitigate supply chain delays. CFOs should evaluate capital expenditures based on ROI, leveraging tax incentives and financing options to minimize upfront costs. Firms that proactively adopt high-impact technologies will gain a competitive edge, improving project speed, accuracy, and profitability in an industry facing increasing pressure on margins and operational efficiency.
- Develop a workforce strategy for long-term stability. Labor shortages and wage inflation are pressing challenges for AEC firms, making proactive workforce planning a financial priority. CFOs must integrate labor cost projections into project pricing, ensuring contracts reflect rising wages and potential skill gaps. Investing in employee retention programs, including competitive pay, training, and career development, can reduce turnover and long-term hiring costs. Exploring alternative labor models – such as subcontracting, trade school partnerships, or automation – can help fill critical gaps. Additionally, firms should engage in policy advocacy to support immigration and workforce development initiatives, securing a steady pipeline of skilled professionals for sustained operational success.
Strong financial leadership has never mattered more, and CFOs are steering their firms through unpredictable terrain. Cash flow discipline keeps projects moving, cost control protects margins, smart investments drive growth, and workforce planning ensures stability. By staying agile, balancing risk with opportunity, and focusing on long-term financial health, you can position your firm to thrive. In uncertain waters, let strong financial leadership be your north star.
Stuart McLendon is a fractional executive at Zweig Group. Contact him at smclendon@zweiggroup.com.
