4 Things the CFO Thinks the PM Understands — But Probably Doesn’t

In construction, there's often a dangerous assumption that Project Managers (PMs) fully understand the financial side of the business. But here’s the blunt truth: many don’t — at least not to the level your CFO hopes they do.

The disconnect between finance and operations is real. And it’s not just about jargon or job descriptions — it’s about risk, profitability, and ultimately, whether a company sinks or swims.

Here are four areas where the gap between what the CFO assumes and what the PM actually grasps is wider than anyone likes to admit.

1. The Contract: The Playbook You’re Probably Not Following

What the CFO Thinks:
The PM understands the Owner Contract and is complying with all its administrative requirements.

Reality:
Many PMs (especially in smaller companies) do not have access to the prime contract or do not recognize their responsibility to administer it. They might have skimmed the contract once. They might flag required notices buried in 80 pages of legal jargon.

Why It Matters:
Let’s say your project is delayed by 45 days due to weather. If the PM doesn’t send a formal notice of delay within the window defined in the contract (which is often 7–14 days), you just waived your right to a time extension — and possibly compensation for extended General Conditions. That’s not a scheduling issue anymore — it’s a financial hit.

Real-World Solution:
Hold a post-award contract training session with the PM and Superintendent. Highlight key clauses that impact money: notice requirements, delay definitions, dispute resolution, and payment terms. Give them a cheat sheet — and make it clear their job depends on understanding it.

2. Prequalification: The First Line of Defense Against Subcontractor Failure

What the CFO Thinks:
PMs understand prequal is about risk — not just paperwork.

Reality:
Fifteen or twenty years ago, only the biggest GCs were doing formal prequal. It was rare. Today, it’s standard — or at least it should be. But a lot of PMs still treat it like an unnecessary hurdle. They don’t understand why Finance cares so much about a subcontractor’s EMR, backlog, or bonding capacity.

Why It Matters:
A PM hires a roofer who looks good on paper — but the roofer is overcommitted on multiple projects. Halfway through the job, they walk off. You’re stuck scrambling for a replacement. Now you’re behind schedule, facing liquidated damages, and possibly stuck footing the bill twice.

Or worse, the roofer causes a jobsite injury and their insurance coverage is insufficient. Now you’re in litigation and your carrier is asking why you didn’t screen them properly.

Real-World Solution:
Train your PMs to think like risk managers. Show them examples of subcontractor failures and how prequal could’ve prevented the problem. Make them part of the prequal review process so they internalize the why behind the what.

3. Forecasting Final Cost: It’s About Reality, Not Optimism

What the CFO Thinks:
PMs are updating forecasts monthly based on real cost trends and schedule implications.

Reality:
PMs don’t have access to real time cost data or only update their forecast when Accounting makes them. They rely on what’s already committed — not what’s really happening and definitely not what could happen in the future.

Why It Matters:
Take a PM running a $12M healthcare project. He’s forecasting a $100K profit. But he hasn’t accounted for the subcontractor delay that’s going to cost $50K. He’s also got $150K in pending change orders that he is not tracking and assuming all will be approved at full value — even though the client is notorious for negotiating hard.

Result? The job closes at breakeven — or worse.

Real-World Solution:
Take a team approach to project risk management and forecasting. Hold a monthly project review with the PM & Accounting to review the health of the project. Forecasts need to include known unknowns. That means projecting for likely risks, schedule slippage, and partial recoveries on change orders.

A PM who updates a forecast with cold realism — even if it’s bad news — is worth more than one who paints a rosy picture.

4. WIP, BIE, and the Mysteries of Construction Accounting

What the CFO Thinks:
The PM understands how overbillings (Billings in Excess of Cost) and underbillings (Cost in Excess of Billings) impact cash flow and financial statements.

Reality:
Finance runs a Work-in-Progress report every month, showing cost-to-date, percent complete, and billed-to-date. From this, they determine whether a job is overbilled (Billings in Excess) or underbilled (Costs in Excess). The Project Managers are asked about projected cost/ percent complete in the field and don’t know how the CFO is able to determine if the project is going well by ‘just numbers’.

Why It Matters:
PMs see a big BIE number and think, “We’re doing great! You’re Welcome!” But that’s not how accounting works. Overbilling might help cash flow in the short term, but if it’s not backed by real progress or cost, it artificially inflates revenue and hides problems.

Let’s say a project is 40% complete, but you’ve billed 65%. Your WIP schedule is going to show a big overbilling — and your profit is overstated this month. But if that job goes south later, the correction hits your books like a wrecking ball.

And don’t forget CIE (Costs in Excess). If your PM is sitting on change orders and hasn’t billed them, your books show a loss that isn’t real — which screws with bank covenants, bonding, and even PE investor reporting.

Most PMs don’t know how the matching principle works. They don’t understand revenue recognition, or how their cost reports roll into the company’s financials. That’s not their fault — nobody ever showed them. But if they’re responsible for job profitability, they need to know how the money flows. They don’t need to be accountants, but they damn well need to understand how their decisions in the field shape the story in the books.

Real-World Solution:
Train your PMs on WIP math. Give them a seat at the table during monthly financial reviews. Explain how their reporting drives big-picture decisions — from hiring to credit lines. Make sure they know: the numbers tell a story, and it’s their job to write it clearly.

You Can’t Afford a Wall Between Finance and Operations

That’s really the heart of it. Finance and operations speak different languages, but they’re writing the same story. The CFO doesn’t need to know how to run a crew, and the PM doesn’t need to know how to close the books — but they both need to understand the cause-and-effect relationship between what happens on-site and what shows up on the P&L.

When those two sides come together — when a PM learns how to read a WIP report, when Finance understands how weather delays hit productivity, when they meet in the middle with mutual respect and shared accountability — that’s when a construction company becomes bulletproof. That’s when profit isn’t an accident — it’s a system.

Because the truth is, profit isn’t made in QuickBooks. And it’s not made in the field either. It’s made in the space between — in the choices, the conversations, and the clarity shared between the office and the jobsite. You want to protect your margin? Teach your PMs to think like owners. And teach your CFOs to see beyond the spreadsheet. That’s the ground where great construction companies are built.

Ready to Streamline Communication Between Your PMs and Front Office?