Is your CPA doing everything they can for you? 7 Questions to Ask

HelpThe construction industry is a difficult one – full of strategic planning, tight deadlines, demanding customers and lean margins. In some projects, just 2-3 percent can be the difference between profit and loss.

However, construction companies that navigate this industry expertly have learned to surround themselves with others who understand the business – especially their CPA firm. You look for subcontractors who have experience in a particular type of work; your CPA firm shouldn’t be any different. Don’t settle for just any old number-cruncher. To be on target in this business, you need a CPA that understands construction.

Certainly, no matter what business you are in, your relationship with your CPA firm should be active year-round, not just during tax season. But there are other factors that are unique to the construction industry that can help make you more efficient and more profitable.

How do you determine whether or not your CPA firm is meeting all of your needs? Here are 7 questions to ask:

  1. Does your CPA simply prepare your information? Your CPA firm should be doing much more than the bare minimum quarterly tax paperwork. They should be analyzing the data and providing you with information that your team can use to make educated decisions moving forward.
  2. Does your CPA add value to your internal accounting department? Your accounting department is your eyes and ears on your jobs and the overall financial well-being of your company. Those job costing numbers need to be accurate, which is something that our construction accounting software specializes in. Your CPA firm should be willing to share valuable insight with your accounting staff to help them see the bigger picture. This, too, will go a long way to providing you with the information you need to make higher-level decisions with confidence.
  3. acctdeskcomputerDoes your CPA firm conduct or have access to benchmarking? Here in the Cincinnati area, the CPA firm VonLehman conducts an annual construction survey, analyzes the data and then shares the information with others. This report helps construction firms benchmark how they are doing in comparison to the rest of the regional construction industry. If you are located in a large metro area like Cincinnati and your CPA firm specializes in assisting construction clients, they probably have access to information to help you benchmark where you stand.
  4. Does your CPA have a proactive approach to bonding? As a construction firm, you need specific information to present to your surety company to secure the bonding capacity you need. Your CPA can proactively help you through this process by reworking your financial statements and restructuring your debt to give the surety the specific information they need. Being proactive allows you the opportunity to bid on a large project when the right one comes along.
  5. Has your CPA firm talked to you about your succession plan? Developing a succession plan is a long process, and your CPA should be helping you through it. Furthermore, a succession plan is more than your legacy. The surety and financial lenders will want to know your succession plan, too. This gives them the assurance that if anything happens to you, your company’s projects will be completed.
  6. Does your CPA help you understand your financial statements? When you work with the right CPA firm, not only will the numbers be accurate, but you will understand where they come from. Intelligent overviews of your financial statements are crucial when meeting with surety or banking representatives.
  7. Does your CPA understand work-in-progress reports? Job costing isn’t an after-the-fact item; it is an ongoing task. When you review your work-in-progress report on a monthly basis, you see what happened in the last 30 days and can make any needed adjustments immediately. The right CPA firm will also hone in on over- and under-billings and work with you to get the project back on track.

The right CPA firm will proactively analyze pertinent information and provide you with the data you need to make business decisions with confidence. Any CPA can crunch numbers, but wouldn’t you prefer a firm that can be an active participant in your business? To discover more ways your CPA firm can be helping you, view our “What Your CPA Should be Doing for You” webinar.

If you want your CPA firm to work with ComputerEase to provide the best possible accounting services to your company – or if you are a CPA with the same goal in mind – find out how our CPA Partnership Program can help!

 

Prevent Major Construction Losses with a Solid Job Costing Structure

Have a PlanIn the construction industry, cash flow is essential to staying viable in a competitive market. Even some of the most profitable construction firms have gone out of business because of poor cash flow management.

Perhaps the reason cash flow is so difficult in construction is that by the time a job is awarded, significant resources have already been invested into it – from the time spent on the lengthy bidding process, to manpower on the job site, to purchasing materials and renting equipment. Often, these expense are incurred months before ever seeing a payment.

How well your company is doing financially may not be an accurate reflection of what money you have in your bank account. You may be over-billed on a project, so it is important to understand how to manage the project properly – so you have money to pay expenses when the time comes.

Contractors with the best understanding of cost and schedule will be the most successful. Having an accurate picture of your labor and material costs allows you to bid competitively and stay profitable.

Successful contractors manage their cash flow on a daily basis. They have a system in place that allows them to access job information in an organized fashion. They have access to accurate work-in-progress and percent-complete reports. They know, with confidence, where each job stands.

That success begins with a solid job costing structure.

Job costing can manage jobs more thoroughly.
As the CEO, you may know the overall financial health of your construction company, but you also want to make sure that each job is holding its own to support the cash flow of the business. Jobs should be broken down into activities (labor, materials, subs) and/or phases so that you can compare real costs against the budget. A solid job costing structure allows you to manage each job more thoroughly because you are able to see where gains (and losses) are happening and plan accordingly.

Job costing allows you to spot potential issues early on.
Spot Issues EarlyIt is important to know where each job stands, and to do this we need to have accurate “Work in Progress” and “Percent Complete” reports. If you’ve only done 25 percent of the work but you have spent half the budget, you need a red flag alert that will make you aware of the problem. Jobs go off-course for a variety of reasons, but diagnosing and correcting them early minimizes the loss and goes a long way toward making the job as profitable as possible.

Job costing generates accurate estimates.
One of the easiest ways a construction firm can lose money is through the estimating process. When you start with a poor estimate, you are immediately beginning a project with a deficit, and you might spend the entire job trying to dig your way out of it. You can generate accurate estimates by using historical data for calculating labor rates.

Imagine your estimator is bidding a job using $45 per hour as your fully-burdened labor rate, but historically over the last 12 months, that rate has actually been $46 per hour. With a solid job costing system in place, this information is available to help you create solid estimates.

Job costing creates better work schedules.
Unproductive labor is one of the top reasons jobs lose money, and inaccurate job schedules can cause work stoppages. As a project manager, you want to allocate your labor properly so you can meet or conserve your labor budget. Say you were planning to have five workers on the job site for the next five weeks, but then you realize that you are ahead of schedule and only need four. Job costing allows you to see whether you are ahead of or behind schedule and plan your labor intelligently.

Job costing gives you the “fade and gain” comparison.
Every job has a natural flow to it. A job that is a little bit behind in the beginning can catch up midway, but contractors need to know where they stand at all times. When a solid job cost structure is implemented, you can see the flow come into focus and be better equipped to track the “fade and gain.”

In construction, managing cash flow begins with a solid job cost structure that can detect and help prevent huge cash flow mishaps. Get more job costing tips by viewing our webinar, “How to Optimize Your Profits through Job Costing.”

Why You’re Running Out of Time to Save Big on Taxes through New Software

Uncle SamSection 179 Deductions and Bonus Depreciation have been used extensively in the construction industry. Both grant your company big savings on taxes as a result of any major equipment purchases you’ve made in the tax year. Accounting and project management software is included in the equipment that qualifies, and it’s been one of the most popular routes that contractors have taken to seize this opportunity.

That opportunity, however, may be coming to an end. With tax law changes looming, this may be your last year to take advantage of historically high savings under Section 179 and Bonus Depreciation laws. That means that if you’ve been putting off purchasing new equipment or upgrading your software system, you’ll want to stop putting it off now! Starting January 1st, some of the major tax advantages of implementing those changes may disappear entirely.

If you want to learn more about Section 179 and Bonus Depreciation, or if you want more tips on what you should be doing to prepare for Year End, you may want to check out our recent construction accounting webinar on the topic, featuring Steve Hausfield, CPA who specializes in construction accounting.

New Webinar: “7 Tips to Keep Your Premiums from Skyrocketing”

Last year, we had the privilege of hosting a webinar alongside Matt Mauller, Vice President of Neace Lukens Insurance Agency. At the time, we were in what he called a “soft market” for insurance. Premiums were low, and he told us how to take advantage of the market by either renegotiating with our brokers our kicking them to the curb and finding a new one. You can recap that information by viewing our previous webinars. Since that time, the insurance market has taken a hard turn. Premiums are going up, and it’s making life tougher for contractors. Luckily, Matt Mauller is coming back this year to co-host another webinar, “7 Tips to Keep Your Premiums from Skyrocketing.” Matt will tell us about the current market, how we got there, and what you can do to prevent your premiums from following the upward trend.

This webinar is a must-see for contractors, and it’s absolutely FREE. Space is limited, so be sure to register today!