How is the FASB accounting standards update revenue from contracts with customer (Topic 606) impacting contractors?

Brian Drumm 
Delivery and Product Director
Construction Industry Solutions Corp. (COINS)

In May 2014, the Financial Accounting Standards Board (FASB) introduced an update that included new cost guidance for FASB Subtopic 605-35, Revenue Recognition—Construction-Type. After reviewing the document, I believe the changes do not alter the basic philosophy of revenue recognition for construction. Instead, they help clarify issues that have been problematic in the past, such as job partitioning and performance obligations related to revenue recognition.

One of the goals of this update is to provide comparability of revenue recognition practices between a construction company and any other entity that engages in contracts with customers, regardless of their industry, jurisdiction or capital market. The guidance also requires financial statements to have improved disclosures for users.

There is time to learn about the changes. The new standards take effect for public entities for annual reporting periods beginning after Dec. 15, 2016, and are effective for other entities for annual reporting.

How does a contractor’s inability to obtain bonding for government projects impact opportunities for growth?

Henry W. Nozko, Jr. 
President
ACSTAR Insurance Company

Some contractors avoid the requirement for bonding by relying solely on private work that does not require bonding. That strategy has worked for many contractors, but it precludes almost 50 percent of the nonresidential construction market. In terms of market opportunity, becoming approved for bonding significantly widens the scope of possibilities for a contractor to maintain a backlog sufficient to sustain profitable operations and increase growth possibilities.

Now is a good time for contractors that do not have a surety program to seek approval. Because of the excess surplus available to the surety industry, most surety companies are very receptive to considering new accounts. When sureties have excess capacity and are looking for business, which is the current situation, underwriting usually becomes more flexible.

Today, any contractor with a reasonable financial base will be able to gain surety credit fairly easily. Once surety credit is established, the public construction projects immediately become available.

What are the core differentiators of cloud services in contrast to traditional methods of IT management?

Gord Rawlins 
President
HIKUU Construction Cloud

Recognizing authentic cloud offerings is key to making tech investments that will deliver reliable, tangible results in the long run.

Perhaps the most important distinction impacting ROI in the cloud exists between genuine cloud services and hosted IT environments that simply market themselves as such. While true cloud offerings are developed, delivered and managed in a multi-tiered data center environment, some providers merely host a private infrastructure for one application and client at a time. The latter approach does not provide the economies of scale afforded by a true cloud solution, and in some situations may even decrease ROI over the long term as it introduces an extra layer of complexity.

Inauthentic cloud solutions are more expensive, inefficient and not nearly as scalable. Also, as imposter cloud providers attempt to manage a multitude of separate servers, they are slower to deliver updates to their applications, less responsive to technical needs of end users and often fail to protect their software with the proper security protocols.

What is the potential financial ROI for contractors that automate collection of labor time and attendance information?

Scott Prewett 
Chief Technical Officer
ExakTime

Time Rounding: A study by the American Payroll Association found that a company will normally lose 10 minutes each day in “time rounding” using handwritten timesheets. That figure might not seem like much at first, but at the end of a year, it adds up to 42 hours—one full workweek—in time loss. For companies with employees that work away from a central office, that figure nearly triples.

Calculation Errors: A 2008 report from the Aberdeen Group, “Evolving Time and Attendance,” surveyed 333 companies and found that the loss from timesheet computation errors typically ran from 1 percent to 8 percent of payroll. This is nearly eliminated using an attendance system.

Data Entry: The Aberdeen report found that once the companies moved off handwritten time cards, the accuracy of attendance increased 65 percent and overtime costs decreased 59 percent.

How can construction companies make the most of cloud and mobile technologies?

John Chaney 
CEO and Co-Founder
Dexter + Chaney

The new generation of construction software must be designed with the intelligence to give structure to large and diverse sets of data and to do so in an intuitive fashion. The increasing complexity of business data calls for increasingly simple navigational tools.

When software is developed by people who understand how different pieces of a construction business fit together, they can build relationships into the software connecting different pieces of information and events. With this more complete picture of their operations, managers can translate business intelligence into action.

Until recently, most project communication occurred through phone calls, emails and meetings. Information sharing occurred at physical plan rooms or via online document repositories. The new generation of construction software can bring these worlds together, providing collaborative platforms that enable immediate communication, provide tools to share and update documents, and proactively alert project participants when a ball drops into their court.

What are the critical components for implementation of new technology?

Fred Ode 
CEO/Chairman
Foundation Software

The answer to this question has been the same since I first became involved in this industry in 1981. The critical components are:

Buy-in from everyone involved: Consider what it will take to get everyone to enthusiastically accept the change.

Proper analysis of your company’s needs: Determine if your company has the processes in place to leverage the new technology.

Selection of the right technology: Have a list of specific items to look for in both a product and a vendor.

Planning the implementation: Establish a realistic plan and time frame to get your new technology up and running.

Allowing the time to properly implement the plan: Commit to the plan with a laser-like focus on a successful implementation.

Many companies simply buy the “shiniest” product on the shelf and expect it to work miracles for their business, which sets them up for failure.

What are the financial benefits of mobile and remote reporting and management systems?

JON WITTY
Vice President and General Manager
Sage Construction and Real Estate

The financial benefits are huge for contractors using mobile technology. Imagine what happens when a project has an issue. The speed at which the issue is communicated and resolved equates to how quickly everyone makes money on the project. The ability to communicate and collaborate is not just an issue of convenience; it’s an essential project element that has a huge impact on a project’s financial outcome.

Mobile devices also aid in jobsite documentation. Field reports can be sent electronically to the main office, including photos and video. Contemporaneous documentation such as this is the strongest litigation response to protect contractors from legal fines.

Finally, for contractors that do service work, technicians can use mobile devices to access historical data, warranty and other relevant artifacts, as well as take customer payment at the jobsite, speeding payment.

Tom Cook 
Director of Mobile Software Development
Viewpoint Construction Software

The primary benefit of giving workers access to job cost information in the field, whether collecting data or consuming reports, is to promote better decision-making. The closer that data collection—of time, equipment, production units and more—occurs to the actual event, the more accurate it is. 

Provided the data gets into the ERP system quickly, the better and more current the reporting and analysis. It’s all about better decision support and better insights to ensure projects are as profitable as possible.

The notion of remote is interesting. In a way, mobile makes the work local and the back office remote. Mobility means that people can do their jobs where they work and when they work. Mobile is not about apps, necessarily, but about enabling people to work in the manner that makes them most efficient.

Peter Lasensky
CEO
NoteVault

Using a mobile and remote reporting management system provides financial benefits ranging from individual time savings on a daily basis to major savings in the prevention of accidents and their associated costs, as well as protection in the case of arbitration years after the project is completed.

Employees can save a minimum of one hour a day by using their mobile device to record notes.

With proper objective documentation, construction managers can prevent many major and minor incidents while also protecting themselves from litigation. For one general contractor, the implementation of a CrowdSource Safety service has resulted in zero injuries and no OSHA violations in projects where the technology is being utilized.

Also, the system reduces risk by chronicling detailed events to counter false claims of negligence.