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Why does the technology evolution call for a reassessment of accounting software? 

Jack A. Callahan 
Partner, Construction Industry Practice Leader  
CohnReznick LLP 

From GPS on the blades of graders to 3-D imaging and BIM technology, measurements are now taken and wirelessly transmitted to a central database where quantities and values can be recorded with little to no manual intervention. Project progress can be tracked on dashboards summarizing contract performance in real time, and so on. Jobsites have changed, and there is no indication that these advancements will slow down any time soon. 

Too many times we see companies embrace these field technologies while running their accounting systems on antiquated equipment and software. The tools exist today to allow collection of data from various sources, with the ability to combine the data to make decisions in real time. Materials, subcontractor scheduling, labor and finance teams can all interact to make timely decisions that impact job performance, revenue and results. 

With some upfront investment in hardware and software, the timing of financial information can improve significantly. 

What are the Affordable Care Act (ACA) filing requirements in 2016 for companies with full-time employees? 

Cathy Terwilliger
Marketing Director

In 2016, you should have provided your employees with 1095-C or 1095-B forms. Large employers should have completed the electronic filing of this data, which was due on June 30, reporting on the 2015 tax year. Tracking should continue throughout 2016. 

The ACA Information Returns (AIR) electronic filing process requires companies filing on their own behalf to register and obtain a Transmitter Control Code (TCC) and perform a test load. A number of software developers and others can act as transmitters if you are in the position of not having a TCC. 

If the changes to tracking and filing requirements for the 2015 tax year are any indication of what is to come for the 2016 tax year, there are some helpful sites and tools to keep you informed on ACA requirements for 2016. The IRS website contains a lot of good information and subscribing to the IRS Quick Alerts is one tool you can use to stay up to date. 

How does a general contractor benefit by requiring funds control?

Matt Hodson 
Great Horn Financial Services 

Although funds control is a tool that is most often required by sureties to enhance a subcontractor’s bonding capabilities, it is also commonly used to help a general contractor mitigate second-tier payment risk associated with a non-bonded subcontractor. 

Funds control accounts are generally used to help any at-risk party mitigate the payment risk inherent to a contract or subcontract. A properly managed escrow account should require the controlled subcontractor to budget costs, prioritize vendor payments, and ration profit and overhead. This inhibits “robbing Peter to pay Paul,” and helps protect the interests of all parties subject to payment risk: general contractors, owners, sureties, creditors and banks. 

It is also important to vet the track record, insurances and internal controls that are in place with any prospective funds control agency. 

Is an employee stock ownership plan (ESOP) the best buyer for a construction company? 

Darren Sparks

In today’s red-hot job market, construction companies should be evaluating ways to incentivize its best and brightest employees. While an ESOP can be an effective incentive plan, there are drawbacks that don’t make it optimal for all companies. 

ESOPs are a type of defined contribution retirement plan in which the plan assets are invested in company stock. Employees’ retirement accounts rise and fall with the company’s stock price. Theoretically, the more value employees add, the higher the company’s stock price and the greater the incentive. 

If stock value decreases and the retirement savings decline, employees may lose motivation. Employees are considered equal up to a certain compensation level, so it doesn’t provide the ability to recognize key performers who drive profitability. Therefore, it is critical to combine an ESOP with another incentive plan, such as cash bonuses or deferred compensation, to recognize individuals who truly make a difference. 

Larry A. Mackowiak
Managing Partner, Construction and Real Estate Services  
Crowe Horwath LLP 

An ESOP is generally the most tax-efficient method to buy out existing shareholders—meaning the exiting owners have lower credit risk and get paid their value faster. The company can deduct the contributions made to the ESOP, which then can be used to pay the buyout proceeds. 

In a normal transaction, the principal (purchase price) is not deductible, but an ESOP can allow the company to eventually get a deduction for all the proceeds paid to the seller. If the company is an S corporation, all the income attributed to the shares held by the ESOP is sheltered from federal and most state income taxes. It is hard to argue with the competitive advantage that a profitable 100 percent ESOP-owned company that no longer pays any income taxes would have over other tax-paying entities. 
ESOPs are challenging traditional ways of thinking about management buyout structures. What worked for baby boomers in the past may not be as effective in the future with millennials. 

Is it safe to put an accounting system in the cloud?

Fred Ode
Foundation Software 

Thirty years ago, data security meant you had a heavy metal filing cabinet, and user error meant you accidentally left a drawer open. The Internet is more complex and has a lot more threats: Imagine someone jiggling the handle of that filing cabinet 24 hours a day. We’re as secure as we choose to be. 

The obvious way to make cloud accounting safe is to select a cloud application that lives up to industry standards, such as restricted-access multi-site data centers and AES-256 encryption. Just as important is having systems and practices in place ahead of time. Restricting and auditing access rights and implementing Internet-use policies are essential, regardless of whether your company works on the cloud or strictly on premise. 

You can put client data behind an inch of steel, but that won’t mean anything if you keep the key right on top of the lockbox. In the same way, cloud accounting can be absolutely safe when paired with reasonable and responsible measures to protect your data. 

What are the financial benefits of implementing cloud-based technology? 

Rick DeLand
Vice President
JOBPOWER Software 

The largest benefits of cloud-based technologies come in the way of reduced IT costs, increased collaboration and communication opportunities, along with anywhere/anytime access. 

There are many implementation options. Whichever way you go, you will end up with a hybrid system of software hosted locally and in the cloud. 

Project management is the key to any cloud implementation. Project management in this case involves selecting the right software for your business, learning the software, implementing the change management involved in adopting new software, possibly replacing or updating PCs and printers, as well as beefing up your Internet service. Failure in any one of these areas can derail financial benefits. 

You should expect incremental and meaningful cost savings by going with a cloud software provider. Your overall IT costs will be reduced through a cloud “subscription” including regular software and server hardware updates, offsite backups, data security and full hardware redundancy. 

John Chaney  
Executive Chairman
Dexter + Chaney

The economies of scale afforded by cloud computing make hosting costs nearly always lower than the costs involved in purchasing, maintaining, and regularly updating your own hardware and software. 

Efficient access to business information drives efficient workflows, which drive improved cash flow and profitability. Adopting cloud-based software puts your business and operational applications into the hands of anyone who needs them, anywhere they are working, from virtually any device. Real money is saved when accurate job information can be entered once as it occurs and be automatically routed, shared and processed by everyone who needs to be involved. 

Relying on legacy technology and software systems means spending more time managing these systems and less time using them to your advantage. IT staff freed from the burden of routine maintenance tasks can instead work to optimize the flow of data and communications across your organization. 

John Rosch
Senior Account Executive 
Explorer Software

Managers are continually faced with decisions about the adoption of technology to make their organizations more efficient, providing better access to information and keeping up with competitors. One area of potential cost savings can be the implementation of cloud-based technology. By moving email, job cost accounting and project management solutions to the cloud, you reduce your dependency on in-house servers and the related maintenance to keep them operational, secure and up to date. Elimination or reduction in staffing of an IT department would be your largest savings. 

Many clients using self-hosted systems are not sufficiently prepared for a significant failure, when downtime and data loss can cripple your business. Your cloud-based provider offers routine data backups and retention in addition to failover solutions. Cloud-based technology provides financial benefits in administration. Typically, there is no software to install on workstations so the time taken to add a new user or deploy a new workstation is greatly reduced. 

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