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As most construction executives know, getting a job completed on time and on budget often hinges on having the right mix of people serving the company. A CPA firm can provide a wide range of expertise, including strategic planning, smart growth and expansion, sound internal controls, tax and cash flow planning, and budgeting and forecasting. But in order to reap that added value, it’s critical that construction executives take the time to select a truly qualified CPA firm for the job.

Strategic Planning
Construction firms have a multitude of  daily operating challenges that are constantly competing against priorities. The right CPA firm will be able to help executives strategically navigate and prioritize those issues. For example, a qualified CPA can help make strategic planning a priority by challenging the executive team to develop long-term goals and then benchmark daily decision-making against the desired end result. This kind of guidance is critical because many construction firms have reduced strategic planning to an agenda item discussed at their annual meetings.

An engaged, qualified CPA firm can bring relevance to the strategic plan through an ongoing process that keeps the company moving toward achieving well-developed goals and enhanced performance. The right CPA will provide feedback and help benchmark the firm’s operational and financial results against industry leaders.

Smart Growth and Expansion
Another valuable area in which CPA firms can offer guidance is expanding business operations. Whether a firm is expanding service lines in related industries or expanding the geographic region in which it actively bids new work, a significant financial investment will be required to be successful. A qualified CPA will provide financial guidance to best position the firm to withstand the impact of the financial investment and to make the business expansion profitable both now and into the future. A CPA also can provide insight on tax and regulatory compliance in new geographic regions. 

Sound Internal Controls
Managing the finances of a growing construction firm is no easy feat. As revenues grow, the amount of daily transactions that run through the accounting department increases exponentially. CPAs that have a thorough understanding of the construction industry can help develop a control environment that fits the size of the accounting department and reduces the firm’s exposure to undue risk for theft or other wrongdoing. The CPA will work to provide a solution that minimizes operational challenges and avoids overburdening the department staff.

Tax and Cash Flow Planning
Long-term success for construction firms often depends on a proven track record of performing well in the field. Ignoring tax and cash flow planning can cause operational inefficiencies that erode profits on completed jobs and threaten the company’s future. That’s where a qualified CPA firm comes in.

The right advisor will provide guidance on income tax implications of profitable operations on the company’s cash position and avoid liquidity issues and operational challenges for new jobs. Similarly, a CPA will work with executives to address aging receivables, increasing under-billings and variances in gross profit that can significantly impact available cash to fund new projects, invest in the company’s infrastructure, and pay vendors, suppliers and employees.

Budgeting and Forecasting
In general, construction executives expend significant time and effort developing a reliable annual operating budget. However, during times of growth or contraction, the monthly budget and operating discussions are often put on the back burner. A qualified CPA can improve the annual budget process by introducing a rolling forecast, which will implement market and industry
changes throughout the year. Deviations from the forecast can be analyzed to identify and correct negative trends.

In addition, compensation derived from meeting budgeted results can more accurately reward good performance as the plan and compensation structure evolve with the firm’s approach to the current market and industry. 

With all that said, the question remains: What’s the best way to identify the right CPA for the job? Construction executives should look for the following when hiring an accounting firm.
  • Industry expertise. A CPA who understands the construction industry and its unique challenges will provide better insight on how industry trends will impact the firm’s financial position. The CPA’s general awareness and appreciation of operational challenges will result in better decision-making, viable strategic planning advice and fewer financial surprises. A qualified CPA also has access to industry connections and other qualified professional service providers.
  • Reputation. CPA firms are just as mindful as construction executives when it comes to reputation in the marketplace. Gaining insight on a prospective CPA candidate’s reputation should begin with other trusted service providers with which the executives already do business (e.g., banker, lawyer, surety agent and insurance agent). The candidate also should provide the construction firm with a list of references. Executives must take time to contact the references and focus on questions related to timeliness of services provided, reasonableness of professional fees during the length of the relationship and quality of advice on key business decisions impacting the construction firm’s future.
  • Complement to the firm’s culture. An important part of the selection process is meeting the individuals of the CPA firm who will provide guidance and interact with the contractor’s personnel. Make it a point to interview the full team and determine if, collectively, the CPA firm maintains a culture similar to that of the construction company. The construction executive team will need to feel comfortable with the individuals of the CPA firm selected in order to confidently work through complex issues.
A rebounding economy offers surviving construction firms the opportunity to capitalize on increased volume and returning margins in many markets. Similar to when construction firms expand their employee base, a thorough selection process for a qualified CPA will ensure the firm finds one with a strong reputation in the marketplace, proper industry experience and the ability to complement the construction firm’s existing culture.  

Bryan C. Porter is a principal in the audit, accounting and consulting department of Ellin & Tucker, Baltimore. He is also a member of the firm’s Audit and Accounting Technical Standards Committee. For more information, email bporter@ellinandtucker.com.


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