What should contractors consider when choosing a new accounting firm?
Michael B. Ceschini, CPA, CCIFP, CM&AA
Managing Member
Ceschini CPAs Tax & Advisory PLLC
A critical relationship for any successful business is the one it has with its CPA firm. And while every industry has special circumstances to consider, the construction industry is truly unique. The construction industry deals with up and down business cycles and special income-tax issues as well as distinct information systems, financial reporting, bonding and financing needs, all of which require special knowledge from the professionals who serve those in the industry. With that in mind, below are some things to look for when hiring a construction CPA firm:
Knowledge of construction accounting, such as the method of recognizing revenue, allocation of indirect and direct costs, and work in progress calculations.Understanding of contractor’s unique tax accounting methods. The construction industry has its own set of tax rules.Familiarity with construction accounting software. Most contractors use industry-specific accounting software.Recognition in the accounting industry. A reputable CPA firm gives other professionals, such as bankers and sureties, a higher comfort level when working with financial data, which in turn means they are more comfortable extending credit and providing bonding, allowing contractors to operate successfully.Experience working with a large number of construction clients of all sizes and types. This ensures the CPA firm knows the industry as a whole and benefits your company since experienced firms can offer value-added services beyond assurance and tax.
Theodore M. Pettko
Audit Shareholder
Let’s begin with the premise that no company wants to switch accounting firms. That is a complex transition that takes time and patience, but sometimes it is necessary in order to meet your business goals, plans and vision. Recognize when it’s time to explore other options. Start by establishing clear expectations and needs for the services you require now, as well as in the future. Consider aspects like financial reporting, tax compliance and advisory services, but also these factors:
Industry Expertise: This is a unique industry. Look for a firm that understands the nuances you face daily.Chemistry: You will spend a lot of time with your new firm. Strong relationships foster effective communication and collaboration.Specialized Knowledge: Does the firm have expertise in areas like project accounting, cost allocation or revenue recognition?Ancillary Services: The needs of construction companies are increasingly complex and may transcend traditional tax and audit services. Look for capabilities beyond traditional accounting, such as business consulting or technology solutions. Find a firm that can meet your future needs.Timeliness: You should expect prompt responses and timely deliverables. Ask for assurances those expectations will be met.Referral Sources: Reputations—both good and bad—are earned. Seek recommendations from trusted advisors, such as attorneys, bankers and brokers. Their insights can guide you toward reputable firms.
Your company and its needs are unique. Align yourself with the right partner—one that takes the time to learn why you are special and then tailors their service delivery to your needs. After all, you don’t want to repeat the process in just a few years. Good luck with your search!
Wade Sandy
Partner, Construction & Real Estate Industry Leader
Contractors face increasing challenges in attracting and retaining talent, expanding their businesses and managing risks. They need to work with a business advisor who has deep expertise in construction, understands their challenges and offers forward-thinking solutions.
When choosing a new accounting firm, contractors should consider several key factors to ensure the firm can meet their needs. First, expertise in the construction industry is crucial. Accounting firms with a specialized focus understand contractors’ unique challenges and opportunities, such as job costing, long-term contract accounting and seasonal cash-flow variations.
It’s also essential to evaluate the range of services offered. The ideal accounting firm should provide comprehensive services such as financial statement preparation, audit and assurance services, business-advisory and tax-planning strategies that can help contractors stay compliant and achieve their goals.
Technology and innovation are also vital. A firm that uses the latest digital solutions can offer efficiencies, insights and enhanced security for sensitive information.
Finally, contractors should consider personal fit and communication style. Regular, clear communication and a strong, trust-based relationship with your accounting firm can significantly impact the effectiveness of the guidance you receive. Selecting a firm that aligns with your business values and communication preferences ensures a more productive and satisfying collaboration.
By considering these factors, contractors can select an accounting firm that meets their immediate needs and supports long-term business goals.
Eide Bailly’s team of advisors have one goal—to help you build a solid financial future.
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Louis Sandor III, CPA, CCIFP
Partner, Practice Leader, Construction Services
Choosing the correct accounting firm for a company that operates in the construction industry is an essential step in creating a relationship that delivers value to both parties. Besides the traditional CPA services rendered in conjunction with tax and accounting preparation, the accounting firm needs to be able to address your needs when it comes to succession, estate and trust planning, software solutions, business valuations, buy or sell strategies, market intelligence, salary benchmarks, job-cost accounting and OH absorption, outsourcing and wealth and retirement management, etc.
To bundle this amount of intelligence takes a great quarterback and team that can manage, train and collaborate in handling these important services properly and a firm that invests in its people, technology and the future. But more importantly, it takes grit, perseverance, an interest in the success of the services the team supplies and customer satisfaction with those services.
In the end, many accounting firms have great talent, CPAs and CCIFPs [Certified Construction Financial Professionals] and vast other resources, but it takes a team dedicated to client service, understanding management’s needs and empathy for those needs to obtain relationship value. Therefore, next time your company is considering a new accounting firm, invest time in understanding the team approach to the relationship versus the individual just selling the elevator pitch.
Julian Xavier
Construction Leadership Team
As contractors grow and become more diversified, they may move beyond the capabilities of their current accounting firm. A construction-focused accounting and professional services firm can help the contractor present their financial statements in a way that enhances their banking and surety credit. Beyond financial statements, a construction-focused firm can provide guidance on leading practices around cash flow, technology innovation, internal controls and other operational areas that can improve a contractor’s profitability and efficiency.
So, what should a contractor look for when choosing a firm? Some key attributes include:
Experience in providing assurance and tax services for contractors who perform similar types of work and are of comparable sizeAdditional capabilities beyond traditional assurance and tax compliance areasProficiency in succession planning, digital strategies, costing best practices, wealth advisory, mergers and acquisitions, entity structure and selection (including ESOPs) and other operational experienceThat the lead person servicing your account has the experience and capacity to provide you with the level of service you expectThe reputation of the firm within your geographic area
Check with your surety, banker, attorney or other relationships you trust for references to understand the firm’s skills, experience and reputation.
Changing to an accounting firm that is focused on construction and wants to be your valued business companion can be a smart and beneficial decision for a contractor.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.
Please share best practices for managing cash flow year round.
Carl Oliveri, CPA, CCIFP, CFE
Grassi, Partner and Construction Practice Leader
Successful construction companies have a strong culture of cash-flow management; it is their lifeblood. Without proper cash flow, projects can halt, leaving the company vulnerable to financial ruin. Some best practices for managing cash flow year-round include understanding the customer’s requisition-approval payment process and pinning project cash disbursements to this.
While some costs, such as payroll, are paid as incurred, other job costs may be negotiated according to the terms the contractor is under so that the company is never too stretched on any given project. It is also important to prepare and utilize construction financial management tools, such as project-centric cash-flow reports, budgets and other forecasts, designed to help identify cash peaks and valleys; best practices suggest a 13-week look forward on a global and project basis. Finally, always be aware of and track the capacity of other sources of liquidity the contractor may have access to. While bank lines of credit are the most common, there could be other avenues, such as ownership’s ability to infuse additional capital.
Aaron Faulk
Partner, Construction National Practice Leader
Effective cash-flow management requires forecasting and budgeting as well as emphasis on liquidity related performance metrics. Within a contractor, many individuals, including owners, estimators, project managers and finance executives, can significantly impact cash flow. Accordingly, those entities that emphasize the importance of cash flow and each team member’s impact on it are the most effective at managing and improving cash flow and liquidity.
Phillip Ross
Partner
Cash flow is the heartbeat of any business. Contractors should project cash flow at least one year ahead, scheduling project timelines and anticipating potential changes and their impact. Creating three different budget and cash-flow projection scenarios—what is on pace to happen, the best-case scenario and the worst-case scenario—ensures multiple strategies are available to proactively manage current situations and adapt to unforeseen changes.
Timely billing for completed work is crucial for maintaining healthy cash flow. Contractors should review all their contracts to understand the billing terms. As many adhere to a monthly billing cycle, ideally, invoices should be issued within three days of the close of the month. Contractors should also follow up diligently on overdue payments to reduce days sales outstanding.
Many contractors have diversified the work and markets in which they operate. This helps to smooth cash flow by reducing reliance on any single revenue stream. These firms plan ahead in order to capitalize on shifts in demand by reallocating workers to the busiest sectors, thereby converting potential idle workers into revenue and cash-flow generators.
To be successful in today’s market, cash-flow management needs to take place year-round. Having an updated plan and communicating the plan to management and employees is essential. Finally, working with an accountant who specializes in the construction industry will ensure that you are staying informed and up to date on industry trends, tax-law changes and potential effects.
How might a recession affect the competitive landscape and what strategies can construction firms put in place now to prepare for the possibility?
Jon Zeiler
Managing Partner, Construction Services
Contractors continue to be concerned about a potential downturn or a recession of the economy and how it could affect the construction industry and their businesses. The substantial economic downturn in 2008 caught many contractors unprepared to manage the impact to their businesses. Accordingly, contractors today should be taking steps to help prepare themselves for a potential change in the economy. Below are some action items to implement to help safeguard your company:
Your current backlogs and sales pipeline may not be as assured as it was a year ago. Projects, especially development projects, could be put on hold or cancelled altogether. Stay on top of your key future projects and consider a general reserve against future work in your forecasting.It will be essential to retain your top performers—A/B players—to help you manage through challenging economic times. Be sure you are staying close to them and continuing to offer competitive current and deferred compensation and benefits. Additionally, it is always good to evaluate your C/D players and consider parting ways with under-performing employees.Forecasting, especially cash forecasting, will be critical to managing through difficult times. It is no longer acceptable for your financial group to simply report on financial results. A typical strong forecasting package should be timely and reliable, and ought to focus on labor, cash and availability, and financial results.
Don’t wait until it’s too late to implement these best practices as these are sound behaviors regardless of the economic situation.
What are the most important financial metrics that contractors should track to ensure profitability?
Chelsey Goossens, CPA, CGA, FCCA (UK), MBA
President
Ensuring profitability in the construction industry requires a keen focus on several critical financial metrics. Chief among them is cash flow, the lifeblood of any contracting business. Contractors often face a cash-flow crunch due to the delay between incurring expenses and receiving payments. To avoid this, maintaining a solid line of credit and closely monitoring accounts-receivable turnover and accounts-payable cycles are essential.
Another vital metric is job costing. Accurate job costing allows contractors to track the actual expenses of a project against estimates or budget, helping to identify cost overruns early and adjust accordingly. This includes keeping a close eye on overhead costs—expenses that are general and administrative, such as rent, utilities and non-billable salaries, which can eat into profits if not managed properly.
Gross profit margin is also crucial, as it reflects the direct profitability of projects by comparing revenue to cost of goods sold. Coupled with net profit margin, which accounts for all operating expenses, it provides a comprehensive view of the company’s financial health.
Work in progress reports are indispensable for understanding the financial status of ongoing projects. These reports highlight the progress and costs incurred, allowing for proactive adjustments to keep projects on track. Additionally, conducting a break-even analysis for each project helps set realistic revenue targets and ensures that all costs are covered before profits are realized.
By diligently tracking these financial metrics, construction professionals can gain a clearer financial picture, make informed decisions and steer their businesses toward sustained profitability, navigating the complexities of the industry with confidence and precision.
Joseph Natarelli
National Construction Leader
To ensure profitability, contractors and construction firms need to communicate effectively with clients, partners and internal stakeholders. That means establishing relationships characterized by the free flow of information, close reading and thorough understanding of contract language, and the diligent management of contracts. By reviewing work-in-progress reports and knowing where the job stands at all times—and obtaining signed change orders for out-of-scope work before starting on it—there will be fewer opportunities for misunderstanding, and a smoother, more collaborative project in which all involved know what to expect of one another. That doesn’t just serve the project(s) currently being undertaken, but establishes a foundation for future partnerships.
If your contracts are professionally drafted and negotiated with the care and attention they deserve, they are offer strong protections for your business. Things can happen unexpectedly in life, but that’s doubly true of an active jobsite with so many moving parts. Contracts help clarify each party’s responsibilities through the development and building phase, but that’s not all. They also have a knock-on effect when it comes to your tax strategy. The nature of your contracts and the language they contain can affect your eligibility to defer taxes owed under Section 460. That can be a major advantage in certain situations, and a sophisticated tax strategy requires deep familiarity with the status of every project and the contracts associated with it.
Brian Kassalen
Partner, Construction Industry Leader
The are a variety of financial metrics that contractors can analyze to track the profitability and financial health of their company. Some may focus on balance-sheet metrics such as working capital or cash flow, while others may focus on income-statement metrics such as gross profit, project profitability or net income. Given the unique characteristics associated with construction companies, tracking a combination of these metrics can give clearer insight into a contractor’s financial performance. A few key financial metrics a contractor should track to ensure profitability are gross profit, working capital and cash flow.
Gross profit is the measure of how profitable a contractor’s projects have performed and is calculated as revenue earned less direct project costs (labor, materials, equipment and subcontractors). The higher the gross profit, the more profit a contractor is making on their projects and helps to drive overall profitability.
Working capital is another key metric for contractors to focus on. Working capital measures the company’s ability to pay their short-term obligations and is measured as current assets less current liabilities. Positive working capital indicates the ability to cover short-term operating needs and, while it may not directly ensure profitability, it can be indicative of overall financial health.
Lastly, cash flow is another key metric for contractors to focus on. A contractor will want to track cash flow and ensure that they are generating positive cash flow. Positive operating cash flow is important to ensure that the financial performance of the company is strong.
Jean Hackstock
Partner
To ensure profitability, contractors should track financial metrics that go beyond the basics of profit, revenue and costs. While these are important, they don’t always reveal the underlying operational issues that can affect financial health, especially in the construction industry. Having a strategic collection of both financial and nonfinancial indicators to capture all aspects of your business operations is preferred. Here are five examples of predictive key performance indicators to consider:
Bid development:
Track pending bids, business development meetings and win probabilities.Set benchmarks for bid-related activities to forecast work volume.
Buyout process:
Monitor the speed of the buyout process post-project win.Slow buyout can predict and prevent job fade.
Quality control:
Establish KPIs for engineer involvement and owner inspections.Conduct independent reviews for high-risk jobs at set milestones.
Subcontractor inventory:
Regularly compare inventory levels with purchasing activity.Use exception reports to prevent over-purchasing and optimize cash flow.
Safety:
Predictive safety KPIs focus on current safety activities, such as meetings and audits, for future safety performance.
Historical profit, revenue and costs are an essential part of measuring business performance, but they don’t represent a complete picture. Considering predictive KPIs will equip leaders to drive strategically, focusing on the future rather than past performance, and ensure a proactive journey towards success.
What strategies can contractors employ to retain current employees and attract new skilled workers in a competitive labor market?
Brad Werner
Partner and Leader of Construction and Real Estate practice
Construction firms need to understand that Millennials and Gen Z care very much about being able to maximize their productivity during their work hours. These workers grew up with digital devices and expect to use them in their work environment. They also value efficiency, flexibility, collaboration and feedback. In order to be a best-in-class talent acquirer, you have to equip your organization with top tier tools and processes. Evaluating the requirements of your business and mapping it to the technology tools you have and could invest in is essential in making good decisions about where to prioritize your investments.
For example, some of the tools that can benefit both the employer and the employee are:
Mobile apps that allow workers to access project information, report progress, submit requests and receive updates in real time.Cloud-based platforms that enable data sharing and collaboration among different stakeholders, such as architects, engineers, clients and subcontractors.Drones, sensors and cameras that monitor site conditions, track materials and identify potential hazards.Wearable devices that collect biometric data, alert workers of risks and provide feedback and coaching.Virtual reality and augmented reality that simulate scenarios, train workers and improve quality control.
By implementing these technologies, firms can not only improve their operational efficiency and profitability, but also demonstrate their commitment to innovation and employee development. This can help them retain their existing workforce and attract new talent who are looking for a rewarding and challenging career in the construction industry.
Elizabeth Williams, SHRM-SCP, SPHR
Principal
In today’s market, people are looking for more than a paycheck; long-term job security, career opportunities and liking the people you work with carry a lot of value.
To retain your best employees, give them room to grow by providing more tools in their toolbox. Build upon their skills by offering training and development programs, ranging from cross-functional training across different departments and roles, to personalized growth plans that suit the individual employee’s career goals. This can also include a tuition reimbursement program to help with the cost of specialized training or college classes outside of the company; an employer can provide up to $5,250 per year, tax-free, to an employee, which can be incorporated into the terms of an employment agreement.
To attract the best employees, focus on your employer branding by sharing your core values and stories about your company culture through your job postings, website and social media. It’s even more impactful if your employees tell their stories through these avenues, of what it’s like working with you. You’ll draw a stronger pool of candidates who resonated with your story, and when you interview them, you can better align their skills, desires and values to your company’s needs, values and culture.
Don’t forget to recognize and reward their hard work through positive words and deeds, which fuels ongoing teamwork and synergy, cements trust and builds long-term loyalty. Keep a pulse on their level of engagement versus burnout and address both proactively by utilizing employee engagement surveys.
What are the main differences between generic accounting software and accounting software made specifically for construction?
Derek Chu
Product Manager, Financials
Managing job costs and budgets to ensure you maximize ROI can be challenging when delivering construction projects. However, this is feasible through construction accounting—a specialized, project-centric approach to finances. Unlike its general counterpart, this form treats each construction project as a unique entity, adapting to its project-specific revenue, expenses and profit parameters. The sheer depth of its methods showcases its overall value.
Construction accounting has been developed to aid contractors in monitoring individual projects and understanding their overall impact on the company.
Here are some key terms within construction accounting:
Contract revenue: The revenue generated from the construction contractContract costs: Expenses associated with fulfilling contract obligationsGross profit: Revenue after deducting the costs related to a particular projectWork in progress: Ongoing projects and their accumulated costsOverbilling and underbilling: Charging more or less than the work performedRetention: The amount withheld until the project has been completed satisfactorilyChange orders: Modifications to the original contract, which often impacts costs
Accounting software tailored for the construction industry should offer robust features designed to manage and forecast project revenues and costs and have a strong focus on tracking work in progress. Essential functionalities for construction firms include job and work order billing, job costing, managing subcontracts and handling change orders—all crucial for navigating this dynamic and growing industry.
Additionally, these programs must integrate seamlessly, ensuring comprehensive accounting information for accurate reporting, enabling businesses to make informed decisions on various complex construction projects.
Joel Hoffman
Director, Product Management (Construction, Field Service, Property Management)
Generic accounting software excels at handling day-to-day financial tasks for most businesses. However, the construction industry presents unique challenges that generic software often struggles to address.
Construction-specific accounting software tackles these challenges head-on. It streamlines processes like job costing, tracks progress billing seamlessly and offers features specifically designed for construction workflows. This allows contractors to gain a clearer picture of project finances throughout the lifecycle.
For instance, generic software might require complex workarounds to manage change orders—a common occurrence in construction. Construction software integrates change orders directly into the accounting system, saving time and reducing errors.
Additionally, construction software often integrates with project-management tools, facilitating real-time data flow between the field and the back office. This improves collaboration and ensures everyone has access to the latest project information.
While generic software can seem to be a cost-effective option for some businesses, construction companies benefit significantly from the specialized features and functionalities offered by construction-specific accounting software.
How can contractors assess their needs to choose the right accounting system?
Steve Antill
Chief Revenue Officer
Selecting the right accounting system or ERP solution is predicated on evaluating your business at a macro and micro level.
On a broader scale, consider your company’s size, the types of jobs you perform, your pain points, gaps in your reporting and growth you forecast over the coming years.
By answering these questions you’ll get a clearer picture of what type of accounting solution you’ll need.
Next, zero in on specific areas of operation to determine what features you’ll want. Keep in mind:
Payroll: How much time is spent processing payroll? Do you deal with compliance requirements? The software you purchase should create conveniences that simplify your reporting—such as certified payroll and union reports—and cut your payroll commitments substantially.Job costing: Job costing allows contractors to compare estimated costs versus actual costs in real time. If you handle larger jobs or plan to take on additional work, you may need a solution that builds more detailed job-cost structures.Billing: Developing accurate billing methods is crucial to maintaining project timelines and establishing healthy cash flow. The software you invest in should be able to simplify industry specific forms like AIAs, T&M and track retainage.Scalability: Always look ahead to the future. If you’re planning to expand your company in size or function, choose a system that scales to your operations. Whether that’s with add-on modules or integrations, invest in products that grow with you.
What can contractors do to ensure overhead costs are correctly allocated to individual projects to ensure profitability reports are accurate?
John Gallo
Managing Director, Leader of the National Construction Practice
Contractors should be aware of the different direct and indirect costs that make up overhead. Examples of direct costs include materials, direct labor and subcontractor costs that are allocated to a specific project. Indirect costs are not necessarily attributed to a specific project but are associated with running the business. Examples include rent, utilities, marketing or jobsite overhead costs like trailers, permits and security. The final subcategory of costs are project management costs which are benefits and salaries of non-direct project labor costs.
There are many different formulas for allocated overhead to utilize when allocating costs. Choosing the right method depends on the nature of the project and structure of your business. Some options include, percentage of direct labor hours, percentage of direct costs, machine hour rate—best for equipment intensive projects—and square footage method.
When allocating overhead, the following factors must be considered: the allocation base, various cost pools, being consistent in your allocation and performing periodic reviews. Periodic review is the most critical factor. Regardless of which overhead allocation method is used, the overhead rate should be reviewed at least annually. This will help ensure that there is an accurate overhead rate for your company and that the job is bid profitably or you risk going in at a loss because of an outdated overhead rate unable to cover costs. Inaccurate overhead rates can turn individual jobs from profitable to loss jobs quickly and if not updated turn your year upside down in a matter of months.
Properly calculating and allocating overhead costs will help improve profitability and mitigate risk of losing project bids. It is important to review your overhead rate regularly and consult with a skilled accountant if you need guidance or assistance calculating overhead rates.
What are common mistakes business owners make when managing their wealth?
Anthony Hakes
National Construction Practice Leader
Business owners often make several key mistakes in managing their wealth. Primarily, they may lack accurate and comprehensive financial information. Without clear financials, including cash flow and debt management, they can’t plan effectively for future business and wealth goals, especially with changing tax laws. Inaccurate financials can lead to overestimating wealth and cash flow, impeding retirement planning and debt reduction.
Another common mistake is commingling personal and business finances. This practice complicates financial clarity and can negatively impact the business valuation, especially if planning to sell. Maintaining separate financial records and obtaining a CPA’s opinion can enhance financial credibility and accuracy.
In line with obtaining a CPA’s opinion, business owners should form a reliable advisory team, including financial advisors, accountants and lawyers. Trusted advisors help navigate complex decisions and future planning, ensuring strategies are adaptable to changes in tax laws and family dynamics. Strong relationships with advisors who understand the owner’s goals are crucial for long-term success.
Finally, starting wealth management planning too late is another critical error. Ideally, planning should begin well before age 55 to allow sufficient time for strategic decisions. Understanding the personal motivations behind the business can reveal important insights that owners may overlook, aiding in better succession and retirement planning.
Effective wealth management means having precise financials and a competent advisory team. Accurate financials provide a true picture of the business’s health, enabling informed decisions. A strong advisory team offers guidance, flexibility and trust, ensuring the owner’s goals are met and adapted as circumstances change.
How will AI and predictive analytics impact a typical construction business?
Karoline Lapko
President, CEO
AI’s journey has been remarkable since Christopher Strachey’s checkers program in 1951. Today, around 55% of organizations have adopted AI, streamlining customer interactions and internal queries. AI’s ability to analyze vast amounts of data and present actionable insights enhances decision-making, saving time for leaders with instant, data-driven recommendations.
In the construction industry, AI will serve as a catalyst for transformation and advancement. By optimizing resource allocation, AI minimizes waste, promoting environmentally friendly practices. It can analyze past projects to create efficient schedules, reducing unnecessary emissions and conserving resources.
Innovative project planning and management are further benefits of AI integration. Predictive analytics analyze extensive data from previous projects to improve scheduling, forecast delays and suggest optimal timelines.
AI also enhances financial control by reducing costs and improving profitability. Predictive analytics monitor equipment in real time, anticipating failures. AI aids in budgeting and financial forecasting, providing accurate insights for better decision making.
Moreover, AI boosts risk management and safety by identifying potential hazards and suggesting preventive measures. Predictive models reduce the likelihood of accidents, protecting workers and minimizing legal liabilities. This not only ensures safety but also prevents project delays.
Additionally, AI-driven design tools can create innovative construction solutions, while robotics automate repetitive tasks, increasing efficiency and precision.
This is only the beginning! Despite AI’s exciting capabilities, skilled people remain crucial for driving great businesses. As AI capabilities expand, a well-trained workforce will be indispensable for maximizing AI’s potential and achieving sustained business success.
What are the benefits of outsourcing accounting functions to a CPA firm?
Mark P. Barnett Jr.
Principal, Construction & Real Estate Industry Leader
As a business owner, you know how important having accurate financial management data is to your success. However, the complexities of construction accounting can make it difficult to find and retain skilled in-house accountants. Outsourcing your accounting functions to a construction CPA firm can alleviate most of these challenges.
Accurate data throughout the year empowers you to make stronger, smarter business decisions. Outsourcing gives you access to a team of construction-focused advisors who ensure accurate and timely financial statements. This provides you with up-to-date job schedules, enabling proactive forecasting and management of in-process projects.
Moreover, bond agents and banks often require interim internal financial statements. Most construction companies struggle to provide accurate and complete internal financials throughout the year and typically rely on CPAs to clean up their financials at year-end. With outsourced accounting, you always have complete, accurate and timely financials readily available to provide to third parties throughout the year, eliminating the need for last-minute CPA intervention.
Tax planning also becomes more accurate and efficient with outsourcing. An outsourced construction accountant can streamline the process, resulting in faster turnaround times and significantly less cleanup at year-end for tax return filings and required financial statements. This reduces stress and ensures compliance and optimization of your tax positions, as well as timely information required for licensing and bonding.
Outsourced accounting gives you accurate, timely financial data and expert advice, empowering you to manage projects proactively and make smarter business decisions year-round.
Andrew Donohoe
Assurance Director
In today’s race for talent, contractors are constantly dealing with the pressures of hiring talented field employees. That pressure is also affecting the accounting side of business. As construction companies have grown rapidly, so has the need for increased accounting departments. Unfortunately, most companies are feeling the competition to hire and, most importantly, retain good talent.
Because of these pressures, outsourced accounting has become one of the fastest growing segments of CPA firms. Outsourcing can be extremely beneficial for contractors for a variety of reasons.
Types of Outsourcing
Full outsourcing: Depending upon the company’s size, it may make sense to have the entire accounting function.Partial outsourcing: A company may have good talent but need assistance in one area. Partial outsourcing assists in filling that specific role.Supplemental outsourcing: A company may want someone to help with a high-level role. For example, a company may need someone to look over month-end close and identify any possible concerns.
Benefits of Outsourcing
More timely reporting to help drive better business decisionsLess burden of replacing talent; if a person leaves, it is the firm’s responsibility to fill the rolePeace of mind that reporting will be complete and accurate
With the utilization of technology and online platforms, outsourcing is easier than ever. Outsourced accountants don’t need to be sourced locally, which gives businesses a better chance of filling roles more quickly.
What common accounting mistakes can technology eliminate?
Woody Chamberlain
President, Owner
The Davis Bacon Act of 1931 has 31 compliance issues that must be followed. But, human error comes into effect when construction companies manually produce checks for their employees. Checks that are not correct are a burden to the payroll department, wasting more time and more money correcting the error. Other compliance issues such as the amount of journeymen to apprentices must be checked every payday. The 31 compliance issues of Davis Bacon must be adhered to for every check or stiff fines and jail time may be the result. eMars offers “Compliant Client,” the automatic payroll system that does not allow a payroll to be submitted unless all payroll information is correct.
What benefits of technology are contractors not utilizing to manage payments to vendors, suppliers and subcontractors?
Mike Milligan
Chief Growth Officer
We’ve all experienced never-ending email trails, error-prone spreadsheets, inconsistency in lien waivers, forgotten compliance documents, manual check writing to multiple subcontractors with different payment schedules… the list goes on and on. Add all that up and it turns into a lot of time that can significantly delay payment application approvals for subcontractors. That’s where using invoicing software in addition to your ERP can be game-changing for the payment process. By utilizing technology to manage payments, you can significantly streamline your team’s day-to-day by removing the possibility of errors and delays.
Most of us have auto pay set up to pay our utility bills and car payments, so why aren’t general contractors doing the same for their invoicing process? There are still a significant number of businesses dealing with paper checks. Payment processes to subcontractors can represent more than 75% of the project’s cash outflow, and being able to manage invoices, lien releases, compliance documents and other expenses efficiently is paramount to the project and company’s success, so adopting these practices are imperative.
Additionally, we know there is a labor shortage in the U.S. construction industry. In the back office, the subcontractor management process used to require multiple employees to execute payments on time and with accuracy. Mike Patarno, the president of construction at Cityscape Residential, recently told us that because he added invoicing software to their accounting process, a 4-6 day process to get a draw done has now become a 4-6 hour process, removing the need to add extra headcount.
