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Ready or not, a new year is here. As your construction business looks to make it a successful one, consider these five best practices for optimizing your financial position.
Frequently overlooked by construction professionals, the Research and Development (R&D) tax credit rewards businesses for improvements to their processes or technologies. New and innovative construction techniques, improving an existing building structure and designing and constructing a new facility are just a few examples of projects that may meet the R&D tax credit requirements. The Section 179D deduction is another opportunity to consider. Although more complex to qualify for, Section 179D allows contractors performing qualified energy-efficient lighting improvements for tax-exempt entities to qualify for the deduction even though the cost of the improvements were paid for by the tax-exempt entity.
A well-constructed and maintained budget allows you to properly plan your expenses, determine revenue and ensure your financials are on track for each project. While creating your budget, be sure to estimate revenue, calculate upfront costs and account for your monthly expenses in order to get a better understanding of monthly financials. Once the actual numbers are in, make sure to compare your budget to actual costs to determine what changes you need to make for upcoming months or future projects. Stay on track with budgeting and your financials with benchmarking tools and resources available to you through the industry associations.
In order to keep projects on track and on budget, it’s important to know the job schedule and be prepared. By developing a schedule, you will know in advanced when every facet of the job is to begin, when it should be completed, timing for arranging subcontractors and progress throughout the various project stages. It is also important to keep in contact with your team and to have your group on the same page. Often times your team can provide strategic thinking to help with challenges as they arise and give valuable input on cost cutting throughout projects. This can be achieved by conducting weekly or bi-weekly meetings with accounting professionals, management and account managers.
Working with accounting personal to analyze financial statements allows you to catch potential problems early on before they become bigger issues and result in costly losses. Understanding your financial standing allows you to be on the lookout for problematic areas impacting cash flow, such as profit fade, under-billings, change orders and flaws in the billing process. Communicate problems or concerns to your accounting professionals to develop and implement processes to minimize cash-flow risks.
As technology continues to evolve, fraud also continues to rise. The construction industry in particular is targeted because of the various cost inputs, multiple suppliers and subcontractors. Industry professional suggest establishing internal controls and implementing employee policies and procedures to reduce fraud opportunities. One scam we’ve been hearing a lot about involves a fraudulent email address imitating an assistant or company employee you work closely with, sending an email on your behalf asking for a wire transfer to the account they provide information for. Make sure your policies and procedures include measures to protect yourself from such scams. Once money has been transferred from one account to another, there is very little, if anything, that can be done to reverse the transaction or replace what has been lost.
Planning for the unknown of what 2016 holds for your construction business can be challenging. Doeren Mayhew’s specialized group of construction CPAs can help you implement strategies that are just right for your individual needs. Rely on our team to help manage your financials and find savings opportunities for your business. Contact our construction CPAs today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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