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Considering Credit to Finance Business Growth in the Construction Industry

Posted by Concannon Miller on Thu, Oct 17, 2019

If you find your construction company gaining a large influx of projects, the biggest problem will be the boost in the amount of capital you will need in comparison with your cash flow.

A jump in new jobs can strain your firm's resources, challenging the firm's capacity to hire field crews, its technology infrastructure and its cash flow. The upside, of course, is that a large backlog of incoming projects means more income and a lead time that lets your management team meet increasing cash flow demands. The more backlog of construction-in-progress the more big payrolls, more benefits going out, larger materials bill. And of course, everyone wants to be paid in cash.

This demand for cash can make it hard to ramp up to meet growth opportunities, but you can effectively manage it by using existing credit efficiently and taking out new strategic lines of credit.

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Topics: Construction & Real Estate Development

A Roadmap for Preventing Construction Disputes

Posted by Robert Otruba, Mark Baker, Wiley Wright, Simon Braithwaite, and Ian Shapiro on Tue, Sep 17, 2019

Whether resolved through mediation, arbitration or trial, construction disputes can be costly and time consuming for both project owners and contractors. Construction disputes may involve just a few thousand dollars or may be valued in the billions.

The time required to resolve disputes may span years, and cripple both the contractor’s and owner’s financial resources. To eliminate the risk of being embroiled in a costly construction dispute, some construction firms may not bid certain types of projects and avoid working for owners who have a reputation for contentious relationships with contractors.

In this article, we have outlined a few of the major steps that we feel can reduce or prevent construction disputes based on our collective involvement in thousands of construction projects throughout the world. Since there are many reasons that construction disputes occur, these steps may not necessarily apply to every dispute. Every dispute should be evaluated within the context of its own unique circumstances.

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Topics: Construction & Real Estate Development

Construction: Improve Cash Flow with the Critical Path Method

Posted by Concannon Miller on Thu, Aug 22, 2019

Construction project financing and cash flow management are unique for several reasons.

First, start-up construction companies are very easy to form with the "two men, tools, and a truck" business model. Because of this, credit and business history often are not extensive as the positive histories that typically give businesses access to large sums of capital to start the business.

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Topics: Construction & Real Estate Development

Construction Bookkeepers: Tips for Producing Quality Financial Statements

Posted by Concannon Miller on Thu, Jul 18, 2019

Many construction bookkeepers have gaps in their knowledge about how to produce quality financial statements. That can matter at year-end. There is only so much your CPA can do at the end of the financial year to correct or modify poorly recorded transactions.

In some companies, bookkeepers may keep records in a certain, albeit less-than-perfect, way simply because it is how things have always been done. That may not help your business meet the challenges in today's competitive world where lending, bonding, and mergers and acquisitions depend on accurate representations of business transactions. Well-trained construction bookkeepers can help you plan and save cash, gain access to more leverage and credit, and finance large-scale initiatives.

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Topics: Construction & Real Estate Development

REITs Contending with Flexible Lease Demands

Posted by Stuart Eisenberg on Tue, Jun 18, 2019

This year is poised to be an eventful one for REITs, with several regulatory and policy changes taking effect that will impact operations and balance sheets.

These changes—coupled with a real estate business cycle that many executives feel is at or past its peak, according to findings from BDO’s Global REIT Report—present a mixed bag for REITs in the new year.

As I wrote last year, REIT executives’ expectations have been tampered, but they remain overall confident for the near-future. The most recent and long-term change for REITs is the much-anticipated, new lease accounting standard that took effect at the beginning of the year for most public companies after it was first announced in 2016. For private companies, the new standard will begin in 2020.

Now that the new standard is officially here, I’ve outlined immediate takeaways and potential long-term impacts.

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Topics: Construction & Real Estate Development

Looking to Invest in Opportunity Zones? There’s New Guidance for This Tax Benefit

Posted by Concannon Miller on Tue, May 14, 2019

The IRS has issued proposed regulations that provide guidance under new provisions added by the Tax Cuts and Jobs Act (TCJA) related to Qualified Opportunity Funds (QOFs). Specifically, the guidance addresses the gains that may be deferred as a result of a taxpayer's investment in a QOF, as well as special rules for an investment in a QOF held by a taxpayer for at least 10 years.

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Topics: Construction & Real Estate Development, 2017 Federal Tax Reform

New Real Estate Investment Tax Benefit: FAQs on Opportunity Zones

Posted by IRS on Thu, Apr 25, 2019

Tax Reform through the Tax Cuts and Jobs Act provided a new tool for promoting and incentivizing long-term investment in low-income communities.

Opportunity Zones are economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment.

Learn more about them in this comprehensive Opportunity Zones FAQ from the IRS. Also, see the Lehigh Valley’s Opportunity Zones here.

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Topics: Construction & Real Estate Development, 2017 Federal Tax Reform

Seize the Opportunity (Zone), But Keep Your Head on Straight

Posted by Stuart Eisenberg and Marla Miller on Thu, Mar 28, 2019

The IRS defines an opportunity zone as an “economically distressed community where new investments may be eligible for preferential tax treatment.” The Treasury has certified nearly 9,000 of these districts across all U.S. states and its territories, including the entire island of Puerto Rico. An opportunity zone designation has the potential to trigger a rush of investment activity and is intended to help revitalize neglected areas.

A qualified opportunity zone fund is an investment vehicle that must invest at least 90 percent of its assets in businesses that operate in a qualified opportunity zone, either by acquiring stock or a partnership interest. The fund can also make direct investments in properties and real estate located within a qualified opportunity zone. REITs and other operators are forming opportunity zone funds to access the capital expected to be generated by this program to acquire and develop properties.

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Topics: Construction & Real Estate Development, 2017 Federal Tax Reform

Reasons for Construction Companies to Certify Financial Statements

Posted by Concannon Miller on Thu, Feb 28, 2019

Throughout the year, construction companies and real estate developers need to be able to provide verified financial results to others.

This may be your CPA, a lender or investor, a potential purchaser of your business — should you decide to sell — or another interested party. Not to mention that you, as the construction company owner should know your books are being done with accuracy and completeness.

For all of these reasons, you should consider having your CPA prepare certified financial statements for your business, rather than always relying on internally generated reports.

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Topics: Construction & Real Estate Development

Tax Reform & More: 5 Construction & Real Estate Predictions for 2019

Posted by Concannon Miller on Tue, Feb 5, 2019

Marked by turbulent trade conditions, a shifting retail landscape, continued fallout over tax reform and the accelerated growth of coworking companies, 2018 has been an eventful year for the real estate and construction industries.

As we enter 2019, a variety of forces are at play. The IRS will continue to release additional guidance on provisions introduced via tax reform, the future of U.S. trade policy is uncertain and interest rates will likely rise again.

As the new year unfolds, we’ve outlined our top five predictions for 2019.

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Topics: Construction & Real Estate Development

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