4Thought Blog

As COVID-19 spread throughout the country this March and April, many states restricted the movement of residents while allowing those in "essential" businesses to continue working. Generally, construction companies have been deemed essential for this purpose — leaving contractors to grapple with the logistics.

Although nothing is certain at this point, some standard COVID-19 operating procedures have been established by American General Contractors, one of the construction industry's leading associations. Here's an overview of what you can do to keep workers and others safe in the current hazardous environment.

The current labor market is tight — particularly in the construction industry.

Recently, the 2,700 contractors, construction managers, builders and trade contractors surveyed in the Commercial Construction Index reported having "difficultly" or "moderate difficulty" finding skilled workers. And according to a new survey from the Associated General Contractors of America, four of every five construction companies are having a hard time filling hourly and craft positions, which represent the bulk of the industry's workforce.

In this tough environment, contractors need to explore all their options. A recent tax law change suggests one potential labor source and provides a welcome tax break. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extends a special tax credit through 2020 for businesses hiring workers from certain disadvantaged groups.

Job costs are the lifeblood of your construction business and accurately estimating them will determine if a project will make money.

Managing job costs across the life of the project will ensure that your firm makes money on every job. Moreover, those job-by-job profits make the office and your executive salary possible.

Despite this, some CFOs don't take job costs seriously. Some see tracking those costs as more trouble than it is worth, while others think that the costs are so obvious that tracking them seems like extra, unnecessary work.

Neither is true and both can limit your firm's profitability. Here are seven tips that can make job cost tracking easier than you might think:

In general, government contracts are awarded to the lowest bidder. Yet prevailing wage laws require contractors to pay wages that are comparable to those for similar work in the same city or geographical area. Such laws can make it difficult for contractors to win public projects.

However, you may have an opportunity to reduce costs and make your bids more competitive by leveraging fringe benefits. Let's look at this strategy.

As 2019 approaches its final months, construction firms may start to see an uptick in interest for projects in opportunity zones.

Enacted as part of 2017 Tax Reform, the opportunity zone program began attracting significant investor interest after the IRS released clarifying guidance about the program’s rules in October 2018 and again in April 2019.

While additional IRS guidance is still expected, one thing is certain: 2019 is the prime time to invest in opportunity zones to receive the program’s full tax benefits. Consequently, eager investors have begun pouring capital into qualified opportunity funds (QOFs)—the investment vehicle to participate in the opportunity zone program.

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.

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.

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.

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.

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.