The construction segment is at the rocky bottom of all segments worldwide for access to working capital and length of accounts receivable, according to Pricewaterhouse Coopers’ Annual Global Working Capital Survey. However, industry stakeholders seem to report making money. How do they do it? They must be holding money for longer periods of time.
In the past, contractors relied on paper and a variety of methods to manage their accounting needs. The problem was the time and effort it took to consolidate the data and generate reports.
The 9th Circuit Court’s review of how construction contractors should recognize income had a somewhat surprising outcome. The key question being considered was: When should developers recognize income under the completed contract method? Is it when the entire project is complete, is it on percentage of completion, or is it upon the sale of each individual home sold?
Business owners must collect, report and submit payroll taxes as required by federal and state laws. It is important that payroll systems and processes are accurate and efficient to meet federal and state obligations. Otherwise, a corporate officer or other responsible party (as defined by the IRS) may be personally liable for payroll taxes that are not reported or deposited, even if someone else processes payroll.
Contractors drive an average of 75 miles every day, according to a recent study by The Aberdeen Group. Those miles equate to more than $10,000 in tax write-offs each year However, the vast majority of miles go unreported and dollars are never claimed due to lack of awareness or failure to use tracking technology.
A successful contractor does everything possible to run a lean, financially sound company. Finding ways to save money while increasing margins, improving cash flow and operating more efficiently is key. Following are 12 financial strategies contractors can implement to stay financially healthy.
There was a time when non-recourse financing for commercial real estate projects protected borrowers against personal liability for a loan gone bad. Lenders would look solely to the underlying assets of the project to recover losses when a loan defaulted. However, as times have changed, so too have these protections.
The new presidential administration is poised to lead to a number of proposed tax and regulatory changes, many of which will impact the construction industry.
Cash is essential to running day-to-day operations and improving a company’s financial position when presented to banks and other creditors, so contractors continue to search for ways to keep cash available. One of the best opportunities to keep more cash in the company is to create a tax deferral. Tax deferral strategies for contractors are often overlooked or misunderstood.
The construction industry pays the highest effective tax rate of any sector of the economy. Given that realty, contractors should be proactive in tax planning, which includes taking advantage of tax incentives and understanding the internal revenue codes specific to contractors when filing tax returns.
Though many contractors are aware of the upcoming changes to lease accounting, many are unsure of how to transition to the new accounting standard, known as Accounting Standards Codification Topic 842 (ASC 842).
With profit margins averaging around only 3.5 percent, construction companies can not afford to waste money. It is imperative that company owners plug any and all leaks in their financial systems, including any possibilities of fraudulent acts by employees or outsiders. Unfortunately, fraud has been widespread in the construction industry for a long time.