Contractors need to invest in tax planning throughout the year to gain the maximum impact. While most year-end tax strategies strive to accelerate income in the current tax year and defer expenses to the next year, strategic tax planning takes into consideration many other factors, including how reducing income for tax purposes will affect a contractor’s financial statements, cash position, working capital and financial ratios.
More than almost any other industry, construction contractors need to spend time and resources planning for their income taxes before the end of their fiscal year. Contractors must be sure to retain their financial statement strength and ratios while considering possible tax methods of accounting, projected taxable income for remaining months, tax vs. book depreciation and the calculation of alternative minimum taxes and available tax credits for the entity and the pass-through owners. It is important that all these variables be considered to ensure the most favorable financial and tax objectives are achieved.
Sureties and banks, as well as rating agencies and governmental customers, analyze a contractor’s financial strength using different metrics and methods. Liquidity (the ability to meet obligations as they arise) is generally prized as the greatest strength, with leverage and profitability close behind. For bonding purposes, the contractor must understand the surety’s unique approach to liquidity analysis, with the goal being to steer the bonding company—rather than being steered by it.
Equifax, one of the three largest consumer credit reporting and financial services providers in the nation, announced its data was breached on Sept. 7. The personal information of an estimated 143 million U.S. consumers (44 percent of the population) was stolen from May 13 to July 30. This includes full names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers.
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.
Distributors in building and construction supplies are well aware of the benefits automation can deliver. When it comes to the physical supply chain in particular, automation leads to improved fulfillment management, optimized processes and increased profits. However, the impact automation can have on the financial supply chain is often overlooked.
Construction input prices increased 0.3 percent in July and are up 3 percent on a year-over-year basis, according to an Associated Builders and Contractors (ABC) analysis of data released by the Bureau of Labor Statistics. Nonresidential construction input prices were in line with overall industry dynamics, increasing 0.3 percent for the month and 2.7 percent for the year.
To have long-term success in the construction business, a company needs to ride the ups and the downs and navigate the surprises that present themselves on an all-too-regular basis. The business cycle can be “feast or famine,” and neither is good. So how does one stay financially prepared for every bump in the road? Continue »
Prevailing business wisdom holds that the way to reduce credit risk is to limit credit lines, be stingy in allowing credit and freeze orders on past due accounts. This line of thought posits that it is generally impossible to lower “bad debt” losses without adverse consequences to sales and business expansion.
Verify Clients’ Credit History and Cash Flow to Protect the Bottom Line Construction Contractors Must Research Potential Clients to Ensure Timely Payment
Most construction contractors don’t consider how the creditworthiness and cash flow of their customers can impact their bottom line. But they should. More than 40 percent of small businesses have customers that are more than 90 days late on a payment, according to a survey by RocketLawyer.
Watch Out for Bad Boy Guarantees in Commercial Real Estate Financing Construction Contractors Must Understand Common Liability Provisions in Lending Agreements
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.
Construction input prices collectively rose by 1 percent on a monthly basis and 3.8 percent on a year-over-year basis, according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors. This represents the fastest year-over-year rate of materials price inflation since the beginning of 2012. Nonresidential input prices rose 0.9 percent for the month and are up 4 percent year over year.