Articles and Letters

Recommended Construction Management Tips

July 22, 2015

We’re in the sweltering center of summer, the most fast and furious time of year for our construction clients. At this time, not only do our construction clients need to make sure their jobs are running on schedule, they also need to be diligently checking to ensure they’re on budget. Remember, there should always be enough time to stop and conduct a proper check-in to make sure you have — and will have — the working capital to finish the job. 

With a little bit of structure and process, your business will scale and grow strategically. It’s a much better option than cleaning up bookkeeping and accounting messes at the end of the year, or even worse, when your cash runs out in the middle of a project and you’re asking a banker for help.  

Our number one recommended best practice for all of our construction clients is to create a one page summary of jobs in process to know the fiscal status of each project at all times. By doing so, you’ll have quick answers to critical questions such as: Are we making money? Losing money? Did something happen? How can we plan better or quickly course-correct? Each job must be monitored to understand the company’s big-picture financial capacity.  

Open dialogue and pre-scheduled meetings with your project manager will help to keep track of the money spent on a project, especially if the project requires one or more change orders from the original job specification and bid. If you don’t know how to start a monthly financial meeting with project managers and other key employees (or explain why it is important), our team can step in and help. Many of our construction clients rely on our construction team to start and facilitate monthly meetings to help review jobs and provide recommendations. 

“Job costs can escalate quickly over the course of a few hours,” says Ian Grimbleby. “If you’re reviewing jobs at the end of the job — or, even worse, at the end of the year — it’s too late. Our most successful clients know where they stand throughout the project thanks to regularly scheduled check-ins.” 

Helping our customers to operate in a more fiscally sound, efficient, and profitable fashion is our goal. Please contact us so we can help you kick off these internal processes. 

Interested in learning more operational construction tips from Ian Grimbleby and our construction team? Please click here to check out a construction Q&A with Ian!

Q&A with Ian Grimbleby: Recommended Construction Management Tips

July 22, 2015

What is an example of an agenda for the monthly finance check-in meeting? 

  • Review each line item of the budget: Are we under or over? Need to issue any change orders to accommodate customer requests?
  • Billing: Are we hitting milestones and is billing timely for each job? 
  • Collections: Are we collecting from the customers?
  • Estimate to complete and projections: Check your overages and understand the costs to complete, not just the costs incurred.
  • Big Picture: How accurate have our estimates been? What in the contract process do we need to change? 

What is the best timing to schedule the check-in?

It is best two weeks after the month closes; approximately on the 15th of each month. Often times the financial trail is 2-3 months, which is fine for financial planning; however, from an operational perspective, that is challenging to manage because you are not able to make change orders with a client, if required. 

What does budget vs. actuals mean?

Each job should have a budget (estimate) that you can compare to actual costs incurred.  Are your actual costs coming in as originally planned? If not, do you know why? Labor overruns? Sub-contractor issues? Unplanned material cost inflation? 

How do we manage cash flow and financing requests?

If you have an accurate look at your per job expenses, forecasting will be easy because of the timely understanding of the job. You’ll understand the cash flow and upcoming required purchases. When dealing with cash flow, ask yourself: Is our accounts receivable going to come in, or will we need to pull from the line of credit? You’ll especially need to know this information for bigger jobs because there are more challenges than the typical fixed costs. As Ian Grimbleby explains, “Job expenses are the outliers when it comes to cash flow, especially for sub-contractors. Managing cash flow and financing is critical because subs tend to be paid last, so they have to think about financing upfront.”

When do you contact a banker for help?

Ideally, you want to have an established relationship with a local banker before you need financial support, so that the process will move quicker when you are in need of a loan or line of credit. If you’re in financial trouble and need help now,  Ian suggests calling your banker and your accountant immediately to course-correct before it’s too late. Access to working capital is critical, even if it is not needed immediately. Knowing it’s there can help with financing growth or with bonding requirements. 

What will the banker ask you if you’re looking for a loan?

They’ll want to review the following financial statements: cash, accounts receivable aging, accounts payable aging and key ratios (KPI’s).  Specifically, KPI’s such as gross profit and on-the-job margins, working capital, and current ratio. This will help the banker understand your ratio of assets to liabilities. Lastly, they’ll want a solid understanding of cash balance versus revenue. 

How much cash on hand is enough?

Our team recommends a minimum of 10 percent of revenue available as cash and/or in the form of a liquid investment. 

Last question! How can the Grimbleby Coleman construction team help?

Ask us to help you launch project management and financial review meetings.  We’ll prioritize and kick off the internal processes that will help you with long-term profitability and financial planning. 

Interested in more operational construction tips from Ian Grimbleby and our construction team? Please click here to learn more!

Meet Principal, CPA and Construction Team Lead, Ian Grimbleby

      

Ian Grimbleby has been with Grimbleby Coleman since 2011 and heads up the construction team while serving as a lead client contact for many of the firm's attest services. Ian is a Modesto native but spent seven years with PriceWaterhouseCoopers, where he started as an intern in San Jose, then joined the firm's Los Angeles office before eventually transferring to their offices in Edinburgh, and later Aberdeen, Scotland. Ian enjoys spending time with his young family, and they can often be found camping or relaxing at the beach. This year, Ian started Bean Counter Coffee Roasters, a hobby small-batch coffee roasting business, with his wife!    

Mid-Year Tax Planning: Start Now, Stress Less Later

July 22, 2015

Now that we’re halfway through the year, from a tax-planning perspective it’s time to start thinking about how to build your business or personal portfolio. Mid-year tax planning is a great idea for both businesses and individuals to plan for long-term success. 

Instead of waiting to get your ducks in a row in November or December, meet with your tax advisor early to develop a strategic plan for next season rather than scrambling at the last minute. As President and Principal Clive Grimbleby explains, “Meeting mid-summer gives your advisor the chance to check in with you and take stock of your unique situation.”

        

A mid-year tax planning session will help you prioritize your plans and alert you to opportunities or challenges. It will also give you a chance to ask your advisor any nagging questions that have built up over the past six months, and the space and time to deal with them before the end-of-year crunch. Instead of waiting to get your ducks in a row in November or December, meet with your tax advisor early to develop a strategic plan for next season rather than scrambling at the last minute. As President and Principal Clive Grimbleby explains, “Meeting mid-summer gives your advisor the chance to check in with you and take stock of your unique situation.” 

Your mid-year planning session could include:  

  • Reviewing recommendations based on your previous return
  • Reviewing your retirement plan, including options and deadlines
  • Strategic succession planning discussion
  • IC-DISC, employment and R&D credits discussion
  • Review of captive insurance company options
  • Review change in entity type options
  • Upcoming asset acquisitions
  • Discuss tax law regulation changes so far this year
  • Discussion of your estate: Is it performing as expected? 

These topics are proactive points for further discussion, but they may not be relevant for all. You’ll find many tax and financial planning articles online and on our website; our team is here to help you cut through the chatter and discuss your unique options. 

Vacation and Taxes - Do they mix?

"It's summertime! Can I write off any of my vacations?"

July 2, 2015

As you're planning your trip to the cool mountains or to the sunny beach, stop and ask yourself: is this vacation deductible? You might be surprised at the answer. Jeff Coleman, CPA and Principal, walks us through your options.

            

For Domestic Travel

A business day is defined as a period of time during regular business hours when you perform business-related activities. This is generally considered to be Monday through Friday between 9:00am and 5:00pm and excludes weekends and public holidays, although industry-specific exceptions may apply. If more than 50 percent of your vacation days are spent primarily on business purposes, then 100 percent of your transportation is deductible (including airfare, car, train, cab - even tipping, when travel related). Also, travel days are considered business days. Even if you have to move your travel date to save money on a flight, that day is still considered a travel day. However, lodging and meals are deductible only on the business days.  

Of course, the sticky problem is that when less than 50 percent of the trip is business related, the transportation expenses are not deductible. However, lodging and meals are still deductible for the business days. We recommend combining and coordinating your travel schedule to get you over the 50 percent mark.

    The Coleman family on a summer hiking vacation in the     

Fitzsimmons Mountain Range, near 

Whistler, British Columbia

For International Travel

Allocate your international travel expenses based on business days, as a percentage of total days traveled. There are a few key differences:

  • The transportation expenses are 100 percent deductible if the trip is predominantly for business and is no more than 1 week in length.
  • The transportation expenses are 100 percent deductible if the trip is over 1 week and more than 75 percent of your time is spent on business.
  • The transportation expenses are 100 percent deductible if the trip is predominantly for business, the employee is traveling for an employer, and the employee is not a managing executive.

Again, lodging and meals are deductible on business days only. Remember, spouse and family expenses are not deductible. Only employees who are there for true business purposes may deduct expenses.

For more information on how you can save on upcoming business travel, please give us a call.

Featured Article

IC-DISC: the best choice for my Ag business?
June 18, 2015 The government's sea of acronyms is enough to make anyone bored, but there is one acronym worth getting excited about: IC-DISC. IC-DISC stands for Interest Charge-Domestic International Sales Corporation, and it can be an ideal option for growers, manufacturers, or food processors that export overseas.            Never heard of it? Don't worry - you can still reap the benefits. An IC-DISC is a corporation formed in the United States that gives special tax treatment on sales of, or commissions on, qualifying export products. IC-DISCs are not subject to federal tax on export income, which can save businesses substantial amounts of money over time.  This type of corporation has its roots in the early 1970s, when Congress enacted DISC legislation to help encourage the U.S. export trade and shore up the economy by encouraging companies to stay on American soil.  Done correctly, an IC-DISC is a corporation on paper only, making it easy to set up and maintain. And the benefits may be substantial, according to Nate Miller and Jeff Bowman, Grimbleby Coleman CPAs and Partners. "An IC-DISC may reduce your business' federal income tax," according to Miller. "In fact, you may save approximately 8 percent of your net export income."  A properly set up IC-DISC will allow your business to pay commissions to the IC-DISC based on your export income - potentially up to 50 percent. That commission is not taxable and is considered a tax deduction, which can cut your regular taxable income.  With an IC-DISC, you'll then receive cash back in the form of a dividend, which will also be taxed at a reduced rate. In short, you could save money all around.  "Many growers in the Valley export overseas," Miller says. "For those growers, it's important to set up an IC-DISC as soon as possible - unfortunately, the tax benefits are not retroactive, so the savings from the establishment of an IC-DISC come only after the corporation is formed."  You may set up an IC-DISC even if you have an established partnership, S corporation, or LLC; in those cases, the IC-DISC will act as a subsidiary. IC-DISCs are slightly more difficult to set up if your business is a C corporation, but the benefits are still worth the trouble. To setup an IC-DISC, Jeff Bowman, Ag Team lead, recommends beginning the paperwork in June, so it is completed by the start of the Fall harvest.  Establishing an IC-DISC is best left to a qualified certified public accountant. Our Grimbleby Coleman ag team has extensive experience helping growers and manufacturers save money through IC-DISCs. Please call Jeff Bowman or Nate Miller to learn more.

Featured News

Linda Bossard Accepts McHenry Mansion Board Position

Linda Bossard, EA and USTCP, has accepted a three-year board position as Treasurer for the McHenry Mansion. Linda will utilize her extensive Quickbooks and bookkeeping expertise, expressing that "this is my chance to do something that has value for the foundation and allows me to take an active role in our community."  Additionally, "the McHenry Mansion has a great group of passionate board members -they are lovely people!"

Featured Staff

Jeff became a principal of the firm in 2010. His specialty is tax, and he leads the firm's agribusiness industry team.

Jeff is a Modesto native, and grew up in a local farming family. He has an MBA and a Masters in Taxation degree, and is a CPA. Jeff enjoys “being able to explain a concept or communicate information that helps a client, and being able to learn from the experience of clients who are very successful at what they do.”

When he’s not helping clients, Jeff's focus is on spending time with his wife and three daughters. If it’s June, he’s outdoors—probably gardening, grilling, or hiking in the High Sierras. In October, you’ll find him spending time with family and still spending time outside if the weather is nice. But in January … where else would he be but in the office? “It’s tax season!”

Jeff’s favorite number is 2000. “For the year that I got married, and also started my first public accounting job.”

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