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A look at 10 best practices contractors should be looking at to modernize and stay relevant in this new age of construction Construction projects grow in magnitude and complexity every year, demanding more time, resources and creativity from contractors. The business of  construction used to rely on traditional building processes and tools—pen and paper, faxes, emails, spreadsheets—but these methods can no longer keep up with modern construction’s increasingly complex projects and demands for real-time data and workflows. It took a while for construction management to come around, but now it’s widely accepted that the old ways of doing things just won’t work anymore. Veterans of the industry realize that a tech-focused approach is the only way to complete their projects on time and meet client expectations. This mentality shift has led contractors to:
  • Digitize documentation to cut needless paper out of the equation
  • Implement cloud technologies to instantly share data and streamline workflows
  • Implement modern reporting and data analytics tools for optimized decision-making
  • Use mobile applications to open access to data and improve workflows in the field
  • Add new technologies that automatically complete essential daily tasks, including payroll, HR, invoicing, data collection, and other processes that previously took multiple steps and people to complete
[/fusion_text][fusion_button link="https://cicpac.com/wp-content/uploads/2023/06/10-Construction-Best-Practices_USL_0623.pdf" title="" target="_blank" link_attributes="" alignment_medium="" alignment_small="" alignment="" modal="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" color="default" button_gradient_top_color_hover="" hue="" saturation="" lightness="" alpha="" button_gradient_top_color="" button_gradient_bottom_color_hover="" button_gradient_bottom_color="" gradient_start_position="" gradient_end_position="" gradient_type="" radial_direction="" linear_angle="180" accent_hover_color="" accent_color="" type="" bevel_color="" bevel_color_hover="" border_top="" border_right="" border_bottom="" border_left="" border_radius_top_left="" border_radius_top_right="" border_radius_bottom_right="" border_radius_bottom_left="" border_hover_color="" border_color="" size="" padding_top="" padding_right="" padding_bottom="" padding_left="" fusion_font_family_button_font="" fusion_font_variant_button_font="" font_size="" line_height="" letter_spacing="" text_transform="" stretch="default" margin_top="20px" margin_right="" margin_bottom="20px" margin_left="" icon="" icon_position="left" icon_divider="no" hover_transition="none" animation_type="" animation_direction="left" animation_color="" animation_speed="0.3" animation_delay="0" animation_offset=""]Continue Reading[/fusion_button][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]" target="_blank">10 Construction Best Practices You Should Be Doing Right Now

A look at 10 best practices contractors should be looking at to modernize and stay relevant in this new age of construction Construction projects [...]

By |2023-07-25T15:46:20-05:00June 30th, 2023|AM Whitepaper, CICPAC, Construction|
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Tyler Mains, CPA/ABV, Managing Director and Demetri Pazarentzos, Director for their article. Check out bios on Tyler or Demitri via the Lazear Capital Partners website. An Employee Stock Ownership Plan (ESOP) is a great solution for owners of construction companies looking to diversify their personal wealth, develop a succession plan, and/or seek an avenue to reward their employees. However, there are many factors to consider when a company who utilizes bonding is exploring or undertaking an ESOP. Because the surety relationship is vital to the operations and long-term success of many contractors, it is important to partner with the surety early in the ESOP process. The surety is focused on supporting a company’s current and future bonding needs, while reducing or mitigating any potential risk. A leveraged ESOP can cause changes to the structure of a company’s balance sheet as a result of the likelihood of additional debt used to assist in financing the ESOP transaction. If the transaction and associated financing is structured correctly, the perfect balance of financial benefits to company owners, significant upside for key management and employees, and a favorable structure for both the surety and the lender can be achieved. The following items should be considered for companies with surety relationships during an ESOP formation:
  1. Advisors – surrounding the company with knowledgeable advisors who are well-versed in both the construction industry and ESOP transactions is key to ensuring a favorable transaction structure that maximizes benefits for the company owners, while maintaining flexibility for the company post-closing.
  2. Bank and Surety – running a parallel track with open communication to understand each stakeholders concerns or needs (i.e., “giving a seat at the table” early in the ESOP transaction process) leads to a structure that provides adequate financing to consummate the transaction, significant flexibility to support future working capital and capital expenditure requirements of the company, and maintains ample balance sheet strength to support ongoing bonding needs.
  3. Current Bonding Program – evaluating the following items of a company’s bonding program is important to aid in the surety’s analysis of bonding needs moving forward, which can have a significant impact on the surety’s comfort level in regards to balance sheet changes and financing proposed in the ESOP transaction: - Individual and aggregate project bonding limits - Accounts receivable and projects currently bonded (remaining work to be completed vs. total contract value) - Makeup of bonded vs. unbonded projects in backlog and pipeline - The timing and phases of bonded projects (planning/design phase vs. true construction underway) - Current and future working capital and equity levels (as adjusted for specific components found in an ESOP structure)
  4. Managing Personal and Corporate Guarantees – with owners of the company transitioning their ownership to the ESOP trust, special consideration to current and future guarantees required should be discussed during the transaction. An understanding of expectations of the bank or surety regarding guarantees and changes to these requirements (and the timing of these potential changes) is key to mitigating personal exposure for owners who may no longer have an ownership stake in the company.
Overall, a surety is focused on the continuity of the business, with particular attention to adequate financial strength and liquidity and management retention post-ESOP transaction. When structured correctly, an ESOP can be a powerful tool to aide in the long-term succession plan for construction companies and make an extremely positive impact on the lives of employees, key management, and company owners. Additionally, an ESOP-owned company can provide productivity improvements, tax benefits, and a clear competitive advantage in the labor market, all of which can be expected to drive financial performance. Our professionals are here to advise you on structuring a favorable ESOP transaction with lenders and your surety, while maximizing benefits for selling company owners.  " target="_blank">Four Considerations for Construction Companies Exploring or Undertaking an ESOP

Thanks to Tyler Mains, CPA/ABV, Managing Director and Demetri Pazarentzos, Director for their article. Check out bios on Tyler or Demitri via the Lazear Capital [...]

By |2023-05-30T14:08:05-05:00May 30th, 2023|AM Whitepaper, CICPAC, Construction|
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Alexander Bagne, CPA, JD, MBA, CCSP is the President of ICS Tax, LLC, and an expert in tax planning strategies for real estate investors, architecture and engineering firms, and others within the construction industry. He is a strong proponent of energy efficient construction and has served as the President of the American Society of Cost Segregation Professionals (ASCSP). This article was re-published from ICS-tax.com ‘The Inflation Reduction Act Significantly Changes the 179D Energy Efficient Commercial Building Deduction’" target="_blank">Section 179D Energy Efficient Commercial Building Deduction

The Section 179D Energy Efficient Commercial Building Deduction provides a deduction of up to $1.88 per square foot for both building owners who construct new [...]

By |2023-02-22T16:10:47-05:00September 19th, 2022|AM Whitepaper, CICPAC, Construction|
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The Inflation Reduction Act of 2022, H.R. 5376, signed by President Biden on August 16, 2022, extended the 45L credit for homes sold or leased during 2022 with little modification. Thus, residences sold or leased in 2022 would qualify for the 45L credit using the 2021 energy efficiency standards. However, from January 1, 2023 through December 31, 2032, the Act significantly changes the 45L Energy Efficient Home Credit with new provisions and requirements. Beginning in 2023, the Act provides an increased 45L tax credit of $2,500 for single family and manufactured homes when constructed according to the standards set by the ENERGY STAR Residential New Construction Program or the Manufactured Homes Program.
  • Single-family homes must meet the ENERGY STAR Single Family New Homes Program, Version 3.1 for homes constructed before January 1, 2025 and Version 3.2 thereafter.
  • Manufactured homes must meet the latest ENERGY STAR Manufactured Home National Program requirements as in effect on the latter of January 1, 2023 or January 1 of two calendar years prior to the date the dwelling is acquired.
The Act also provides an even higher 45L tax credit of $5,000 for single family and manufactured homes when they are certified as a DOE Zero Energy Ready Home (ZERH). For multifamily homes constructed after 2022, the Act provides a 45L tax credit of $500 when meeting the ENERGY STAR Single Family New Homes Program or $1,000 when meeting the DOE Zero Energy Ready Home requirements. If prevailing wage requirements are also satisfied, the credit for multifamily homes increases to $2,500 or $5,000, respectively. The table below summarizes the 45L Credit rules beginning in 2023.
Home TypeQualification RequirementPrevailing Wage RequirementCredit Amount
Single Family*EnergyStarNo$2,500
Single Family*ZERHNo$5,000
Manufactured HomeEnergyStarNo$2,500
Manufactured HomeZERHNo$5,000
MultifamilyEnergyStarNo$500
MultifamilyZERHNo$1,000
MultifamilyEnergyStarYes$2,500
MultifamilyZERHYes$5,000
*Single Family includes site-built and modular single family homes, duplexes and townhomes.
The Inflation Reduction Act of 2022 has certainly raised the standards for energy efficient home construction with a persuasive tax credit for the next ten years.
This article was re-published from ICS-tax.com ‘The Inflation Reduction Act: Impact on §45L Tax Credit’

About the Author:

Alexander Bagne, CPA, JD, MBA, CCSP is the President of ICS Tax, LLC and an expert in tax planning strategies for real estate investors and developers. He is a proponent of energy efficient construction and has served as the President of the American Society of Cost Segregation Professionals (ASCSP).
" target="_blank">The Inflation Reduction Act: Impact on §45L Tax Credit

Internal Revenue Code Section 45L provides both single and multifamily homebuilders with a $2,000 tax credit for meeting certain energy saving requirements. However, the 45L [...]

By |2023-02-22T16:10:56-05:00August 19th, 2022|AM Whitepaper, CICPAC, Construction|
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construction accounting that will help increase job profitability, manage cash flow, and successfully grow your business.

#1 USE JOB COSTING

At the end of each day, a contractor needs to use job costing to allocate the cost of equipment, tools, and other assets used on a job (e.g., the cost of owning, operating, and maintaining that asset) to keep score of their jobs and business overall. Any easy way to do this is through a robust construction accounting software solution, such as Deltek + ComputerEase.

#2 TRACK COMMITTED COSTS DAILY

Costs already committed for subcontractors and materials should be tracked in real-time to maintain control over a job and keep it profitable. You will know, with certainty, the budget you have available for future expenses and/or additional costs. Some examples of committed costs include an open subcontractor agreement, purchase orders, time from the field, and expenses from the field.

#3 UNDERSTAND THE DIFFERENCE BETWEEN MARGIN AND MARKUP

Markup is the difference between the cost of materials or services and the price charged. Margin is the gross profit on a job and is a percentage of the sales price. Mistaking the two terms may cause you to set a price too high or too low, which can result in losing profits and potentially, business.

#4 DISTINGUISH BETWEEN PERCENTAGE SPENT AND PERCENTAGE OF COMPLETION

If you’ve spent half your budget that does not necessarily mean you have done half the work. You may have done only 40% of the work, or maybe 60% of the work. Understanding and tracking percentage spent and percentage of completion through your WIP reports allows you to come in under budget.

#5 RUN FREQUENT WORK IN PROGRESS (WIP) REPORTS

WIP reports are one of the most important reports for a contractor because they provide a detailed schedule on completed work and in-progress work for a certain period of time. With frequent WIP reports, you can manage work and profit proactively using actual job data as opposed to being reactive to problems that arise. This helps you stay ahead of the game and grow your bottom-line profits. The commonly used WIP methods include units complete, percent complete, and cost-to-finish. WIP reports also identify underbilling and overbilling amounts. The accounting staff must enter these amounts on the P&L Statement and Balance Sheet to get an accurate financial picture.

#6 IDENTIFY OVERBILLINGS VS PROFIT

Overbilling occurs when a contractor bills ahead of work completed. If managed properly, overbilling can positively affect cash flow. If unmanaged, it can be problematic because contractors will not have the available cash to fund the remaining work. For example, if you overbill by $10,000, that is not a cash profit that you can spend. That amount should be recognized as payment for work that has not yet been completed.

#7 MANAGE YOUR CHANGE ORDERS SUCCESSFULLY

Change orders are a product of changing the scope of the initial contract. To successfully manage your change orders, it is important to provide contracts that are detailed and easy-to-understand, introduce the change order process in the initial contract (and negotiate pricing and markups for change orders), and establish the structured process for change requests, both with the client and your internal team. Since change orders occur so often in the construction industry, creating change order templates for customers and exploring construction accounting software tools will save you time, rather than manually creating change orders at the time they are needed.

#8 MONITOR UNPOSTED PAYROLL

Standard accounting software lacks the ability to track unposted construction payroll. However, monitoring these costs in real-time with a project management software allows you to manage costs proactively by seeing the effect of employee hours on the budget without actually processing payroll.

#9 TRACK LABOR HOURS EACH DAY

You want workers to turn in their time at the end of each day, not the next day, not a week later. Tracking things as they happen with remote field-to-office tools, like the Deltek + ComputerEase mobile app, makes them more accurate and you don’t have to return to the office to do this.

#10 CHOOSE THE RIGHT CONSTRUCTION ACCOUNTANT

The unique accounting requirements a contractor is faced with almost always call for a CPA that specializes in construction. Choosing the right Certified Public Accountant (CPA) is a critical step to building out your trusted advisor team and can be a major contribution to business growth. Locate a CICPAC member firm near you." target="_blank">10 Key Construction Accounting Best Practices for Contractors

Construction accounting is complex and mistakes are inevitable. That’s because construction accounting, compared to regular accounting, has unique requirements, processes, documents, and procedures, such as [...]

By |2023-03-28T16:40:33-05:00August 15th, 2022|AM Whitepaper, CICPAC, Construction|
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prevailing wage is typically based on the wages paid to workers on similar projects in the area. The act was intended to avoid situations where contractors would low-ball their proposed costs on a project at the expense of their workers’ wages. There are several states that have their own prevailing wage laws, known as “little Davis-Bacon” acts, for any state-funded construction projects and do, in some cases, extend to projects at the local and municipalities level as well.

So prevailing wage is basically a worker’s hourly wage?

Yes and no. Prevailing wage comprises two parts: The first is the basic hourly rate paid to each worker. The second is what is known as the “fringe benefits” amount. Fringe benefits include a separate per-hour dollar amount paid out as part of a worker’s wages or used to fund a “bona fide” benefits plan, such as a 401(k), life and health insurance, vacation, and holiday pay, or even apprenticeship training programs. Simply put, if a worker’s base pay on a project was $30 an hour and the fringe benefits amount was $10 an hour, the contractor can pay out the $10 in fringe benefits as wages, essentially increasing the worker’s hourly pay to $40, or they can elect to put that $10 into a benefits plan for their employee.

So, which is better — cash or a bona fide benefits plan?

Many contractors pay out the mandatory fringe benefit as wages because it’s the easiest way to comply with the law. While that may be true, it’s also much more costly to the contractor. And the reason is pretty simple: all wages paid to employees are subject to payroll taxes, such as social security taxes, federal and state unemployment taxes, workers’ compensation insurance, and general liability insurance. The rate varies, but it is estimated that the additional cost to the contractor for these payroll taxes is roughly 25 cents for every dollar paid in wages. On the other hand, if a contractor uses those fringe dollars to fund a “bona fide” benefits plan for their employees, that money would be exempt from all payroll taxes. Thus saving the contractor tens of thousands, maybe even hundreds of thousands, of dollars a year. Don’t believe me? Here’s an example: Let’s say Contractor A has 25 employees working on a prevailing wage job that will last six months. Each employee works approximately 500 hours during this time, and the fringe amount is roughly $10 an hour. 25 (employees) x 500 hours = 12,500 hours 12,500 (hours) x $10 fringe benefit dollars = $125,000 fringe benefit dollars If Contractor A decides to pay out that $125,000 fringe benefit as wages to their employees, they will be hit with a 25% payroll tax on every single one of those dollars. $125,000 x 25% in payroll taxes = $31,250 in additional payroll taxes If Contractor A elects to put those fringe benefit dollars into a “bona fide” benefits plan for her employees, such as a 401(k) retirement account, not a single dollar would be subject to payroll taxes. That means $31,250 in savings, which can be used later to make more competitive bids for future projects. Using these fringe dollars properly also allows a contractor to implement or improve their existing benefit programs in a few ways:
  1. For those employers who offer a 401(k), paying the fringes as cash means funding the benefits in duplicity, as these payments are paid out of the operational account of the business. Using these fringe dollars to an employer and employee’s advantage can reduce that extra expense considerably.
  2. In today’s tight labor market, employees look at total compensation packages, including benefits like a 401(k). These fringe dollars can assist companies with bolstering their current programs by offering better benefit coverages or adding additional benefit options for their employees.
  3. Employers can improve their 401(k) plan by using fringe dollars to offset or meet matching requirements they may choose to include. This includes discretionary employer match, safe harbor, or profit-sharing contributions to the plan. Contractors often hesitate to include matching contributions to their retirement plan due to the costs. Utilizing the prevailing wage dollars to meet a portion of these contributions allows you to offer more retirement benefits to all your employees at a reduced cost to the company.
Required annual compliance testing for all 401(k) plans can be extremely complicated and are put into place to ensure that all participants benefit equally from the plan. When working with a plan administrator specializing in designing retirement plans for prevailing wage contractors, you can be confident that you are staying compliant and offering the best solution for all your employees and the company owners. In the end, when utilized correctly, prevailing wage — comprised of a per-hour cash wage and a per-hour benefits wage – is a significant benefit to both the laborers and contractors working on publicly-funded construction projects. Prevailing wage benefits isn’t easy business. For over 35 years, Beneco has focused exclusively on serving the unique needs of contractors through retirement plans, health care benefits, compliance services, and HR solutions and has a level of expertise in prevailing wage that few can offer.  " target="_blank">Maximize Prevailing Wage Dollars with an Employer Sponsored 401(k) Plan

Prevailing wage was established under federal law by the Davis-Bacon Act of 1931. The act mandates that contractors and subcontractors pay their workers an hourly [...]

By |2023-05-02T10:45:58-05:00July 18th, 2022|AM Whitepaper, CICPAC, Construction|
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David Seibel & Tanner Niehaus, McGuire Sponsel The R&D Tax Credit is one of the most subjective areas of the tax code and many businesses believe they qualify. With the IRS placing more scrutiny on the R&D Tax Credit, it is important to be aware of common myths of the credit as well as areas of exposure when building a claim. To dispel some of these misconceptions and provide clear guidance for CPA firms and businesses that may qualify for the R&D Credit, this blog explores the construction sector and what activities and business practices are eligible for R&D Credit inclusion. The construction sector and related industries hold many misconceptions as it relates to the R&D Credit. For firms that are directly or indirectly involved with construction, there are a number of considerations for each individual company to make when evaluating if it is appropriate to pursue a R&D Credit claim. One early factor to examine is whether the business bears the burden of engineering or design at any point during the project cycle. This can often determine whether a business is likely to be working on projects that satisfy the four-part test. This check does not guarantee a R&D Credit opportunity exists, but the lack of design responsibility typically suggests that a company will not meet §41 requirements. A technical risk assessment for a “typical” project or large specialty project would also be appropriate to determine if there are potentially qualified business components. For example, within the scope of a new construction project, the party that is responsible for developing the optimal building design including the detailed engineering is very likely to be conducting qualified research activities. This could also extend to contractors who are designing specific systems for the site. Conversely, a contractor or builder that is constructing from prints and is not responsible for the creation of any new design element or construction procedure is typically not conducting qualified research. While qualified employees do not have to be degreed scientists or engineers, a firm that has an engineering and/or design function is a good indicator of qualified research taking place. Market areas that are most likely to be conducting qualifying activities include architectural/engineering firms, specialty and design/build contractors, and manufacturers of new and unique construction products. Beyond assessing if a business bears the burden of design and if technical risk is present, determining if a taxpayer bears the economic risk of the design is necessary when preparing a R&D Credit claim. This requirement is related to the Funded Research Exclusion as set forth in §41(d)(4)(H). When a company is designing a custom building or solution for a client, the payment structure should generally be fixed-fee, lump-sum, or otherwise structured in a way that the business incurs the costs to resolve any failure to demonstrate the taxpayer is bearing the economic risk. The company must also retain significant rights to use the research without compensation to its client. In recent years an architectural design firm, Populous Holdings, successfully defended its R&D Credit claims against the Funded Research Exclusion in tax court. The court found that because the contract payment structures were fixed fee and Populous Holdings was paid for a “work product” requiring research to successfully complete, the Funded Research Exclusion did not apply and the claims were valid. Between determining who bears the technical risk and economic risk of a project, as well as who retains substantial rights to the research, it can often be difficult to determine if a construction company is eligible to claim the R&D Credit for a particular project. An assessment of a taxpayer’s design responsibilities, project contracts, and work performed should be carefully conducted to determine whether a construction firm is able to claim the R&D Credit." target="_blank">R&D Tax Credits for the Construction Industry

Submitted by: David Seibel & Tanner Niehaus, McGuire Sponsel The R&D Tax Credit is one of the most subjective areas of the tax code and [...]

By |2022-07-18T14:36:01-05:00June 22nd, 2022|CICPAC, Construction, Resources|
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Harness Software (a Foundation Software Company) on Apr 01, 2021 Forget the horse and water; the saying should read: “You can lead a construction worker through a safety program, but you cannot make them follow it.” The goal of any safety program is to reduce incidents, but in order to achieve that, the employees must actually follow the program. This is a challenge for many construction companies. Safety risks and the incidents that follow take place on construction sites for one of three possible reasons: 1. They Don’t Know Employees who simply don’t know all the safety information are more timid around the tools and equipment and are more likely to make a mistake due to lack of training. This is especially true of new hires. 2. They Don’t Care More experienced employees who have been on the job for a while, who have yet to experience an incident, can become overconfident and feel invincible, often leading to very risky behavior on their part. 3. There’s a More Efficient Way The most experienced workers on site have likely gone through an incident or accident themselves and are less likely to take major risks but have also developed more efficient / less safe habits over the years, potentially leading to an incident. > Continue Reading   Sue Drummond knows that learning new technology can be intimidating and overwhelming sometimes. That's exactly why her role at Harness Software is to teach, guide and customize the fear away. Together with our clients, she sets project priorities, exchanges resources and shares best practices, all in an effort to achieve happier and healthier employees and safer job sites.   About Foundation SoftwareFoundation Software delivers job cost accounting, project management, estimating & takeoff, and safety software, along with payroll services, to help contractors run the business side of construction. For more information, call (800) 246-0800 or email info@foundationsoft.com." target="_blank">3 Safety Program Styles Compared: Incentive vs Behavior vs Discipline

Last Updated by Sue Drummond, Harness Software (a Foundation Software Company) on Apr 01, 2021 Forget the horse and water; the saying should read: “You [...]

By |2022-07-18T14:36:01-05:00June 20th, 2022|AM Whitepaper, CICPAC, Construction, Exclude Post, Member News|
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KEY ASPECTS OF CONSTRUCTION ACCOUNTING THAT MAKE IT UNIQUE

  1. Job Costing
  2. Sales and Costs of Sales Categories (diret / indirect / committed)
  3. Revenue Recognition (5 steps to recognize revenue, cash / accrual / percentage of completion method, ASC 606 standards)
  4. Mobile Workforce
  5. Payroll Requirements (prevailing wage, union and multi-level payroll)
  6. Retainage
[/fusion_text][fusion_button link="https://www.deltek.com/en/construction-accounting" title="" target="_self" link_attributes="" alignment_medium="" alignment_small="" alignment="" modal="" hide_on_mobile="small-visibility,medium-visibility,large-visibility" sticky_display="normal,sticky" class="" id="" color="default" button_gradient_top_color="" hue="" saturation="" lightness="" alpha="" button_gradient_bottom_color="" button_gradient_top_color_hover="" button_gradient_bottom_color_hover="" gradient_start_position="" gradient_end_position="" gradient_type="" radial_direction="" linear_angle="180" accent_color="" accent_hover_color="" type="" bevel_color="" bevel_color_hover="" border_top="" border_right="" border_bottom="" border_left="" border_radius_top_left="" border_radius_top_right="" border_radius_bottom_right="" border_radius_bottom_left="" border_color="" border_hover_color="" size="" padding_top="" padding_right="" padding_bottom="" padding_left="" fusion_font_family_button_font="" fusion_font_variant_button_font="" font_size="" line_height="" letter_spacing="" text_transform="" stretch="default" margin_top="" margin_right="" margin_bottom="" margin_left="" icon="" icon_position="left" icon_divider="no" animation_type="" animation_direction="left" animation_speed="0.3" animation_offset=""]Dive into the 6 Key Aspects[/fusion_button][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]" target="_blank">The Complete Guide to Construction Accounting

If you're in the construction industry, you know that accounting and financial management can be more complex than in other industries. In this guide, [...]

By |2023-03-28T16:42:18-05:00August 30th, 2021|AM Whitepaper, CICPAC, Construction|
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Chuck Schwartz, and Chris Porter, Construction Manager at Prophix, to discuss the challenges of resource management in the age of COVID-19 and expectations for recovery.

1. What are some of the resourcing challenges that you think are carrying over from COVID-19?

Chuck: A significant challenge was those businesses that use local server-based software systems (a.k.a. “in-house”) versus those that use accounting and business management software in the cloud. Those that use cloud software saw no significant delays or downtime, versus those that had to scramble to set up computers to be able to connect to their systems. Then, of course, with the office closures and lockdowns, important processes like system backups weren’t performed regularly, if at all. Chris: As so many of us know, labor shortages have been an ongoing issue in the construction industry for some time now. Much like a lot of things, COVID has only magnified this issue. However, it’s not just labor that will continue to be a challenge. Materials and equipment are also in high demand, and prices have risen considerably in both areas due to production slowdowns, amongst other things. This disruption will no doubt continue onwards for some time until production and supply levels can return to what they were pre-pandemic.

2. Based on the challenges mentioned above, what areas do you think construction companies should invest in to prepare for potential future disruptions? (i.e., software, scholarships, or trade programs to train new talent, safety protocols, education for project managers, etc.)

Chuck: There’s an old saying – do things in good times, so you are not scrambling in the bad times. And while these are certainly not quite the good times (at least not yet anyway), think back to just before the lockdown – we had good times. But then, I heard things like, “we are too busy to think about that now,” and other excuses for not doing some of the important things in the good times. So, if we learned anything from the lockdown is that life is unpredictable, and things can happen at any time. Taking care of the important things and the difficult things before disaster strikes is key. Chris: Chuck makes many good points here. Proactively investing in the right areas of your business will set you up for success down the road, no matter what challenges you’re faced with. It’s always nice to relish the good times, but organizations must think strategically about investing in their people, technology, and processes. On the technology side, construction companies use many different technologies to run their business. ERP, Estimating, Project Management, CRM, and Payroll software are just a few. You need all these systems to run your business and make decisions, but it’s tedious to jump from one system to the next to get the answers you need. Contractors should be investing in a data strategy and technology that pulls all their data together. This makes it possible for innovative contractors to see and respond to issues as they arise. Contractors should be able to easily model the impact of project delays, equipment or labor shortages, and the resulting cash flows across the entire business.

3. Are there any technology solutions that you think contractors would benefit from investing in, or if they already have, look for ways to utilize more?

Chuck: Aside from cloud CPM software, I would say an integrated construction ERP software. What I mean by this is that most construction accounting systems have always done a very good job at accounting, job costing, and financial reporting, but I am also seeing wonderful advancements made in the project management and document control side of things. Most of the contractors I speak with would prefer one system to manage their entire business, from accounting and back office, to project management, and out to the field. What I’ve seen recently from system vendors like Viewpoint is very impressive and eliminates the need for third-party project management systems. I will also share that what I’ve seen from Prophix and how they work with ERP systems to offer advanced opportunities for financial and statistical reporting is very impressive. CPM software is valuable to contractors who deal with things like PPP, ERC, and other reporting and forecasting needs. Chris: I completely agree with Chuck that without an integrated construction ERP software like Viewpoint, you’re not running your business as efficiently as you could be. However, I believe that this is only half the puzzle. You might feel burnt out after a long ERP implementation and think that’s it – but there’s more. Now, you have to consider how you’re going to consume all that great information. At the end of the day, relational data systems like ERPs are primarily meant for logging and storing large sets of data. Getting that data out and into a consumable and easy-to-understand format is where you will start to gain competitive advantages in the marketplace and make better decisions.

4. What areas of focus do you think contractors should be looking into regarding scheduling and staffing because of COVID restrictions?

Chris: One of the lessons I think we have all learned from this pandemic is that our situation can change at the drop of a hat. In many ways, this isn’t anything new to construction professionals who deal with scheduling changes on jobs all the time. What matters is your ability to understand where and when you can make changes to your scheduled labor and equipment ahead of time. Being able to reforecast your staffing levels and equipment usage well in advance will result in better utilization and margins on those key assets. So, the question we should be asking ourselves is, can I do this today? Moreover, can I report on my required, scheduled, and actual resource hours daily? This is where a data strategy comes into play. Connecting these 3 datasets is imperative, and thankfully, Prophix has a purpose-built solution to make this possible.

5. What should contractors be prepared for in 2021 once the vaccine has become more widely available?

Chris: In speaking with several sureties and accounting partners, there has already been an increased focus on cash management and financial health. Everyone is asking for more regular 13-week cash projections and updates on key performance indicators, such as days of cash and other liquidity ratios. Knowing this will likely continue in the foreseeable future, contractors need to consider the processes they have for putting this data together for stakeholders. Are you spending days and days getting this data out of various systems and crunching it in Excel? A bank or surety will have a lot more confidence if you’re able to show them the solid foundation upon which you have produced these numbers. Corporate Performance Management solutions, such as Prophix, provide contractors with the automation, scale, and best practices that Excel can’t offer. Out-of-the-box dashboards, coupled with a library of KPIs, can give contractors insight into the health of their business almost instantly. To learn more about resource management, watch our on-demand presentation, Navigating Challenges and Strategies Related to Construction Claims During a Pandemic, with Marcum, Viewpoint, and Prophix.

About Prophix

Your business is evolving. And the way you plan and report on your business should evolve too. Prophix helps mid-market companies achieve their goals more successfully with innovative, cloud-based Corporate Performance Management (CPM) software. With Prophix, finance leaders improve profitability and minimize risk by automating budgeting, forecasting and reporting and puts the focus back on what matters most – uncovering business opportunities. Prophix supports your future with AI innovation that flexes to meet your strategic realities, today and tomorrow. Over 1,500 global companies rely on Prophix to transform the way they work." target="_blank">Navigation the New Normal: Q&A with Construction Experts

Our Associate Member, Prophix, created this engaging Q&A and has allowed us to share with our membership. In 2020, the construction industry faced many different [...]

By |2022-07-18T14:36:01-05:00March 30th, 2021|CICPAC, Construction, Resources|
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