Managing Risk in Today’s Construction Market

The construction industry is experiencing a wide variety of risks due to the complexity of its project environment.

Risk is defined as the probability of setback, injury, loss, or disadvantage for a particular entity. In the construction market, risk entails the failure to achieve what is feasible as well as the predicted measures. Although there are many definitions of the word “risk” and how it relates to the construction industry, it is important to seriously take them into consideration when it comes to making decisions.

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Do you have a strategic plan for your business?

Do you have a strategic plan for your business?

“Measure twice, cut once” is a common saying among construction professionals. You know the value of looking before you leap, of thinking ahead and of taking extra care. You know it saves you time, money and mistakes.

Strategic planning is another way of measuring twice before cutting once. It’s a way of considering factors that can affect outcomes. Yet, many people in construction (and in business overall) fail to take the time to practice good strategic planning. They’ll say, “We’re too small,” or “So many factors are uncontrollable, so what’s the point?” Read More

Cost Segregation Studies

 

Is your trade or business involved in constructing, renovating, or acquiring commercial real estate? Practically, any commercial owner will benefit from a Cost Segregation Analysis. These studies involve differentiating among various real estate and/or construction costs by allocating them to other asset categories and assigning a useful life that is unique to each asset for federal tax purposes.

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Implementing the New FASB Lease Standards – Will your bank loan covenants be adversely affected?

 

During 2016, The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016 – 02, Leases.  The purpose of the update is to address transparency and improve reporting of obligations for entities involved in leasing activities.  The impact of the new standard on lessors will be minimal, primarily affecting income statement reporting.  However, for lessees, the new standard will impact both the balance sheet and the income statement.  For leasing obligations that are not considered “short-term leases” (12 months or less), lessees will now need to record a “right of use” asset along with a corresponding “lease liability” that is to be amortized over the life of the leasing agreement.  Adding this lease liability to the balance sheet could create a violation of certain loan covenants, even though this new liability will not be considered debt in the eyes of the FASB.

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How to Better Control Direct Construction Costs

Financial Services in Maryland

How to Better Control Direct Construction Costs

With rising materials costs and downward price pressures, it is more important than ever to manage project expenditures. There are fewer jobs out there so it is essential to make a profit on every project.

Customers are looking for efficiencies and are examining quotes closely. Stay one-step ahead by managing your direct and indirect costs and their impact on gross margin, which must cover administrative overhead and profit. The gross margin – what’s left after job costs are subtracted from revenue – will vary according to the type of construction project. The percentage can range from under 10 percent on large commercial jobs to more than 40 percent for home remodeling.

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Are you taking advantage of this huge tax opportunity?

  energy efficient deduction

When clients call me looking to create tax deductions before year end, I generally deliver the bad news that if they want to bring their taxable income down they are going to have to spend some of their money or at least put it in a restricted account.  This, however, is not necessarily the case with clients working in the construction industry.  Clients in this industry do have an opportunity to create tax deductions for jobs that they have already completed that vastly exceeds any additional cash they will need to spend to create those deductions. 

This elusive opportunity, to magnify the deductibility of cash outlays, is called the “179D Deduction”.  The 179D deduction is available to the owner of a building that meets certain energy efficiency guidelines. More importantly for those of you who own or manage a construction, engineering or architecture firm; the government has the ability to allocate a 179D deduction to a contractor, engineer or architect who designed a newly constructed building or upgraded building system.

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How to Increase the Quality of your Construction Contract Work

construction contract life cycle

The main goal for a construction contracting company is to carry out a construction project’s work in a way that meets the project’s objectives, at a high level of quality. It is up to the project manager to meet these objectives, which can occur through the completion of four phases: initiation, planning, execution, and closing. Once these phases are finished, the contract is deemed complete.

Together, these four phases are known as the contract life cycle. One important aspect that runs across the four is effective management. Aspects of management that include communication, documentation, and budgeting are all critical to a successful project.

Here, I’ll explain each of the phases of the life cycle in greater detail, along with a discussion of some of the benefits of using life cycle management.

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