The Role of Strategic Accounting in the Construction Industry

Success in the construction industry hinges not only on the quality of workmanship but also on effective financial management. Construction professionals must recognize the pivotal role that strategic accounting plays in driving profitability and sustaining growth.  

Accurate Cost Estimation

Accurate cost estimation lies at the center of financial viability in construction projects. By accurately forecasting expenses, including material costs, labor, equipment, and overhead, construction professionals can mitigate the risk of budget overruns and ensure projects remain financially sustainable. Integrating historical data and industry benchmarks into cost estimation processes enables construction firms to predict potential challenges and allocate resources judiciously, thereby enhancing project profitability.

One way to aid in accurate cost estimation is through preparation of a contract schedule. A Company’s contract schedule provides better understanding of Company operations and financial performance for each job allowing for more effective management. The contract schedule is a critical tool for risk management, planning, and communication, making it indispensable for the smooth execution of construction projects.

Cash Flow Management

Effective cash flow management is essential for construction companies to maintain liquidity and meet financial obligations promptly. By implementing cash flow forecasting models, management can estimate and predict future revenues and identify potential cash bottlenecks, allowing for proactive measures to mitigate risks. Moreover, establishing stringent invoicing and payment protocols can accelerate receivables turnover, enhancing cash flow and bolstering financial resilience.     

The included cash management resource, published by RSM US, is tailored for construction contractors providing relevant insights and best practices to better assist you.

Construction Cash Guide

Strategic Financial Planning

Strategic financial planning is imperative for construction firms to achieve long-term sustainability and capitalize on growth opportunities. By developing comprehensive financial forecasts and investment strategies, construction professionals can align financial objectives with broader business goals, enabling informed decision-making and resource allocation. Furthermore, fostering a culture of financial literacy and empowerment among project stakeholders cultivates a collective understanding of financial performance metrics and fosters a collaborative approach towards achieving organizational success.

Identifying and evaluating Key Performance Indicators (KPIs) is crucial, as it provides a clear measure of performance against strategic goals and objectives. Regular assessment of KPIs allows for real-time insights into operational efficiency, financial health, and project progress. It enables managers to make informed decisions, identify areas for improvement, and allocate resources effectively.

In an increasingly competitive construction landscape, the importance of strategic accounting is undeniable. By championing a proactive, holistic approach to accounting, firms can navigate challenges with confidence and position themselves for success in an ever-evolving marketplace.

Kirsten Sokom

Kirsten Sokom

Principal
Audit services for construction, manufacturing, and distribution companies; engagement quality control and best practices.

Key Differences between Alabama Department of Transportation and Alabama General Contractors Licenses

In the construction industry, navigating the bureaucratic processes of prequalification applications and license renewals is crucial for contractors to legally undertake projects. In Alabama, two key processes that contractors must be familiar with are the Alabama Department of Transportation (ALDOT) Prequalification Application and the Alabama General Contractors License Renewal. Here’s an exploration of the differences between the two:

The ALDOT Prequalification Application

A process that contractors must complete to be eligible to bid on state transportation projects. This involves submitting a Confidential Financial Statement and Equipment and Experience Questionnaire. The application assesses the contractor’s financial stability, equipment availability, and relevant experience. It’s a prerequisite for contractors aiming to work on transportation-related construction projects and is specific to the Alabama Department of Transportation.

The Confidential Financial Statement and Equipment and Experience Questionnaire must be submitted no more than 16 months after the date of the financial statements previously submitted (April 30th for calendar year-end entities). This deadline is firm, with no available provision for extension. A contractor will not be issued a bid proposal if the Company’s prequalification application has not been submitted.

The Alabama General Contractors (AGC) License Renewal

A broader requirement that applies to all contractors working in commercial and industrial construction within the state. This annual renewal process ensures that contractors maintain their eligibility to operate legally. It involves updating the licensing board with current financial information, proof of liability insurance, and evidence of continuing education where applicable. The renewal process is not project-specific but is a general requirement for all contractors to continue their practice in Alabama.

License renewals with the AGC operate on a unique schedule. Renewal due dates are based on the first letter of the company’s name published on the AGC website. License renewals may be extended up to 90 days upon written request.

License Requirements Comparison

Both licenses require the financial statements must be prepared by a certified public accountant under generally accepted accounting principles in the United States (US GAAP). ALDOT requires financial statements be audited or reviewed by a certified public accountant. The AGC will accept compiled, reviewed, or audited financial statements or ALDOT Prequalification Application in lieu of its own. Thereby consideration should be given to the time needed to perform these engagements to avoid disruption to operations.      

Both also consider different criteria in determining an entity’s eligibility:

  • ALDOT regulations state applications with negative net worth will be rejected.
  • AGC regulations specify a minimum net worth and working capital requirement of $10,000. If either of the requirements are not met the AGC license renewal application will be rejected. 

Additionally, bid limits are determined using different criteria:

  • ALDOT bid limits are determined by considering working capital, total assets, and net worth. Determination of an entity’s bid limit may be subject to additional adjustments upon evaluation of the Prequalification Application.
  • Bid limits are calculated by the AGC using the lesser of the Company’s net worth and working capital based upon the table below. Additional considerations to increase net worth or working capital one step are also available.
Bid Limit
Minimum Net Worth or Working Capital
Contracts Up To
A
$10,000
$100,000
B
$17,500
$250,000
C
$37,500
$500,000
D
$75,000
$1,000,000
E
$200,000
$3,000,000
U
> $300,000
Unlimited

Other financials elements can impact these limits. Given the unique nature of these criteria we advise discussing these options with your certified public accountant.

Understanding these differences is essential for contractors to ensure compliance with state regulations and to secure and maintain the ability to bid on and execute construction projects in Alabama. Failure to comply with application regulations can result in the inability to secure new contracts or the suspension of ongoing operations. It’s imperative for businesses to stay informed and proactive in managing their license renewals.

Kirsten Sokom, CPA

Kirsten Sokom, CPA

Principal
Audit services for construction, manufacturing, and distribution companies; engagement quality control and best practices.

My CPA says, ‘extend.’ What does that mean to me?

Filing taxes can be daunting, but understanding the purpose and process of filing an extension can provide much-needed clarity and relief. Let’s delve into the world of tax extensions and what they mean for you.

What does filing an “extension” do?

  • An extension is a formal request to the IRS for additional time to file your federal tax return (1040).
  •  The extension period typically extends the due date by six months, shifting it from April 16 to October 15th.
  •  While filing an extension grants extra time to file, it’s crucial to estimate and pay any anticipated taxes by the original due date.

Why does my CPA suggest we extend my tax return?

  • Your CPA might recommend an extension due to the complexity of your return or limited time within the filing season.
  • CPAs often have cutoff deadlines to manage their workload efficiently and ensure accurate filings.
  • Pending guidance or legislative changes could also prompt a suggestion for an extension.

Am I more likely to be audited if I extend?

  • No, filing an extension does not increase your chances of being audited.
  • It’s preferable to file an extension than submit an incomplete return or rush through the process without careful review.

What are the primary benefits of extending my tax return?

  • Provides extra time to file without penalty, especially when waiting for missing information or tax documents.
  • Offers opportunities for additional retirement planning or funding certain retirement plans.
  • Generally, filing an extension is less expensive and reduces the likelihood of needing to amend your return later.

Should I do anything differently if I am filing an extension?

  • Provide your CPA with all available information as early as possible.
  • Anticipate and pay any taxes owed by the original due date.
  • Consider making quarterly estimated tax payments if required, with guidance from your CPA.
  • Discuss refund options and tax planning opportunities with your CPA to optimize your financial situation.

Is there anything I can do to avoid filing an extension if I know I am missing some information now?

  • Provide all available documents to your CPA promptly to facilitate early preparation and review.
  • Your CPA may be able to draft a return for review and add missing information before the original due date.

Have there been any changes to the due dates of returns for this year?

  • As of now, there have been no changes to the due dates for tax year 2023.

Filing a tax extension can provide valuable breathing room and ensure accurate filings. By understanding the process and working closely with your CPA, you can navigate tax season with confidence and peace of mind.

Download Extension FAQ PDF from AICPA & CIMA719 KB

Empowering Growth: Crow Shields Bailey PC Welcomes New Shareholder to Leadership Team

Celebrating a Significant Achievement for Alex Martin & CSB!

“I’m very thankful for the opportunity to join an incredible leadership team at CSB. The support and mentorship they’ve shown over the course of my career has been invaluable. With our talented, dedicated team, our firm will continue to maximize our clients’ wealth and be good stewards of the gulf coast community.”

Alex Martin, CPA, Shareholder

Crow Shields Bailey PC is thrilled to announce the continued growth of our leadership team. With excitement and pride, we congratulate Alex Martin on reaching the significant milestone of becoming a firm Shareholder. Alex will continue to bring a wealth of experience, dedication, and a passion for innovation to our firm. As we welcome Alex to this new role, we look forward to the continued evolution and success that will undoubtedly follow.

As we embark on this new chapter with Alex as a Shareholder, we invite you to join us in congratulating him on this well-deserved achievement. Alex enriched our team for six years before venturing into a CFO role within the manufacturing industry, achieving six impactful years of invaluable experience. Now, with a wealth of knowledge and seasoned expertise, Alex assumes a pivotal role in guiding our team.

His commitment to excellence and alignment with our core values of Innovation, Teamwork, Integrity, Community, Client-Focused and Work-Life Integration make him an invaluable addition to our leadership team.

Here’s to continued success and growth!

 Dive into the Q&A below to discover the depth of his passion and dedication.

Q & A

What is your favorite thing about working for CSB?

My favorite part of CSB is having the opportunity to provide value to a diverse set of clients while working with a talented team of individuals who are all committed to serving our clients well. The leadership at CSB has brought together a group of high character people who love to work hard and have a good time while doing it.

Can you share a memorable experience or challenge from your journey in the accounting profession?

I spent the first 6 years of my career as an auditor with CSB. One of the challenges that stands out was in the aftermath of the BP Oil Spill in April of 2010. CSB was heavily involved in the claims process that followed, and eventually I was tasked with leading the efforts internally. It was a crash course in managing client expectations, interpreting and analyzing data, and developing internal controls. In my role as an industry CFO, we expanded our operations to overseas markets beginning in 2019. That brought interesting challenges as we had to build our import/export infrastructure, learn regulations by country, and navigate complex deals often with a language barrier. It was a very rewarding experience.

If you could go back, what would you tell yourself as an intern?

If I could go back, I would tell myself to give yourself a break and focus on being a sponge. Accounting encompasses so many different aspects that cannot be learned overnight. It must be learned through experience, by making mistakes and learning from them, and being open to advice and mentorship. Knowledge compounds over time, so I would tell myself to take Warren Buffet’s advice and strive to “go to bed smarter than when you woke up.”

Outside of work, what are your passions or hobbies to unwind and recharge?

I enjoy spending time with my two young sons – playing sports with them, coaching soccer, and going on weekend adventures. I also enjoy reading, writing, listening to a wide range of podcasts, golfing (although poorly), enjoying craft beers with my buddies, and weekend getaways with my wife.

What aspect of the accounting industry excites you the most?

Public accounting is poised for explosive growth in the coming years. The changing technological environment with cloud-based platforms and artificial intelligence is fundamentally changing how we prepare tax returns, perform audits, and provide monthly accounting services to our clients. The firms that embrace these trends will succeed. The firms that don’t, won’t.  In particular, the growth of outsourced/fractional accounting/CFO models is what excites me the most (and the driving reason I returned to public accounting). A small to mid-size, growing business can leverage the knowledge of not just one person, but an entire team of experienced accountants and CPAs by outsourcing their accounting/CFO function. This is a model that is not only cost effective for the small business, but more importantly drives a very high return on their investment.

In your opinion, what are the key qualities that make an accountant successful?

Accounting is a very broad and diverse profession. There are many ways to be successful in this field. If I could boil it down to a few big picture points, I would say that to be a good accountant, you have to enjoy and be comfortable being in the weeds. You must deeply understand the books of your client before you can advise them appropriately, and that takes an investment of your time in the details. After understanding the details, you have to be able to zoom out and see how it all fits in with the grand strategy of the enterprise as a whole. How will your analysis and recommendations impact other functions of the business – operations, finance, personnel, etc.? Lastly, and probably most importantly, the most successful accountants in today’s environment are highly effective communicators. You can understand the details of the business, you can understand how it fits (or doesn’t) with the overall strategy of the business, but if you can’t communicate that in a way that resonates with management, your effectiveness is limited.

Same question, but what are some qualities that make a successful leader?

Leadership and understanding what makes an effective leader is an area I am very passionate about. Leadership isn’t a choice – we are all called to be leaders in some form or fashion in our lives. The choice is whether or not to be a good leader. Good leadership is about accountability first and foremost – taking ownership for all mistakes and giving away praise and accolades for any success to the team. The second aspect of good leadership is empathy. Understanding that every person has a different background and path to where they are today, and that good leadership often requires flexibility in approach depending on those individual circumstances. Lastly, good leadership requires effective communication. You have to be able to communicate expectations, give constructive feedback, and maintain an open-door policy.

Can you highlight a few professional achievements or milestones that you’re especially proud of in your career?

I very much enjoyed my time as a CFO in the manufacturing space. We took a small company that was relatively unknown and grew it tremendously over 6 years through a series of strategic investments in new lines of business and capacity. Ultimately, we grew revenue by 10x over the period, grew margins, expanded both sales and purchasing into international markets, and received recognition at the state, national, and international levels for our efforts. Along the way I had the opportunity to work with national accounting firms, investment bankers, and private equity groups – experience that translates very well to my role here at the firm. In the last year back at the firm, I’m very proud of the team we’ve assembled and the processes we’ve streamlined to ensure the foundation is set for future growth.

How do you believe your personal values align with the values of Crow Shields Bailey PC?

We have a leadership team who share and are committed to the core values of innovation, teamwork, integrity, community, client-focused and work-life integration. Those values resonate not only with me, but with anyone striving to (1) build a meaningful career, (2) be present in family life, and (3), be good stewards of our community. I couldn’t ask for a better fit.

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CSB Recognized as INSIDE Public Accounting Top 500

We are proud to have been recognized by INSIDE Public Accounting as a 2022 IPA Top 500 Firm, as well as an IPA 500 Fastest-Growing Firm. IPA 500 firms are ranked by U.S. net revenues and are compiled by analyzing the nearly 600 responses received for the 2022 annual IPA’s Survey and Analysis of Firms. This is IPA’s 32nd annual ranking of the largest accounting firms in the nation.

CSB is grateful to our team and our clients for any recognition we receive. Our team works hard to provide excellent service to our clients, and we wouldn’t be where we are without our loyal clients.

CSB CAAS Team Rolls Out New Initiatives

Last week, the CSB Client Accounting & Advisory Services (CAAS) team had a meeting to discuss rolling out their new plans and initiatives. Our CAAS team and services have grown exponentially over the last three years.

The team has many goals moving forward, including but not limited to streamlining, improving, and creating consistency in all service lines; defining, measuring, and analyzing the current state of the CAAS line of business and identifying new areas of opportunity; and further developing CAAS team members’ confidence and cross-training them in different areas.

Members of the CAAS team are all very excited to enact these changes and see the possibilities transform into reality. According to Jennifer Lowe, “It is very exciting to see the growth in the CAAS department and I, for one, am very excited about the changes we are making. The changes will allow us to better serve our clients as well as empower the team members.”

Leaders of the CAAS team have worked tirelessly to come up with plans and procedures moving forward. Their hard work did not go unnoticed by the rest of the team. According to Misty Cutshall, “It was so refreshing to be part of a project that everyone was so passionate about.  Everyone was engaged in every element and we had fun.  It did not seem like work.  It felt like we were planning a road trip and not like we were revamping processes and procedures.”

We are very excited to see the results of this hard work and dedication by the CAAS team!

Building Your Personal Brand

August 23, 2021

Emilee Shuler | Marketing Assistant | Published by Crow Shields Bailey PC

Personal branding is vital for professionals of every age and stage in their career to understand. Professionals should consider branding to be an outward representation to the world of the sum of their values, goals, interests, and skills.

While, in essence, building your personal brand is about selling yourself, it is very important to be genuine and organic in your efforts. The process of learning and developing your personal brand involves an element of self-analysis that will also lead to a great deal of personal growth along the way. Your personal brand is the combination of your own unique identity and your reputation. Intentional and thoughtful personal branding will help you to stand out in a sea of other highly qualified peers.

 

Looking Inward

The first step is to ask yourself, “Who am I?”

  • What are your skills?
    • These should include both technical and soft skills.
  • What are your interests?
    • This should include your professional interests and your personal interests.
  • What are your values?
    • These should also include both your personal values and your professional values. If these conflict with each other, then branding is not the biggest project you need to be tackling right now.

Next ask your friends, family, and peers, “Who am I?”

  • What do they think your skills are?
  • What do they most enjoy discussing with you on a personal or professional level?
  • What do they believe are some of your values?

Finally, ask yourself what it is you would like to achieve.

  • What are your personal and professional goals?
  • Do they align with your values, interests, and skills?

It may seem daunting to explore these ideas, but it is a critical step towards building your authentic brand. Personal and professional goals are constantly changing and values and skills evolve as people grow in their lives and careers. You will need to revisit this process often in order to make sure your brand is still an accurate reflection of all of these things.

Building Your Brand

Once you have answered these more introspective questions, it’s time to start building your brand. It is at this point that you will put to work what you gleaned in the beginning of the process. What knowledge, experiences, goals, skills, and passions can you use to promote yourself to employers and peers?

What will be your main avenues of promotion?

  • Which social media platforms should you utilize?
    • Typically, LinkedIn is the platform that has the most focus on professional achievements and accolades, sharing best practices, and networking and interacting with peers in your industry and others. LinkedIn should be a priority for all professionals.
      • Make a point to follow and interact with other leaders in your industry. Share, like, comment, and take part in their conversations. This will give you visibility and help you gain followers organically.
    • Even on more casual platforms such as Facebook, Twitter, and Instagram, you should always consider whether the image you are conveying aligns with the values and goals presented by your brand.
  • Should you consider writing a blog?
    • If you feel that you have useful insights to share, a blog is a great way to promote and establish yourself as an industry leader while also sharing helpful knowledge with others.
  • What networking opportunities should you utilize?
    • Always be on the lookout for continuing education courses, networking events, and any opportunities to have conversations with people. Never underestimate the power of networking. Not only are you gaining and sharing valuable knowledge and making meaningful connections, but your network of peers is also part of your brand and should be a reflection of your values and interests.

How will you stand out from the crowd?

  • What makes you unique?
    • Use your unique personality, talents, passions, experiences, and abilities to connect with people to differentiate yourself.
  • Do you have any professional specializations or certifications that you should highlight?
  • How will you stay up-to-date on industry trends?
    • Subscribe to reputable sources of information for your particular industry. Use continuing education to bolster your knowledge and stay current with best practices, trends, innovations, etc. This will ensure that your content and conversations are always relevant.

The beginning stages of introspection will guide you in the process of building your brand while simultaneously helping you get to know yourself and your goals better. By defining your identity, developing a strategy for promotion, and letting your personality shine, you can build a very effective personal brand for your personal and professional life.

AMERICAN RESCUE PLAN ACT OF 2021: CHILD TAX CREDIT

AMERICAN RESCUE PLAN ACT OF 2021: CHILD TAX CREDIT

Under the American Rescue Plan Act (ARPA), the IRS will be releasing advance monthly child tax credit payments to eligible taxpayers in equal amounts starting July 15th. Following the first payment in July, the payments will go out on the 15th of each month through December of 2021.

Many taxpayers may want to unenroll using the link below if the amount of 2021 taxes owed are expected to be greater than the expected refund.

For taxpayers who are married filing jointly, each person must unenroll separately.

The payments will be as follows:

  • Up to $300 per month per child under age 6, and
  • Up to $250 per month per child ages 6-17.

For 2021, ARPA raised the child tax credit amount to up to $3,000 for each qualifying child between the ages of 6 and 17 at the end of the 2021 tax year, and $3,600 for each qualifying child under the age of 6 at the end of the 2021 tax year. ARPA also made the child tax credit for 2021 fully refundable if the taxpayer (or spouse, on a joint return) has a primary residence in the United States for more than half of the 2021 tax year.

For more detailed information and frequently asked questions about child tax credit payments, or to unenroll, visit the IRS Child Tax Credit Update Portal. Please call our office at 251-343-1012 if we can be of further assistance.