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Summer 2013
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Construction and Real Estate Industry
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Because Harding, Shymanski & Company, P.S.C. is committed to providing quality service to our construction and real estate clients, we have selected a team of dedicated professionals to serve as your industry's consultants. These individuals understand the language and key issues unique to your industry and possess the drive and determination to help you manage your company on a proactive basis.
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Profit and Cash Flow: Finding the Right Mix
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While the path to success is not set in stone, there are some concrete questions you can ask to help manage your cash flow in order to remain profitable:
- As the accounts receivable balance grows, are you looking for signs that a potential bad debt looms?
- Are slow moving items showing up in the inventory balance as an increase over the previous balance sheet?
- Is there a note receivable on the balance sheet from a related party or third party that has used the cash of the business during the reporting period?
- When purchasing a fixed asset with an extended life, would it be better to lease the asset or purchase it using a short term bank loan?
- As you look at liabilities, did the management team use cash to pay down a bank note, a significant accrual or accounts payable balance, or a loan to a shareholder?
- In reviewing the equity accounts, did management elect to make cash distributions to shareholders for tax payments, as a return on capital or repurchase a shareholder's stock?
Even a profitable business can fail if its growth outpaces the working capital needs of the business.
For more information about how to ensure that you have the right mix, contact Randall Schulz, CPA at (800) 880-7800 ext. 1344 or email rschulz@hsccpa.com.
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Obama Administration Delays Key Affordable Care Act Insurance Mandate
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The mandate requiring companies that employ 50 or more workers to offer coverage or face fines has been delayed until 2015. The Treasury Department and the White House say the delay comes in response to concerns about the complexity of the new requirements and the need for more time for businesses to implement them effectively. The decision effectively means that penalties that would have been assessed against non-compliant businesses, originally set to kick in for 2014, will be delayed until 2015.
Below is a summary of the items delayed to January 2015:
- Offer minimum essential coverage to 95% of full-time employees.
- Offer minimum value (60%) coverage to full-time employees.
- Offer affordable (9.5% of income or less) single coverage to full-time employees.
- Consider employees who average 30 or more hours per week full-time for purposes of their health plan.
- Count variable employees' hours to determine whether they average 30 or more hours work per week.
While the employer mandate is being delayed, the individual mandate, which requires individuals to obtain health insurance, remains on schedule for 2014. The administration still plans to open up a new marketplace for government-related insurance plans on October 1, to take effect January 1. The subsidies are also expected to stay in place. The delay of the employer mandate, though, raises questions about whether more elements of the law might be delayed in the coming months.
Please contact John Rittichier, CPA at (800) 880-7800 ext. 8484 or email jrittichier@hsccpa.com for more information.
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Controlling Fleet Costs For Profitability
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FMI Corporation data reported a 20% drop in total annual construction spending between 2008 and 2012. When construction spending started to decrease, many construction companies with large construction fleets found themselves unable to recover their fleet costs. Here are some ways to ensure good control of fleet costs.
Cost Tracking - Cost Centers or 'pools' allow for a high level look at equipment costs including depreciation, insurance, fuel, lubricants, shop labor and burden, small tools and repair costs. However, companies should set a goal to recover these costs on a per project basis by tracking all of these costs to each specific piece of equipment. Tracking the costs accurately for each piece of equipment will not only allow better cost recovery, but it also better informs the buy v. rent decision making.
Utilization rates - Track utilization rates on an hourly basis and set an annual hourly budget for each piece of equipment. Project managers should monitor utilization rates for the equipment used on their projects, allowing for better understanding of what rates should be charged for each piece of equipment. In addition, compare estimated annual hours to annual costs in order to determine the actual internal cost per hour.
Profitability - Once the internal rate is known, gauge whether the rate is in line with market pricing in order to stay competitive in the bidding process. Remember that as workload decreases and chargeable hours drop, the internal cost per hour increases. Additionally, idle equipment hours should be tracked for accurate financial reporting. Rates and recover costs should be reviewed at least quarterly to ensure that the company recoups its costs and remains profitable.
Knowing the true cost and utilization rates for your equipment fleet are keys to remaining competitive and profitable in a tight economy. For a more in-depth look at managing fleet costs, click here.
For more information contact Paul Esche, CPA, CCIFP, CCA at (800) 880-7800 ext. 1335 or email pesche@hsccpa.com.
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Disclaimer
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The information contained in this email is for general guidance on matters of interest only. The publication does not, and is not intended to provide legal, tax or accounting advice.
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Harding, Shymanski & Company, P.S.C. provides accounting, tax, and consulting services to our clients from offices in Evansville, Indiana, and Louisville, Kentucky.
Call us today! (800) 880-7800
www.hsccpa.com
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