In This Issue
News & Resources
HOW IS THE MARKET SHAPING UP FOR CONSTRUCTION IN THE OHIO VALLEY IN 2016?

We want you to be a part of Harding, Shymanski & Company, P.S.C.'s inaugural Ohio Valley Construction Market Outlook Survey. We invite construction businesses headquartered in or whose businesses perform construction work in the Ohio Valley Region* to participate. Join construction executives throughout the region in reporting current company financial data as well as your perspective on the market's outlook for 2016.
 
By taking our 15-minute survey, you will help identify regional trends that may directly influence your business in the coming year. You'll receive a free, bound copy of our research report and will be invited to attend a forum to discuss the survey results later this Spring.
 
The survey is open now through March 18th.
 
The study is being conducted by Harding, Shymanski & Company, P.S.C. and all responses will be held in strictest confidence.

Please call Paul Esche, CPA, CCIFP, CCA at 800.880.7800 ext. 1335 with questions. 
 
*Ohio Valley Region includes: 
Southeastern Illinois, Southern Indiana (from Marion County south), Southwestern Ohio, Western and Central Kentucky as far east as Fayette County. 

ARE YOU FILING INDIANA PERSONAL PROPERTY TAX IN 2016?

If you are required to file personal property taxes in Indiana, here are a few important changes you should know about when filing for 2016. 

Read the full coverage here.

TAX EXTENDERS PACKAGE MAKES MANY PROVISIONS PERMANENT

Just before recessing for the holidays, the House and Senate passed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). President Obama signed the Act and a FY 2016 omnibus on December 18. The Act does considerably more than the typical tax extenders legislation seen in prior years. It makes permanent over 20 key tax provisions, including the research tax credit, enhanced Code Sec. 179 expensing, and the American Opportunity Tax Credit. It also extends other provisions, including bonus depreciation, for five years; and revives many others for two years. In addition, many extenders have been enhanced. Further, the Act imposes a two-year moratorium on the ACA medical device excise tax. The House passed the Act on December 17 by a vote of 318-109; The Senate approved the Act along with the FY 2016 omnibus on December 18 by a vote of 65 to 33.

For more information, contact Michael Vogel, CPA, Michael Cameron, CPA or John Rittichier, CPA at 800.880.7800.

RAISING YOUR INTEREST IN WORKING CAPITAL

Lower interest rates in recent years have apparently dimmed the spot light on the essential business function of working capital management. Many companies have chosen to take advantage of these rates by borrowing against their line of credit instead of continuously improving their working capital process and collection practices. This may be workable now, but what about when interest rates begin to rise?

According to the 2015 CFO/ REL Working Capital Scorecard, only 96 companies out of the 967 surveyed have improved their cash conversion cycles (CCC) over the past three years. So what exactly is the cash conversion cycle?

The cash conversion cycle is a measure of overall working capital performance. The CCC takes into account how quickly a company collects on receivables, how much inventory they keep on hand, and the amount of time they take to pay their payables. Companies that work to improve their working capital management and lower their CCC will have a competitive advantage once the interest rates do rise. In other words, they will have more cash and less interest expense than their competition.

There are three general areas that a company needs to improve on in order to lower their CCC:
  • Accounts Receivable: Accounts receivable is the obvious answer to improve cash flows without financing. If a company collects cash from their sales faster, they will have more cash to move to other areas of the business. Collecting receivables, however, is sometimes easier said than done. Many buyers attempt to defer payments as late as possible in order to retain cash. There are a couple of ways to combat this and collect faster; the first of which is timely billing. The company should send the invoice to the customer as soon as possible: the longer an account remains unpaid, the lower the probability of collecting that account is. The invoice should clearly state discounts for an early payment and the penalty for late payments. After sending an invoice, the company should firmly enforce payment terms. If a customer is late on a payment, the customer should be charged the late fee stated on the invoice.

Another way to decrease the time it takes to receive payments is to contact the customer.  When a customer's payment is late, the company should call the following day. Letters and other written reminders are often times ineffective, as they only provide one-way communication. This verbal communication will reinforce the company's collection policies. One more way a company can improve in collections of receivables is to have stricter credit policies and not sell to companies that would be unable to pay their balances on time.

  • Inventory: An additional lever that can be pulled to improve CCC is to reduce the overall investment in inventory. One simple way a company can lower inventory levels is to sell older or outdated inventory at a discount. A company can also partner with vendors to supply inventory on a consignment basis. Another way is to calculate how much inventory needs to be kept on hand in order to still meet demand without holding extra inventory. This will allow companies to maintain adequate inventory without having excess inventory.
  • Accounts Payable: Days payable outstanding (DPO) is a metric that is used to measure a company's average payable period in days. It is calculated by taking the year-end accounts payable divided by one day of cost of goods sold. Companies can use this number to compare themselves to others in the same industry and determine if there is room for improvement. If their DPO is smaller than others in the same industry, then they may need to work on stretching that number and delaying payments.
Vendor relationships and the timing of payments can drastically affect the amount of cash available for working capital. The company should work to extend payments as much as possible and establish discounts for early payments. The company should negotiate payment terms with the vendor based on how much the vendor needs that company's business. If the company is the vendor's largest customer, the vendor likely cannot afford to lose that business which makes it easier for the company to negotiate better terms. However, if the company is a smaller customer, it may not be able to extend payments more than the industry standard.

Companies need to be proactive with their approach to managing working capital prior to experiencing rising interest rates. The companies that work to improve now will not be as deeply impacted once interest rates do rise. They will be poised for growth while others in the industry struggle to react.

WHERE DO YOUR COLLECTIONS STAND? 

The Institute of Certified Construction Industry Financial Professionals (CCIFP) conducted a contractor payment survey in August 2015 to gain an understanding of trends in collections that contractors are facing. When the survey closed, there were a total of 142 respondents from the following industries: General (54 respondents), Heavy/Highway/Civil (21 respondents), and Specialty (67 respondents). The survey included five questions, and the results of two of those questions are summarized below.

1. On average, how long does it take to collect payments?

 Respondent
16-30 days
31-45 days
46-60 days
61 or more days
General Contractors
19%
45%
33%
3% 
Heavy/Highway/Civil Contractors
30% 
10% 
50% 
10%
Specialty Contractors
1%
12%
50%
37% 

2. How does your current collection time compare to last year?

Respondent
Same
Better
Worse
General Contractors
71%
8% 
21%
Heavy/Highway/Civil Contractors
85%
10%
5%
Specialty Contractors
79%
12% 
9%

For the full survey, comments, questions, or suggestions please contact Paul Esche, CPA, CCIFP, CCA at 800.880.7800 ext. 1335.

INTERNAL REVENUE SERVICE EXTENDS DUE DATES FOR ACA REPORTING (FORMS 1094 AND 1095 B & C)

On December 28, 2015, IRS issued Notice 2016-4, which extends the due dates for the 2015 information reporting requirements, both furnishing to individuals and filing with the Internal Revenue Service (Service), for insurers, self-insuring employers, and certain other providers of minimum essential coverage under I.R.C. 6055, and the information reporting requirements for applicable large employers under I.R.C. 6056.  
 
Specifically, this Notice (1) extends the due date for furnishing the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2016, until March 31, 2016, and (2) extends the due date for filing with the Service the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage from February 29, 2016, to May 31, 2016 if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically. 
 
This Notice also provides guidance to individuals who, as a result of these extensions, might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns.

UPCOMING EVENTS

Friday, February 26, 2016
Preparing for Your Business Transition hosted by Southwest ISBDC

ABOUT OUR CONSTRUCTION, REAL ESTATE AND MINERALS INDUSTRY   
Because Harding, Shymanski & Company, P.S.C. is committed to providing quality service to our construction, real estate, and mineral industry clients, we have selected a team of dedicated professionals to serve as your industry's consultants.  These individuals under the language and key issues unique to your industry and posses the drive and determination to help you manage your company on a proactive basis.

Harding, Shymanski & Company, P.S.C.
800.880.7800
Jeff Happe
SEE WHAT OUR CLIENTS ARE SAYING...

We can go anywhere to get an accountant who can do our taxes. Harding and Shymanski's construction team brings so much more to the table. I feel confident that they have the resources on staff to help me with important issues regarding the day to day operation of our business.

 
 
~Jeff Happe, President, Happe and Sons Construction, Inc.