Recently I attended the Construction Industry CPAs/Consultants (CICPAC) conference in Chicago. The conference is held annually and provides Yeo & Yeo professionals with the latest knowledge of construction industry challenges, and valuable insight that we will use to advise our clients.
I attended eight sessions, and I would like to share my notes about the following topics that I consider especially important to our clients.
1. Be aware of the most common reasons why contractors fail.
Ryan Howsam of FMI, a leading management consulting firm dedicated to serving the construction industry, says that the most common root causes for failure include the following:
- Not planning resources needed to complete jobs
- Taking on projects too far outside of capabilities
- Moving outside of the company’s core competencies
- Inadequately managing large, long-duration projects causing significant equity, cash, and working capital to be tied up in uncompleted work
The top risks today include skilled craft labor shortages, contract language/insurance terms, and subcontractor default.
2. Consider cash flows while jobs are plentiful.
Anirban Basu of the sage 100c Policy Group recapped the state of the construction industry over the past few years and shared the detailed economic outlook for construction going forward. Michigan is recovering from the recession and has seen 4.7 percent growth in construction jobs. We may be transitioning very quickly from the mid-cycle stage of the recovery to the late-stage: The 2017-2018 outlook is very murky. He stressed that it is very important to think about cash flows at this time while the jobs are plentiful on the market. The economy is starting to show signs of slowing down during the next few years, so having the necessary reserves now is crucial for all contractors.
3. Maintain a solid workforce.
Finding good help can be a difficult hurdle to overcome, but retaining those individuals is an even harder task. Spending more money on good help will make each job more efficient and, while it costs more in the short term, it bolsters the company’s reputation. The better the reputation of the company, the more likely the company can secure contracts in the future.
4. Data management and asset security are crucial to the construction industry.
Several construction CEOs shared their top concerns for the construction industry. Data management and asset security are the most crucial. Implementing a solid data network with backups is not something that can be overlooked because a disaster can happen at any time. Ask yourself, in the event of a disaster, is your data offsite and secure? If the answer is unknown, or worse, if the answer is no, then the success of your company could hang in the balance with just one mishap. Consider learning more about backup and disaster recovery by seeking technology solutions for your business.
Call on Yeo & Yeo’s Construction Services Group for assistance with business consulting, tax planning, accounting, employee benefits and IT security.