Chavon Wilcox is CPA, CCA and a CCIFP with Aronson LLC who has specialized for 14 years in the construction and real estate industry. Here, she offers professional advice to residential and commercial contractors on managing their accounting. Read on:
What are some of the unique accounting needs of residential and commercial contractors?
Cash is king in construction; therefore, ensuring a contractor’s cash position and related areas are managed properly should help with day-to-day operations and safeguard against surprises. Accurately managing cash means making sure you have the correct internal controls in place, your equipment is managed and usage is accounted for daily, and your jobs are being closely tracked to make sure current and future job cost are up to date.
Additionally, making frequent inquiries into your current bonding capabilities and managing lien waivers will save contractors time and money.
What are the most account common mistakes or oversights you see these types of businesses making?
Most common mistakes and oversights we see from our clients can be avoided or, and at the very least, the impact can be minimized if contractors are willing to focus on these key areas in the back office:
- Application of indirect costs
- Financial reporting
- Full utilization of accounting systems
- Accurate estimating methods
- Revenue recognition
- Equipment management
- WIP schedules
What advice do you find yourself repeating to your clients in contracting over and over?
To help our clients avoid the common mistake areas mentioned, we try to make sure the areas of focus are addressed on a regular basis. Furthermore, I encourage my clients to proactively search for ways to improve all internal processes before an error or misstep occurs.
What are your favorite accounting tools for helping residential and commercial contractors manage their money?
Industry technology is constantly advancing; giving contractors the ability to plan, execute, manage and account for their work from the same platform. I strongly encourage all of my clients to use a construction- and real estate-specific accounting product that integrates with the other systems they use to manage their organizations.
What industry-specific accounting rules and regulations should contractors make sure they’re aware of?
The newly passed, not yet effective standards for Lease Accounting and Revenue Recognition will begin to have an impact on contractors in the near future. Making sure they are up to speed and following the latest developments will make for a smoother transition and minimal disruption.
Furthermore, the Private Company Council (PCC) is constantly evaluating the rules and regulations that the Financial Accounting Standards Board (FASB) issues and their impact to accounting and reporting for private companies. Contractors should follow their projects to make sure they are not missing out on a standard that could be beneficial to their organization.
How important is it that contractors stay up to date on these rules and regulations? How can they keep up with changes?
An informed business owner is at an advantage regardless of the industry they call home. Contractors can stay current with rules and regulatory changes by following industry trade publications, participating in local trade associations, frequenting the FASB and IRS websites, reading construction-focused blogs and subscribing to newsletters for the construction and real estate industry. I also am part of the Construction Financial Management Association (CFMA), which is an excellent resource for financial professionals in the industry.
What are the most important headlines you’re following right now about accounting in the construction industry?
The new Lease Accounting Standards and Revenue Recognition changes are on my list of headlines to watch. I also follow the PCC to stay on top of any changes affecting my clients to make sure they are taking advantage of available opportunities.
What resources (websites, books, magazines, etc.) would you recommend construction contractors check out in order to have a better understanding of how to manage accounting?
In addition to the above mentioned resources, I suggest the CFMA’s website, TUG for those Sage 300 CRE and Sage 100 Contractor users, AICPA Audit and Accounting Guide for Construction Contractors, the Financial Management and Accounting for the Construction Industry (published by Matthew Bender) and CCH Construction Guide.