Each day I talk to business leaders about what they like best – and least – about their Certified Public Accountants (CPAs). The responses range from, “I won’t buy a mobile phone without checking with Mary,” to “Mark is okay, but he likes my rival football team and that’s unacceptable.”

Clearly, there are many factors that can solidify or dissolve a relationship with a trusted advisor such as your CPA. Some, while not preferred, are tolerable; others are absolute deal breakers. Still, the services of a CPA are crucial to the success of any company. That’s why you should ask yourself these five questions to determine if your CPA is meeting your needs, or it’s time to move on to someone else.

Does my CPA understand my business and industry?

As the business development manager of a “Top 50” accounting and wealth management firm, I hear the term “generalist” quite often. In the accounting world, the label applies to a professional with clients in multiple industries. Traditionally, a CPA’s role was to have a working knowledge of each of their clients’ industries. Today, top firms specialize in precise areas of focus to ensure they are experts in the tax laws that govern their clients’ industries. For example, if you own a construction company and the only construction company your CPA works with is your own, are you certain you are taking advantage of every potential tax benefit and functional process available to streamline and grow your operations?

Am I getting the value I deserve?

Value has different meanings for different people. Accounting value is leverageable by:

• Knowing your CPA is always there when you have questions
• Trusting your CPA is current with the ever-changing tax laws that govern business owners
• Counting on your CPA to complete important tasks on time

Value is essentially whatever you perceive it to be. Knowing what is important to you and your business will help you identify problems when your expectations of value are not being met. Make sure you can define “value” when working with your CPA, who must be a trusted advisor to be effective.

Have I outgrown my CPA?

You likely have a good relationship with your CPA. He or she has been with you since the beginning, seen your kids grow up, been there through tough times and good. But does that alone ensure he or she is the best partner for your company today? Can he or she guide you through the complex scenarios your business faces? In many cases after a consultation with their CPA of so many years, a business owner realizes the CPA is not only overwhelmed by the company’s growth, but also ill-prepared to help the company capitalize on its success. This is a dangerous place for a business owner.

Am I receiving the level of service I have come to expect from my CPA?

Do you feel like every time you call, your CPA isn’t in, and it takes forever to get a return call? Are you only meeting with your CPA once a year to drop off your tax documents? Have you ever had to write an unexpectedly large check to the IRS without knowing in advance why you owed so much? Think about what services you believe are most valuable to you, then ask yourself, are you receiving the level of service that you expect from your current CPA?

Are accounting services the only services the firm offers?

In today’s world, accounting firms must take a holistic approach to providing added value and top-level financial services. Does Mike from XYZ Tax do your accounting, Mary from the bank your 401k, and Diane from ABC Investments a business succession plan? What if your business could work with one company in a single location for all that? When the left hand knows what the right hand is doing, you gain significant efficiencies. Can you afford to not have all of your trusted business advisors working together, sharing information, and strategizing about your best options?

Having a trusted advisor as your CPA is more than simply hiring someone who belongs to your club or likes the same sports teams you do. It’s about partnering with a reliable professional who is a specialist in your field of business and who will help guide you and your company to the next level of financial success and security.

HBK CPAs & Consultants (HBK) announced it is expanding its Mid-Atlantic Region through a merger with Zapken & Loeb, LLP. The New York Metropolitan area 70-person CPA firm provides accounting and business consulting services to business owners, executives, and independent professionals. The merger was effective as of November 1, 2023.

“Howard Zapken, Stanley Loeb and their team of talented professionals have been delivering high-quality accounting and business consulting for more than three decades,” noted HBK Managing Principal & CEO Christopher M. Allegretti. “This merger is the largest in our firm’s long history and not only extends our presence in our Mid-Atlantic region, but adds to our deep expertise in a wide range of accounting disciplines and industries.”

“We are pleased to join HBK to ensure the next stage in the growth of our business,” noted Zapken & Loeb Founder and Managing Partner Howard N. Zapken, CPA. “HBK will offer our clients additional services that a firm with such a national reach can obtain.”

As part of the transition Tanvi Shah, CPA; Alex Charitos, CPA; Nachu Vellayappan, CPA; Kieron Ludde, CPA; and Scott Anderson, CPA have joined HBK as Principals of the firm. Howard Zapken, CPA; Jeff Isaacson, CPA; and Steve Bandini, CPA will join the firm as Senior Directors.

“HBK has a track record of being a dominant player in secondary markets,” commented Whitman Transition Advisors CEO Phil Whitman, who advised both firms on the transaction. “The merger of Zapken & Loeb brings HBK five young Principals who are poised to bring the firm significant growth and expansion opportunities on Long Island.”

Like HBK, Zapken & Loeb professionals offer deep expertise in a variety of industries, including construction, manufacturing, and health care.

“Zapken & Loeb mirrors our focus on providing business owners skilled professionals with deep experience in their industry to help them proactively manage their biggest financial challenges as they compete and grow,” said Thomas M. Angelo, CPA, CITP, Principal-in-Charge of HBK’s Mid-Atlantic Region.

HBK provides small to mid-market businesses and their owners and operators a wide range of financial solutions, including accounting, tax, and audit services; wealth management; business valuation; transaction advisory services; forensic accounting; litigation support services; and business consulting, including broad expertise in a number of major industries. The CPA firm dates back to 1949 and added its wealth management practice in 2001. HBK CPAs & Consultants and HBKS Wealth Advisors serve clients locally out of offices in Columbus and Youngstown, Ohio; Pittsburgh, Philadelphia, Erie, Hermitage, Meadville, and King of Prussia, Pennsylvania; Holmdel and Cherry Hill, New Jersey; Fredonia, New York; and Fort Myers, Naples, Stuart, Sarasota, and Boca Raton, Florida. HBK ranks in the Top 50 on Accounting Today’s list of the largest U.S. CPA firms; HBKS Wealth Advisors is a Top 100 registered investment advisory.

Financial stability and effective banking relationships are crucial for the success of any construction company. Cash flow can be a never-ending issue. For many contractors, their lines of credit allow them to continue to operate through long and delayed cash-flow cycles. Other construction companies simply need a line of credit available for bonding for larger projects. However, recently unanticipated banking constraints have been causing disruptions and financial strain—and now, more than ever, it is essential for construction companies to be prepared and proactive in order to manage banking challenges. It is time to take a step back and reevaluate your position with your current financial institution and begin to develop a backup plan—just in case. Here are a few key points that will help you remain stable and ready to handle a potential issue with your bank.

Diversify banking relationships

Relying on a single bank can expose a construction company to significant risks if that bank encounters financial difficulties or operational problems. When you diversify your banking relationship, you can spread your risk and ensure options in case of disruptions. Building relationships with multiple banks gives you access to a broader range of financial services and strengthens your company’s position during times of uncertainty. It is always a good business practice to have a second bank up to date on your needs and financial status, including addressing a scenario where you might find yourself out of favor with your current bank. Getting up and running with a new financial institution can take longer than you might expect. Being proactive and keeping another bank up to date shortens that time period.

Keep a close eye on your financial statements

To stay prepared for potential banking issues, construction companies should conduct regular financial health checks. This involves monitoring key financial indicators, such as cash flow, debt levels, and liquidity ratios. Proactive companies watch these indicators regularly and work hard to ensure they understand their position with their bank. Up-to-date financial statements allow open conversations with the bank to ensure they understand your situation and will not be surprised in the event of a downturn in your business.

Maintain Strong Communication Channels

Establishing continuous lines of communication with banking partners is essential for construction companies. Regular and open dialogue helps build trust and allows for early notification of any potential banking issues. It is crucial to keep your banks informed about your ongoing projects, financial projections, and any significant changes in your company. Being proactive with communication has always been looked upon favorably by banks and allows them to prepare alternative routes of financing when needed.

Have a Plan B

Constructing a well-thought-out contingency plan is vital for mitigating the impact of banking issues. Banks can quickly pivot away from certain industries when they feel their exposure is over-weighted in a specific industry. Sometimes, even relatively healthy companies can be asked to look elsewhere for financing. Options can be limited for construction companies that, for example, might require a line of credit to operate or even to be approved for bonding. Your Plan B might involve exploring alternative financing options, such as non-traditional lines of credit or working capital loans, as well as building emergency fund balances.

A strong banking relationship is a critical aspect of running a successful construction company. By being prepared and proactive, you can strengthen your resilience and mitigate the impact of banking challenges. Having a backup plan allows construction companies to focus on delivering projects efficiently and maintaining their financial stability even in the face of unexpected banking disruptions.

In the dynamic and competitive construction industry, financial management plays a pivotal role in companies’ success and sustainability. One crucial tool is a financial budget. Developing and adhering to a comprehensive budget allows construction companies to effectively plan, monitor, and control their financial resources. Financial budgets work in several ways for construction firms:

Financial Planning and Decision Making

A financial budget serves as a roadmap for construction companies, helping them set clear financial goals and objectives. By establishing specific targets, such as revenue, expenses, and profitability, companies can align their strategies and actions accordingly. A budget enables effective financial planning, ensuring resources are allocated efficiently and projects are undertaken with a clear financial vision.

Financial budgets offer valuable insights for decision-making. They help businesses evaluate the financial viability of potential projects, estimate return on investment, and assess risk levels. With a budget, construction companies can make informed decisions about resource allocation, project prioritization, and strategic investments, considering their financial implications. Using the data you have on hand is a powerful way to minimize the frequency of poor performing jobs.

Resource Allocation and Cash Flow Management

Construction projects involve multiple expenses, such as labor, materials, equipment, and subcontractors. A budget facilitates the allocation of resources by estimating the costs associated with each project. It helps identify potential cash flow challenges, allowing companies to plan for adequate funding, manage working capital, and make informed decisions regarding project investments and cash reserves. Jobs will go poorly; it happens to the best companies. The companies that recognize those cases early are the ones that can pivot and adjust quickly to minimize the damage.

Performance Evaluation and Benchmarking

By comparing actual financial results to budgeted amounts, construction companies can evaluate their performance and identify areas for improvement. Budgets provide a basis for measuring financial performance, tracking key performance indicators (KPIs), and benchmarking against industry standards. This allows companies to assess their efficiency, profitability, and financial health, facilitating continuous improvement. Using the industry benchmarking process allows companies to compare themselves to their peers and understand their strengths and weaknesses more clearly. It is critical to have a strategy that maximizes your strengths while minimizing risks associated with the weak areas of your company.

A critical step that almost all construction companies fail to adequately use is post-mortem job cost reviews. Preparing a budget for jobs is a great first step but the paramount step is comparing that initial budget to the actual results of the job. An applicable adage: “If you learned from it, then it wasn’t a mistake. It was a lesson.” By comparing the actual results of a job with the budget, your construction company will learn lessons that will help minimize the recurrence of similar poor results on future jobs.

Contingency Planning and Risk Mitigation

While it is impossible to control all aspects of job performance, budgets help construction companies anticipate and plan for unforeseen circumstances and risks. By incorporating contingency funds within the budget, companies can address unexpected events, such as project delays, material price fluctuations, or regulatory changes. This proactive approach minimizes financial disruptions and enhances the company’s ability to navigate uncertainties. The most successful construction companies build contingency plans into their bids. The critical step is recognizing when these contingencies first appear and being able to react immediately. Construction companies that use their budgets faithfully are always a step ahead of their competition when it comes to risk management.

Performance Incentives and Employee Motivation

In the construction industry the competition for high level talent is cutthroat. Construction firms find themselves needing to be increasingly aggressive to attract and retain the best talent. Some use performance incentives. Budgets can be used as a tool to set performance targets for employees, departments, or project teams. When individuals and teams are aware of their budgetary responsibilities, it promotes accountability, fosters cost-consciousness, and encourages efficient resource utilization. Rewarding employees for meeting or exceeding budgetary goals can also boost motivation and create a culture of financial discipline. If a company does not use budgets effectively to set goals, they will find themselves either over or under rewarding key employees, both of which can lead to financial ruin.

Financial budgets are invaluable tools for construction companies seeking to establish a solid financial foundation and achieve long-term success. By facilitating financial planning and decision making, resource allocation and cash flow management, and risk management, budgets empower construction companies to navigate challenges, optimize profitability, and maintain healthy cash flow. Construction companies that embrace the benefits of financial budgets will enhance financial stability, drive growth, and enjoy a competitive edge.

HBK CPAs & Consultants’ Stacey D. Udell, CPA/ABV/CFF, CVA, has been named among the 2023 Top 10 of the New Jersey Business Accounting Power 50, an annual list compiled by the editorial staff of NJBIZ study recognizing “the most influential men and women in the profession” who New Jersey business owners count on for guidance.

Stacey is a Principal in HBK Valuation, Litigation, and Forensics in Cherry Hill and the Mid-Atlantic Regional Director of HBK Cannabis Solutions, a team of specialists focused on the business challenges confronting businesses in the cannabis industry. Her experience in business valuation, forensic accounting, economic damages, and litigation support services spans more than 25 years. She has been involved in the various accounting-related aspects of the cannabis industry since 2014 providing a wide range of services in the industry in multiple states, specializing in financial modeling and business valuation. Stacey has helped cannabis industry clients before obtaining their license, new operators and experienced operators, buyers and sellers of cannabis businesses, and those involved in litigation.

Stacey has spoken nationally, regionally, and locally for a variety of professional groups and organizations on various business valuation, litigation-related, and cannabis industry topics. She is the author of multiple published articles on topics related to valuation, economic damages, family law, and the cannabis industry. She co-authored the first known book on valuation in the cannabis industry, The Cannabis Industry Accounting and Appraisal Guide, currently in its second edition.

HBK Cannabis Solutions is a dedicated team of cannabis industry subject matter experts within HBK CPAs & Consultants, an Accounting Today Top 50 CPA firm. We were among the first accounting firms to specialize in the cannabis industry and have worked beside entrepreneurs in all industry segments—cultivators, processors, retailers—from single facility to multi-location and integrated operations. We counsel owners, management and investors in multiple states and countries, helping them with key financial activities: from planning start-ups to connecting operators with investment bankers to facilitating M&A; from pre-offering projections, state applications, and licensing to management planning and operations. Our cannabis-specific expertise is recognized throughout the industry; we regularly address industry meetings and conferences, and are active in the organizations and associations dedicated to moving the industry forward.

U.S. Generally Accepted Accounting Principles (GAAP) and the Internal Revenue Code allow businesses to choose one of four methods of accounting for inventory, including Last in First out (LIFO). LIFO has been in use since the 1930s but is often dismissed or overlooked. In periods of inventory growth, or periods of economic inflation, as seen recently, LIFO can provide immediate tax benefits.

LIFO matches current costs against current revenue to provide a better measure of current profit margins. During times of inflation, LIFO values the most recently purchased items in “cost of goods sold” as current deductions, while older lower-cost items remain capitalized in inventory. This means that LIFO transfers current costs from the balance sheet to the income statement, thereby reducing taxable income and creating long-term tax savings.

When prices are rising or inventory is growing—many companies have experienced both over the past couple of years—the increase in LIFO reserves will create immediate tax savings by reducing taxable income. Businesses that have large inventories, such as manufacturers, distributors, retailers, and automobile or equipment dealerships, can benefit from LIFO.

LIFO election options

Companies considering LIFO elections have options. The Inventory Price Index Computation (IPIC) method uses the Consumer or Producer Price Index (CPI or PPI) to measure the inflation used to calculate the annual change in LIFO inventory. Many companies take advantage of this opportunity because it allows them to maximize their LIFO benefits and is far less arduous than calculating via an internal index and manually tracking LIFO layers or specific items of inventory. Calculating an internal index is typically a major undertaking; companies can avoid the hassle if they switch their inventory accounting methods for both book and tax purposes.

Companies already on LIFO may also choose to adopt IPIC for tax purposes while continuing to use internal indexes for internal LIFO calculations. This will result in annual tax differences that should be considered in tax planning. You could generate a higher LIFO expense for tax purposes without increasing the amount of the internal LIFO expense if the internal indexes used for financial reporting are less than the IPIC tax indexes. In many cases, because IPIC is a national measurement, it will create more favorable tax results than internally calculated indices.

The Bureau of Labor Statistics recently released the December 2022 Consumer Price Indexes. While we are beginning to see some declines, most item categories recorded price increases throughout 2022, including the “all items” index, which rose 6.5 percent.

The following manufacturing sectors are typically most likely to elect LIFO:

Metals and metal products

Chemicals and allied products

Rubber and plastic products

Processed foods and feeds

Lumber and wood products

The list is hardly all-inclusive. Other types of manufacturers and many businesses in other industries can also reap significant benefits by electing LIFO.

If you would like to discuss how LIFO can benefit your company, please contact a member of HBK Manufacturing Solutions at 330-758-8613 or manufacturing@hbkcpa.com.

Whether you’re considering selling your construction company internally or to an outside buyer, the best strategies involve planning your eventual transition several years in advance. Somewhere between three and seven years in advance is good timing, time enough to identify issues and implement solutions. There are several areas that, if focused on, will help to drive the value of your company higher in the eyes of potential buyers.

Corporate setup

The first and most important item to consider is your corporate setup. Any business where the owner wears all the hats and performs most of the management duties is not going to be valued highly by a prospective buyer. A buyer wants to step into the shoes of the owner with the time to run the business effectively. Construction company owners often act as their firm’s lead estimator, project manager, head of the HR department, and in other roles because they don’t have people on their internal team talented enough to handle those duties. It’s important that, several years ahead of a prospective transaction, the owner spend time and resources putting the right pieces in place so that the business can run without him. If a buyer sees he will have to spend long hours just keeping the business running, your business won’t sell for as much as it would otherwise.

Project backlog and customer mix

Obviously, the more work you have on hand the better. When the prospective owner can see substantial revenue already on the books, he will understand the business as profitable moving forward, whether that is through distributions of profits to the new ownership group or to produce the money necessary to make payments on the loan he will use to finance the purchase of the company. Also important, though often not so easy to make happen, is a broad customer base. Having one or two large customers might be profitable for you, but a new owner will see that as a risk. If the company under new leadership is unable to retain a particular customer, it would significantly, negatively impact earnings. As much as possible, start from five years out to take on new customers and diversify the company for prospective buyers.

Accurate, up-to-date financials

Current and accurate financial statements are going to be critical to selling your business. Your prospective buyer will want to look back several years at your financial performance, and if your financial statements turn out to be inaccurate, that could kill the deal, or at least cause a lot of issues throughout the buying process. Many times the buyer is financing this new venture, and the bank is going to want to see a history of financial statements. They’ll also be looking for a minimum of a rolling 12 months of activity. At every point you want to ensure your monthly statements are accurate and with proper adjustments for jobs in progress. Your financial statements must provide a clear picture of what you’re trying to sell.

Equipment upkeep and maintenance

No prospective buyer wants to see a junkyard of old equipment. Your equipment needs to be replaced when necessary, but otherwise maintained in good order so a buyer won’t be looking at a huge capital investment necessary to upgrade all of the equipment at once. It is vital to keep up with your maintenance schedule, work through equipment issues as they arise, and ensure your equipment works well and looks good. Many times the buyer will be looking at using those assets as collateral for a new loan, so they have to demonstrate value.

Expansion opportunities

You should be able to identify expansion opportunities that are available to a prospective new owner. Any new buyer will want to grow the business, want to see a future of expansion opportunities. Even if you don’t want to go down that path, you need to be able to highlight areas of potential expansion and have a presentation ready for buyers to show them that there are other aspects of the business that can be expanded or new areas of work they can go into to provide new sources of revenues.

Even if you’re not actively planning to sell your business, it’s important to do all you can do to make your company attractive to potential buyers. Before you’re ready to sell, it will improve your valuation, and when you’re ready to sell, you’ll have access to more and more willing buyers.

Every business has a revenue cycle, and constant cash needs. But unlike my favorite restaurant that gets paid immediately after serving my usual order, spicy tortellini, your construction company might not get paid for 30, 60, or even 90 days after service is complete and the job is done. Supply costs, labor costs, mobilization costs—there are many issues specific to construction that all add up to a unique cash flow process. Understanding how to improve your cash flow, and how it differs from your profit, is crucial to managing your company and avoiding the problems that come with poor cash flow.

A contractor might reason, “If a job is profitable, isn’t that all that matters? Why be concerned about my cash flow cycle?” Because a failure to actively manage your cash flow will seriously negatively impact your growth potential. Consider the findings of the Levelset “2022 Construction Cash Flow & Payment Report”:

• While nearly two-thirds of businesses report profit margins greater than 10%, less than one-tenth of companies report being always paid on time for completed work.
• Companies most commonly offer payment terms of 30 days or less, but less than 40% of construction businesses report getting paid within 30 days on average.
• Explanations for slow payment vary, with half of subcontractors blaming the general contractor while 40% of general contractors blame the project owner’s financing.

Industry news source Construction Dive details the following most common cash flow issues:

• Cash is tied up in projects, used to pay for job-related bills and expenses.
• Customers are slow to pay invoices.
• The contractor submitted invoices that don’t cover the scope of the work.
• The contractor performed/paid for changes that have not yet been approved by the client; therefore, they remain unbilled.
• There are missed deadlines or other billing missteps due to a new client’s unfamiliar billing practices.
• There is an unexpected increase in operating liabilities like payroll taxes, union dues, insurance fees or other financial obligation.

While contractors tend to focus on the production side of their business, there are other considerations key to your financial success. Regardless of the size of your business, when cash flow isn’t prioritized, your business is vulnerable to unnecessary risks. Poor cash flow leaves you exposed to missing deadlines; vendors might not want to work with you due to payment issues; liens could be filed; and ultimately, your reputation is on the line. You can avoid such exposure by mastering your cash flow. Follow these tips to eliminate the struggle to move money around to meet your cash flow needs:

Be Active in the Process

You have more control over your cash flow than you might think; it’s a matter of knowing your numbers. Open conversations with your suppliers and vendors can go a long way to managing and accessing your money. Review your billing process as regularly as your work completion process. Identify areas where there are breakdowns and work to improve them.

Additionally, consider steps like converting to digital invoicing and payment solutions. By taking advantage of technology, you can streamline the entire process and get paid faster. When cash flow is more timely, you can spend more time on growth and leads, less covering bills and payments.

Train Your Team

Training is critical. Spending company resources to properly prepare your team to handle issues is a sure way to improve your operations. Every contractor does some training with their employees, focusing many times on performance and safety, but, are you training those on your team that help you control your company’s cash flow process?

It is critical that project managers and office staff understand your billing process. Training helps them understand their role in the process and the changes they can implement to help make your company more profitable. Do your project managers understand how the timing of cash receipts can reduce your interest expense? Does everyone understand that vendor discounts can provide for substantial savings for a contractor with strong cash flow? Too often, construction team members do not fully grasp all they can do to help make their company more profitable by improving cash flow.

Monitor Your Past-Due Accounts

While some shy away from pursuing late payments, it is simply good business to request payments you are owed. There is a distinct difference between being straightforward and being aggressive. Do you have a team member who is in charge of paying attention to your collections? Do you know how many days it typically takes your business to get paid? Sending friendly reminders to your clients who aren’t paying on time is an important part of a good business plan.

You might also consider being more flexible in how you accept payments. The more convenient payment options are for clients, the faster they can pay. If nothing seems to be working, sending a preliminary notice can sometimes be equally as effective as a mechanic’s lien at getting the property owner or contractor to make a payment.

Focus on Communication

Let me guess: You have communication issues between the field and the office. That is the case with every contractor we talk with. But a consistent, focused effort can improve communications in a reasonably short time period. These issues often come down to understanding the challenges that each side is facing and being empathetic about the causes of the problem, even inadvertent ones. Once your entire team is working together toward the goal of improving cash flow, everyone on the team will see where they can contribute to improvements.

Change Your Change Order Process

Easier said than done? Most contractors use change orders throughout their projects, which are, almost always, not finalized until the last parts of the job. Change orders are “interest free loans” to the project owners. A typical scenario involves a contractor performing these “extras” throughout the job, then waiting until the end to invoice them. Invoicing is followed by 30 to 60 days of negotiation over the amount of the invoice. Once the amount is agreed to, the contract owner takes another 60 days to pay the invoice. The result: a huge strain on the contractor’s cash flow.

The best contractors have a proven system in place to accelerate the cash flow cycle related to their invoices, including billing for the extras as they are completed, or even ordered. If you find yourself collecting change orders well after the job has wrapped up, you need to improve your process to improve your cash flow cycle and avoid being the one financing the work.

Get Creative With Your Bid Line Items and Terms

The most successful contractors know the “art of the bid.” On bids with multiple line items, consider increasing the value on items that will be performed early in the contract. Items like mobilization, when it is not limited, are where savvy bidders will increase their values to accelerate their cash flow early in the contract cycle. Focusing significant portions of your bid on line items that are likely to be paid first can make a dramatic difference in your cash flow. This strategy allows the contractor to use the owner’s money to help finance the job.

Some contractors feel like their hands are tied with contracts, but you need to question unfavorable contract terms and stay transparent about your business needs. This is all about protecting your business. Don’t leave anything unaddressed that you’re not comfortable with. If your clients don’t have to pay you until they “get around to it,” you’re creating a perfect opportunity for extensive delays or even missed payments.

The contract should specify the scope of the work, payment schedule, and legal repercussions of late payments. Remember that your lien rights are designed to protect you. For more than two centuries, the mechanic’s lien has been empowering materials suppliers, contractors, subcontractors, and other construction stakeholders with the most effective weapon they can wield against delinquent or non-paying clients. You want to get liens filed on anything that’s unpaid or late, but a more proactive move is to issue notices that ensure your lien rights are protected at all times as you get more work.

When you walk onto a construction site, there is an entire community of stakeholders on the job. You are under enough pressure without cash flow issues. Being more assertive in your cash flow approach can help save critical dollars on interest, grant you more purchasing power with suppliers and allow you to be available to take advantage of growth opportunities when they arise. No matter how talented you are, or how dedicated to your craft, if you haven’t dedicated the time to improve your cash flow, you’re not setting yourself up for success.

We hope these tips will help you on your journey toward growing your business soundly, profitably, and predictably. HBK Construction Soluitons is here to help. You can reach us at 330-758-8613, or contact me by email at mkapics@hbkcpa.com.

When it comes to accounting, the construction industry is among the most complex and nuanced. Maximizing your bottom line and capitalizing on your opportunities requires the support of a CPA firm that specializes in the construction industry.

Before engaging a CPA firm, be certain they have the capabilities and expertise to support you in key areas:

Beyond your financial statement and tax return

A CPA firm with expertise in the construction industry has a deeper understanding of your business than what is reported on your financial statements and tax returns. The professionals should have real experience, in such roles as CFO, and be able to help you build more accurate and efficient estimating models and procedures, implement technologies to improve reporting and communications, and develop tailored training programs to help your employees perform more efficiently.

CPAs specializing in the construction industry understand risk management and cost controls, and help contractors understand the nature and scope of the various financial risks they are exposed to as well as advise them on techniques and cost-saving strategies for guarding against those risks. They understand how cash flow impacts earnings, bonding, prequalification and financing. They help project managers understand cash flow management and provide strategies and techniques to improve your cash flow cycle.

CPAs with a construction industry focus can provide you with a better understanding of your place the industry. They can benchmark your performance relative to your niche or region, and use that comparative analysis to determine the key performance indicators that reveal areas of strength and weakness—and help you correct weaknesses with best-in-class practices.

Key vendor relationships

Construction-savvy CPAs regularly deal with industry vendors. They can introduce you to bankers who finance construction projects, and to surety firms, insurers, and regulators. They understand the type of financial information these vendors rely on to loan money, provide a bond, or approve a zoning request. They can turn review and audit engagements around expediently, which can be the difference in your company winning that next project.

Costs and profits

CPAs with construction industry expertise understand your cost allocations and estimating strategy, and can help you analyze your costs to avoid what can lead to poor project estimating, and eventually, inability to cover operating costs. They can work alongside you to increase your bid-versus-win ratio and your ability to secure more profitable work. The right CPA firm for your business will analyze overhead, help you determine your cost indicators prior to bid submission, and use work-in-progress reports as a tool for running your business more efficiently. They can help you unearth all your operating costs, and help you know your costs as a job progresses to diminish the incidence of unaccounted costs at the end of a project.

Taxes

Two of the most important decisions relative to income taxes are the type of business entity and accounting method to use for reporting purposes. Experienced, construction-focused CPAs understand the pros and cons of those decisions for every type of construction business entity. If you are operating your business in an entity that isn’t the most favorable, they can help you choose a more fitting entity, and assist with the conversion. They will also ensure you are using your most advantageous income tax reporting method.

A CPA firm educated in the construction industry can identify practices that could be the source of, or lead to, financial liability, for example, not knowing all applicable state and local taxes (SALT), the taxes that must be paid and returns that must be filed. Expertise in SALT will be essential to your initiative in a new market. Understanding all the tax requirements and how they will impact your costs will show you where you are exposed and allow you to bid and propose more accurately.

Your CPA should be proactive, continually looking for new tax-saving ideas and deferral strategies that best serve your interests. It is a key reason for engaging an accounting firm dedicated to your industry.

Business Valuation

In the construction industry, determining value is key in many situations: from the need for buy-sell agreements to estate planning to shareholder transitions, to selling or buying a business, to divorce, to stock-based compensation agreements. A CPA firm with business valuation expertise will be able to provide you with a clear understanding of the true value of your business.

A CPA firm with business valuation expertise typically provide litigation support and forensics. When the need arises, having litigation and forensic experts on your team is a substantial advantage.

Capital utilization and investment returns

A CPA firm with intimate knowledge of the construction industry can advise you on spending, including establishing or updating an equipment maintenance schedule or making improvements to equipment mobilization strategies. A CPA experienced in reviewing equipment purchases and their application can advise on whether buying, leasing, or renting will generate a greater return. They can provide advice on such investments as pension funds, which can be complicated by union regulations.

Contract claim advisory processes

When a change order is delayed, construction company owners and operators might have to file a legal claim to ensure all the details of the change-order process are documented accurately. Your accountant should be able to walk you through this process as well as provide expert testimony and other litigation support.

Keeping current

Industry-dedicated CPAs remain current on regulations and industry trends, so they can advise you proactively on such issues as changes in reporting standards and tax laws and steps you can take to minimize their impact on your operations. They attend industry and regulatory conferences and seminars to be able to arm you with current, relevant information.

Your CPA firm should not only understand the specialized rules and requirements of the construction industry but have the depth to provide the wide range of financial and business consulting you need to improve your bottom line and remain competitive in the ever-changing and challenging construction industry.

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There are many off-the-shelf software programs available to track the activities of a cannabis business – and most cannabis companies will require more than one. For example, tracking inventory requires a seed-to-sale system, such as MJ Freeway or Biotrack while a retail business requires a point-of-sale software program to record sales transactions. And both will also need a dedicated accounting software.

Accounting Software

Accurate accounting allows owners and management to assess the profitability of their business. When choosing a software program, some things to consider are ease of use, customer support, cost, and available data storage.

As to customer support, consider whether the cost is included in the licensing fee or is an additional cost. Also find out the length of the period support is provided.

As to the cost of the program and/or licensing fees, most software is priced as a monthly fee based on the number of users who require access to the program. User companies are billed either a fixed fee for a certain number (or unlimited number) of users or charged per user.

When it comes to data storage, such as receipts and invoices, some programs allow for attachments to each transaction, while others offer a folder for storing program items.

Ideally, any software you use should be cannabis compliant. Four of the most common programs are:

QuickBooks/QuickBooks Online: Designed for small business owners without an accounting background. Probably the most commonly used option but not cannabis compliant.

Xero: An online accounting solution designed for accountants and bookkeepers with apps for invoicing, expense management, inventory management, project management, and bill payment. Xero includes a mobile app and supports unlimited users.

Sage Intacct (Intacct): A stand-alone accounting system that integrates with ERP and CRM software. Good for multi-state operators and multiple entities needing to consolidate.

Oracle NetSuite (NetSuite): Advertised as an all-in-one “software suite” including customer relationship management, enterprise resource planning, and accounting modules.

None of these programs provide an inventory management module that works well for tax- and GAAP-compliant cannabis companies.

Seed-to-Sale Inventory Software

Inventory is one of the most important things cannabis companies track. Knowing the steps from seed to the sale of each plant allows for reliable tracking and results in more useful and accurate financial statements. Many states require the use of seed-to-sale software to ensure accountability.

Things to consider when selecting a seed-to-sale program include cost, ease of use, technical support, and compatibility with regulatory software and accounting software. There are numerous seed-to-sale software programs available, with more being introduced regularly, including:

Cultivation and Processing:

• Agrisoft
• Biotrack THC*
• Canix
• Flouish
• Growflow
• LeafLogix (acquired by Dutchie in 2021)*
• MJ Freeway
• Nugistics
• ProSoft XP (manufacturing only)
• SAP Business One
• SilverLeaf
• StashStock
• Traceweed
• Trellis
• Viridian Sciences

Retail:

• Agrisoft
• Cova
• Blaze
• Flourish
• Flowhub*
• Growflow
• IndicaOnline (also available for delivery)
• Treez*
• Viridian Sciences

* Recommended by Melissa Diaz of Rebel Rock Accounting

Payroll Software

Many accounting software programs offer a payroll module at an additional charge; others do not. They vary in terms of cost, ease of use, ability to link with the accounting software and general ledger, human resource services available, leverage efficiencies of scale HCM capabilities, and recruiting and onboarding capabilities, including benefits management.

Payroll programs:

• Gusto*
• Paychex*
• Primepay
• Wurk *
• ADP (in the future)
• Workday (in the future)

* recommended by Melissa Diaz of Rebel Rock Accounting

Document Management Software

Document Management programs allow users to store documents on physical servers or in cloud-based platforms. Considerations include whether the documents can be automatically categorized or associated with each other, whether it is an external system with the ability to write or read the storage location, how easy it is to access the storage or get help, and finally, the established standards for repository structure and naming convention of retained documents.

Document management solutions:

• Dropbox
• Google Drive
• Hubdoc
• ShareFile

Accommodating your needs

Cannabis companies have many software options, and each business will prefer a different software for different reasons. The best approach to securing the best fit for your business is to do your research and try a program before you buy. Make a list of the services you need and determine which software will meet the needs of your business. Some software providers offer a questionnaire you can use to determine if their product is a good match.

Many companies welcome feedback and encourage users to submit ideas to improve their programs, while others remain reluctant to work with cannabis businesses. We are seeing some of those companies open to change and hope more will be willing to support the needs of cannabis businesses.

If you have questions on Software Programs with Cannabis Companies, please contact the HBK Cannabis Solutions.