by Stephen Reed | Accounting News, Construction, Industry - Construction, News, Technology
The construction industry isn’t known for its willingness to embrace change, so it’s no surprise that, generally, the industry’s been slow to accept technology. Enter the Covid-19 pandemic and subsequent economic turmoil and labor and material shortages, and many business owners are now looking to technology-based solutions to drive productivity and keep costs low. Below are five examples of how modern construction technology can help control project costs.
Make More Accurate Cost Predictions
Every construction project is unique, and for some projects, budgeting can be vague and inaccurate, rendering cost prediction difficult. Faulty cost prediction can lead to the need for rework. 3D modeling software like BIM allow businesses to shift from the design-bid-build model to a more effective design-build model. Project managers can use the software to:
- Digitize the construction site
- Help make better design decisions
- Improve predictability, productivity, and profitability of workflows
- Share plans and designs with trades and contractors to increase efficiency
- Compare supply and financial needs of different building techniques
Cut Down on Rework with Project Management Software
There are typically at least a few changes that need to be made to the scope of a construction project throughout the course of the job. In fact, approximately 30% of the work done by construction firms is actually rework. Project managers are constantly needing to change course, adjust budgets, and communicate changes to their teams as quickly as possible. When project managers take advantage of project management software, they can increase project visibility, improve communication and respond quickly to project changes, and streamline task management with real-time insights from the field. All of this helps to curtail unnecessary rework.
Stay Informed of Market Fluctuations and Identify Areas of Inefficiency
Construction companies are no strangers to the challenges that come with inflation, shifting labor costs, and irregular supply prices. Though these factors are typically observed during the early planning stages, by the time the project gets rolling, project managers could be working off of outdated market information. AI-based software can help project leaders stay informed of adjustments in regulations or costs, while construction budgeting software can help pinpoint inefficient processes within the project.
Prevent Inefficiencies with Real-Time Jobsite Data
Real-time on-site data is necessary to boost efficiency and improve projects. With construction management software, project leaders can collect real-time jobsite data such as daily reports, production tracking, and safety compliance. Daily data collection helps project managers spot and prevent expensive inefficiencies as they arise.
Communicate Through Digital Technology to Ensure Project Success
Construction companies can shorten turnaround time and operational expenses by strengthening on-site efficiency and output. This is why a large number of construction companies have started to invest in connected technologies, which use sensors and tags to connect job sites, machines, and workers, allowing for real-time visibility and adjustment capabilities for project leaders. Benefits of connected technologies include improved communication and transparency, more accurate timelines, and minimized risk.
by Stephen Reed | Accounting News, News, Tax, Tax Planning
As the owner of a small business, you are well aware that taxes are one of the most important topics on which to keep up to date. Making mistakes could mean a higher tax bill, and failing to properly manage your taxes could land your business in trouble. On the other hand, planning in advance, taking advantage of available deductions, and preparing your tax returns correctly can save on the amount of taxes your business is required to pay. Keep reading for tax-saving strategies to help reduce your tax bill.
Use the Qualified Business Income Deduction
The Qualified Business Income (QBI) deduction was created when the Tax Cuts and Jobs Act (TCJA) was established in 2018. With the QBI you might be eligible to deduct up to 20% from your qualifying business income if your business is a pass-through entity—a sole proprietorship, an S corporation, a partnership, or a limited liability company (LLC), where business income is passed to its shareholders, partners, or owners to report on their personal tax returns.
Limits apply to the QBI deduction based on income level and business type, so be sure to talk to your tax advisor. It’s also worth noting that the QBI deduction is set to expire in 2025.
Fund a Retirement Plan
Providing a qualified retirement plan for yourself and/or your employees can help save money on taxes. Owners of corporations can contribute up to 25% of their salary to a tax-deferred plan like a 401(k) or 403(b). Sole proprietors can contribute up to 20% of income into a tax-deferred SEP-IRA account.
Take Advantage of Tax Credits
Tax credits can be subtracted from owed business income taxes at state or federal levels. They encourage investment or provide assistance in targeted areas such as employee hiring, training, and retention; clean energy initiatives; disaster relief; and new construction, historic preservation, and disability access. The list of potential tax credits for businesses is extensive, so be sure to check with your accountant about your available options.
Take Tax Write-Offs for Qualifying Purchases
If you purchase equipment, machinery, and vehicles (and sometimes real estate) for your business, you can take tax-write-offs. The most frequently utilized types of deprecation are Section 179 deductions and bonus appreciation.
Section 179 deductions permit business owners to deduct the costs of certain assets as soon as they’re put to use, so you can deduct the entire cost of equipment in the year it is placed in service. This could allow you to pay lower taxes in the current year and still buy or lease more equipment to write off in following years.
Bonus depreciation is an added advantage for purchasing assets. The TCJA increased this tax break from 50% to 100% of the cost for assets placed in service through January 1, 2023.
Defer Income and Accelerate Expenses
Defer income by shifting some of it from this year into the next. You can do this by holding on to year-end invoices until just before the start of the new year. You likely won’t collect the payment until the first quarter of the new year, so taxes on that income won’t be paid until next year. Accelerate expenses in the fourth quarter by prepaying some expenses that aren’t due until the following year. Of course, you’ll need to determine the year in which you expect to pay the most in taxes. For instance, if you anticipate notably higher personal income next year, it may save on taxes to collect income now rather than delay it until next year.
Deduct Travel Expenses
Business travel is entirely deductible. While personal travel doesn’t hold the same advantage, you might be able to combine an acceptable business purpose with personal travel in order to maximize business travel. Keep in mind, too, that frequent flier miles earned from business travel can be applied to personal travel at a later time.
by Stephen Reed | Accounting News, Industry - Retail & Distribution, News, Retail & Distribution
Both small and big companies have been impacted by the labor shortage that has spanned the country since the pandemic. A short-staffed company can lead to overworked and burnt-out employees, dissatisfied customers, and even a decline in sales. Below we’ll discuss how retail store owners can better retain employees and maximize operations among the “Great Resignation” era.
Provide Consistency, Flexibility, and Gratitude
Consistency is key. Statistically, more than half of the employees whose work hours are inconsistent end up quitting their jobs. A consistent schedule lends a sense of routine and security. Flexibility is also paramount to setting up employees for fulfillment in their roles. Whether this translates into something like more flexible meal breaks; or greater or more flexible time off; or a combination of these, employees want to succeed when they feel like their employers support them and their wellbeing. It follows, then, that employees will likely become frustrated if they’re being overworked when the company is short-staffed. To make sure the workers who go above and beyond know how valued they are, consider small gestures of gratitude such as providing free lunch.
Take Advantage of Your Online Outreach
When the pandemic hit, retailers had to pivot seemingly overnight to online channels. Though it might have been a bumpy transition in the beginning, by now retail businesses should have their websites and social media accounts working to their advantage. Strategies like buy online pick up in-store and curbside delivery offer convenience to customers while alleviating some of the grunt work for employees who are working understaffed shifts.
Prioritize Peak Days and Tasks
To make the most of payroll budgeting, you should be scheduling the bulk of employee hours during peak traffic days and scaling back your staff on less busy days. Not only does this balance scheduling, but it helps to avoid employee burn out and boredom. Too, having a clear understanding of tasks that take priority in your store — and relaying this prioritization to staff — will help to increase efficiency in store operations and provide task-oriented employees with purpose for their shifts. A proven strategy is the 80/20 rule, where workers and managers dedicate 80% of their time and energy to the 20% of work that takes top priority.
by Stephen Reed | Accounting News, News
The Covid-19 pandemic gave rise to a surge in Americans starting their own small businesses. Now, two years later, as a possible recession looms amid rising inflation, these business owners are turning their focus to the possibility of a recession. Read on for tips on how new businesses can weather through an economic downturn.
Potential Impact of a Recession
In a recession, consumers cut back on spending, which means demand for goods and services declines, which leads to a decrease in sales for businesses. When there is a steady decline in economic activity and sales, businesses can be forced into the position of needing to lay off employees, or in some cases even shuttering their doors for good.
Additionally, businesses may also face higher costs during a recession as suppliers of raw materials and other goods raise prices in an attempt to counterbalance their own drops in revenue. Higher prices put further financial strain on businesses, leading to more layoffs and closures.
Establish Resilience with Financial Flexibility
If your revenue takes a nosedive, do you have an accessible line of credit or an emergency fund with enough cash on hand to cover your expenses for a period of time? Either of these options will provide your business with some financial flexibility if you experience a temporary decline in sales. Also think about diversifying your sources of revenue. This will lessen your dependence on any one customer or market and help establish more resilience during a recession.
Know Your Risk Factors
Businesses are no strangers to risk factors even in optimal economic times, but during a recession the risks are intensified. You need to be aware of the specific vulnerabilities to your business (i.e., credit risk, supplier risk, operational risk, or financial risk) and establish a suitable plan to address them. This might include diversifying your customer base, suppliers, and range of products; building up your cash reserves; and reinforcing your financial controls.
Evaluate Expenses
As a business owner do you know exactly what you’re spending money on? By doing a self-audit you can identify areas where you can make small but consequential cuts. Pay special attention to things like:
- Subscriptions to apps, periodicals, and software that go unused or don’t bring value to your day-to-day operations
- Recurring expenses such as phone services, utilities, and bank account fees
- Operation costs and advertising
You might consider shopping around to find vendors who can give you the best deal. Remember that small businesses have more negotiating power in a turbulent economy.
Find New Ways to Drive Sales
When you begin to notice a downward trend in revenue, it’s time to look into new ways to drive sales. This could include modifying your marketing efforts, providing discounts, issuing new products or services, adjusting prices, and cross-selling to customers.
Invest for Future Revenue
Even during an economic downturn, small business owners are wise to spend some money upfront to gain longer-term cost savings. It’s especially important to consider if cash you’re currently spending in other areas of your business could be redeployed for the purpose of investing in future business and revenue. For instance, are there portions of your business that could be automized or digitized? Can you switch to an online training course rather than onsite? What about your marketing approach? You’ll need to strategize this one, but communication with customers is key to keeping steady sales. After all, the future of your business relies on maintaining and growing your customer base—in good and bad economic times.
by Stephen Reed | Accounting News, Financial goals, News, Retirement, Retirement Savings, Uncategorized
After working for decades to save for retirement, you’re finally ready to retire. This calls for a pivotal shift in focus from growing your investment portfolio to planning how you’re going to live off those savings, possibly for decades to come. With the right strategies in place, you can help make sure your retirement savings last.
Establish Your Budget
First, you need to determine your known expenses in retirement (both needs and wants) so you can build your budget to meet those costs. Some examples include:
- Mortgage payments
- Travel goals
- Debt repayment
- Health insurance and costs
- Any big purchases like a boat or a vacation home
Are you planning to minimize expenses in retirement? Are you able to tap into additional income sources in retirement through avenues such as passive income or a part-time job? Will your spending increase now that you’re not tied to a full-time job? These are just some examples of questions to ask yourself to be sure your assets can reach your goals. It’s important to answer them as honestly as possible. And if you start out with conservative estimates — meaning you plan for greater spending than what transpires — you’ll end up with more flexibility down the road. Of course, don’t forget to factor in extra expenses for unforeseen costs that tend to crop up
Is the 4-Percent Rule Right for You?
First, you need to figure out how many years of retirement you need to plan for. If you’re retiring at age 55, plan for at least 40 years of retirement. If you’re retiring earlier than age 55, plan to live until at least age 95 so you don’t run the risk of outliving your assets. If you’re retiring later than age 55, you won’t need to plan for quite as many decades.
Now that you know approximately how many years of retirement to plan for, you need to think about how much you should withdraw. The “4 percent rule” is typically a recommended starting point. Using this method, you would withdraw no more than 4 percent of your retirement savings. This leaves enough funds in the account to give your investments a chance to grow in future years. Growth is important to help withstand the impact of inflation on your assets.
While a 4 percent withdrawal rate will ensure that your money lasts a good while, a more current trend is to withdrawal just 3% from retirement accounts. This is due to the low returns on fixed income investments. Additionally, a more conservative withdrawal rate will give you more elbow room with your budget in the future.
Playing the conservative game is never a bad idea, and could even strengthen your financial position over time. For example, you can allow your accounts to grow by withdrawing just 3 or 4 percent if you consistently average 5 or 6 percent returns.
Balance Income and Growth
Your portfolio needs to line up with your goals, time horizon, and risk tolerance. This typically means selecting a combination of stocks, bonds, and cash investments that will work collectively to produce a steady flow of retirement income and prospective growth — while also helping to safeguard your money. For example, think about:
- Building a bond ladder: This is a fixed income strategy where investors disperse their assets across multiple bonds with varying maturity dates. This method provides for short-term liquidity to help manage cash flow and also hedge against fluctuations in interest rates.
- Adding dividend-paying stocks to your portfolio: Essentially, each share of owned stock entitles investors to a set dividend payment, which is paid in regular scheduled payments, either in cash or in the form of additional company stock. In this way, they are almost like passive income. They are tax-advantaged and provide protection against inflation, especially when they can grow over time.
- Continuing to Hold Enough in Stocks: To keep up with inflation and grow your assets, you still need to stay in the stock game. While stocks are volatile, insufficiency runs an even greater risk of depleting your nest egg too soon. Your stock allocation should align with your investment objectives and time horizon first, then modified for risk tolerance.
Withdrawal Sequencing Matters
The longer your tax-advantaged retirement accounts have to compound, the better off you’ll be in the long run. Therefore, it’s typically recommended to withdraw from taxable accounts first, followed by tax-deferred accounts, and finally tax-exempt accounts like Roth IRAs and 401(k)s. Of course, like anything with taxes, withdrawal sequencing has a number of caveats and exceptions to consider when it comes to your personal circumstances, but this is a reliable starting point.
Manage Your Money
You can help to preserve the long-term growth of your portfolio by managing your day-to-day finances. This means funding an emergency fund — ideally with at least a year’s worth of expenses. Additionally, you can adhere to the three-bucket school of thought:
- Immediate Bucket: This is where you stash quick-access funds for safekeeping. A high-yield savings account or a money market account fits the bill because the focus of this bucket is not to earn a high interest rate or return.
- Intermediate Bucket: You want the funds in this bucket to grow enough to carry you a little more into the future. You still want to avoid high risk or volatility, so opt for a low-to-moderate risk category that offers a reasonable return on your money — think bonds or CDs. Real estate investment could also fall into this bucket.
- Long-term Bucket: This bucket is for growing investments and outpacing inflation. If you’ve set up your immediate and intermediate buckets properly, you won’t need to touch your long-term bucket for at least a decade. Because the goal of these funds is to outlast you, you need to invest into this bucket more aggressively. Stocks, real estate investment trusts, annuities, etc. provide the most growth potential, so this is the bucket for those investments. It’s important to work closely with the guidance of a financial advisor on this strategy.
