The construction business is different from others in some significant ways—especially when it comes to accounting. The CPA you work with can make a measurable difference in your firm’s ability to grow. Here are four things to consider:
1. Construction Accounting
Many companies work on an accrual accounting basis. Their financial statements are based on the recorded costs and revenues, regardless of the current cash status. Other businesses work on a cash basis— only recording costs and revenues when the cash actually comes in and goes out the door. The construction business is entirely different. It works best on a percentage of completion basis—a much more accurate way of accounting for costs and revenues in the construction world. If your accountant is not well versed in this method, you may be missing potential savings and new business.
2. Surety Bonding Often Requires Reviewed or Audited Statements
Small construction companies may be able to get by with a simple compilation financial statement. But once they begin to grow, most bonding companies want to see a reviewed financial statement. Larger firms need a fully “audited” statement.
We have a St. Louis client who had used a small-town CPA for years and was doing OK. But they wanted to grow and could not get the bonding needed. We recommended a CPA who specializes in the construction industry. After he helped them improve their accounting and provided an audited statement, they increased their bonding capacity and quadrupled their sales.
3. Choose Your Accountant Carefully
As you choose a CPA, here are some important questions to ask:
• What’s your experience with handling construction clients?
• How would you rate your knowledge and experience with tax laws, regulations, internal cost systems, tax planning and cash management for the construction business?
• Explain your fee structure. (Ask for an estimate on the current work you’re considering.)
• What’s your response system like? How quickly will you respond to inquiries and provide updates to our firm?
• Who can provide a reference for you? (Be sure to talk with other construction clients.)
4. Manage Your Relationship
Once you find the right CPA, you’ll want to put some thought into managing the relationship.
• The more the CPA knows about your business the better job he or she can do for you. Don’t withhold information about work in progress and completed contracts.
• Be willing to pay for what you need. Avoid going for the lowest-cost option. This is one of those situations where spending money can help you make money.
• Connect your CPA with your broker, your bonding company and your banker. Getting them all on the same page will help you achieve the results you’re seeking.
The Miller Group Can Help
The Miller Group has several longstanding relationships with construction-savvy CPAs—people we have come to know and trust over the years. We know they will do a good job, their prices are good, their quality is good and—most importantly—the surety industry will trust their end product. We can be sensitive to pricing to help match your needs, and we’re happy to provide three or four names so you can identify the one who works best for you.
By Chris Miller, Commercial Risk Advisor, The Miller Group
and Dale Gebauer, Vice President, The Miller Group