Professional Accounting Blog

    Accounting For Your Prosperity

    Using Construction Technology can Result in Significant Cost Savings and Efficiencies

    Posted by Carlin Culbertson on Aug 2, 2019 10:39:44 AM

    Topics: Construction

    I recently attended a construction conference and one of the sessions featured a speaker from Dodge Data and Analytics, who do a lot of research related to the construction industry.  Part of the presentation focused on industry technology and the impact it’s having on construction firms.  Here are some of the takeaways.   

    Building Information Modeling (“BIM”) software is already in use at a lot of contractors.  It is software that allows a contractor to create a digital model/plan of a building, highway, etc. which has significant advantages over a traditional blueprint or paper-based plan.  It provides a great visualization tool to job owners during the bid and planning phases, during the construction process to provide updates/check progress, and when the project is finished provides a complete digital map of the final project to the job owner.  It can be adjusted easily if a change is needed to the design.  It can be used for projections and what if scenarios (like where should I position a large crane, what’s the most efficient placement for materials staging), among other uses that help with planning and in turn reduce inefficiencies.  It can also be used to track progress compared to the plan, catch potential issues earlier, and reduce rework.  Even though it is commonly called BIM, it applies to construction projects other than just buildings, such as civil projects.  To show how BIM can reduce time and costs, the presentation mentioned that Turner Construction reported efficiency increases of 143% for mechanical, 67% for plumbing, and 36% for fire protection from using BIM and related resources.  Some of the other technologies available today integrate with BIM making it even more powerful.  Learn more about BIM here. 

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    Identifying and Combating Construction Change Order Fraud

    Posted by Meaden & Moore on May 8, 2018 3:40:56 PM

    Topics: Accounting & Auditing, Construction

    In part I of our series, How to Spot Construction Change Order Fraud, we highlighted examples of change order abuse. In this post, we will dig deeper into ways to identify threatening behavior ahead of time and ways to prevent change fraud.

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    Steady Construction Industry Growth Expected in 2017 and Beyond, Despite Uncertainties

    Posted by Lloyd Bell on Aug 3, 2017 11:36:33 AM

    Topics: Construction, Corporate Finance

    The following overview of construction industry trends is part of a larger series of industry reports that will be published between August and October 2017 for the benefit of our subscribers. Data and information provided is cited from IBIS World, a global business intelligence leader specializing in Industry Market Research.

    In 2016, Meaden & Moore clients in the construction industry experienced a 4.8% decrease in revenue. This decrease was offset by a 6.3% decrease in cost of sales, allowing for a 17% increase in net income. The construction industry as a whole experienced unexpected revenue growth at 7% in 2016. Most of the industry growth in 2016 occurred during the fourth quarter as commercial, multifamily housing, and public work construction unexpectedly skyrocketed. In comparison, by October of 2016 the year’s growth was expected to be 1%. Revenue for the industry is expected to increase 5% in 2017 as conditions stabilize.

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    The Skills Gap – An Ongoing Challenge for the Construction Industry

    Posted by Meaden & Moore on Jul 26, 2017 12:29:05 PM

    Topics: Accounting & Auditing, Construction

    We often read and hear in the news that there is a serious problem in America due to the significant skills gap between candidates and the needs of employers.  This disparity impacts all industries, but arguably none more than the construction industry.

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    AICPA Weighs-In on New Revenue Recognition Rules for Contractors

    Posted by Meaden & Moore on Jan 24, 2017 8:00:00 AM

    Topics: Accounting & Auditing, Construction

    Recently, the American Institute of Certified Public Accountants (the "AICPA"), through its industry-specific tax force, released proposed guidance on how to implement new revenue recognition standards for engineering and construction contractors.

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    Making Sense of Sales & Use Tax Rules for the Construction Industry

    Posted by Meaden & Moore on Aug 3, 2016 9:28:28 AM

    Topics: Tax Planning & Strategies, Construction

    During the last recession, state tax departments saw a decrease in revenue and struggled to create new cash flows to replace what was lost due to taxpayer income reductions. States responded by increasing their audit activity to replace the lost revenue. Most states pursued sales and use tax audits as there was a greater likelihood of audit findings with related penalties and interest.    

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    Consolidated vs. Combined Financial Statements - Unraveling the Mystery

    Posted by Meaden & Moore on Jul 14, 2016 10:07:27 AM

    Topics: Construction

    Back in 2001, we witnessed the Enron accounting scandal, which led to one of America’s largest corporate bankruptcies and the demise of the prestigious accounting firm Arthur Andersen. A key ingredient in Enron’s accounting plot involved the use of special purpose entities (SPEs). These entities held billions of dollars of debt and incurred substantial losses, yet through loopholes in the accounting standards, they were never reported (i.e. consolidated) into Enron’s accounting records.  

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    How To Spot Construction Change Order Fraud

    Posted by Meaden & Moore on May 31, 2016 8:27:37 AM

    Topics: Construction

    Change orders are amendments to existing arrangements that serve to modify contractual terms and conditions. In the construction industry, change orders are common occurrences, particularly on large complex projects.  

    When we think of change orders, we often associate them with project owner directives to alter the scope or specification of a project. For example, in order to ‘make budget’, a project owner may decide to save on construction costs by reducing the original size or amenities of let's say a new mixed-use development. Alternatively, new technologies or innovations might spur a project owner, of let's say - a health care facility, to modify the project to accommodate new medical equipment or devices.

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    Putting Your Best Foot Forward

    Posted by Meaden & Moore on Sep 24, 2015 10:00:00 AM

    Topics: Construction

    A core competency of a Construction Manager ('CM') and/or General Contractor ('GC') has always been the ability to effectively manage 'subcontractor risk'…that being the risk that the CM or GC incurs additional uncompensated time and cost to fulfill the contractual obligations of the subcontractor.

    Under the traditional fixed-price arrangement, the Project Owner knows the price of the project, while any construction cost savings goes directly to the GC's bottom line. Under this model, the GC is incentivized to hire the lowest priced subcontractor, but not necessarily the 'best contractor for the job'. Furthermore, the GC can reduce its 'subcontractor risk' by purchasing surety bonds, the cost of which is incurred by the GC, rather than the Project Owner.

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    Pay-when-Paid vs. Pay-if-Paid Provisions

    Posted by Meaden & Moore on Oct 28, 2014 11:03:11 AM

    Topics: Construction

    Often confused within the construction industry are pay-when-paid vs. pay-if-paid provisions in contracts between general contractors and subcontractors.

    Under a pay-when-paid provision, a general contractor must remit payment for work performed by subcontractors within a reasonable time even if the general contractor has not received payment from the project owner.

    Conversely, pay-if-paid provisions require that a general contractor remit payment for work performed by subcontractors only after the general contractor receives payment from the project owner.

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