January 2014 Newsletter
All indicators are cautiously optimistic for a construction boom in 2014. While this is great news, are you feeling a little nervous? Are you so lean you don’t have the resources to quickly go full throttle? The theme for Ledgerwood Associates’ Quarter One is “Preparing for the Construction Boom” to provide you with resources, training and education and other opportunities to ‘rev up’ in 2014!
What is the Construction Forecast for 2014? Boom or bust?
AIA published an EXCELLENT interactive graphic of the 2014 construction prognosis, featuring contributing authorities from McGraw-Hill Construction, HIS-Global Insight, FMI, Reed Construction Data, Associated Builders and Contractors, and Wells Fargo Securities. While considered a “brighter” forecast for 2014, the first half of 2013’s slower commercial construction compelled experts to scale back initial projections for 2014. However, there is significant agreement of an overall uptick. To view the individual predictions, click on this link and then click on each contributor’s tab.
Contrarily, ENR Southwest says “No New Boom” in an article addressing the outlook of the 2014 construction market. Though conservative in tone, ENR does cite “gains” throughout the Western regions:
“In Las Vegas, one of the metropolitan areas where the construction sector was hit hardest by the recession, it has been nearly three years since a new hotel-casino has opened. But Genting Group, a newcomer to Las Vegas, has purchased the abandoned Echelon steel skeleton and will develop a new mega-resort that is scheduled to begin construction in 2014.
Renovation projects as well as retail and entertainment projects have kept the industry afloat over the past couple of years and are also slated to continue in the future. Perhaps the most high-profile project is MGM Resorts and AEG’s development of a $350-million, 20,000-seat sports and entertainment arena between New York-New York and the Monte Carlo.
In Arizona, the largest office development in the state’s history will hit high gear along Tempe Town Lake. The 2,000,000-sq-ft, $300-million project will house a State Farm operations center.
Renovations and new construction at Sky Harbor Airport in Phoenix are expected to begin more than six years after they were initially proposed. The $500-million modernization plan will increase visitor flow and add a new concourse.” Read more here.
Regionally speaking, Colorado has massive construction/infrastructure rebuilding ahead after the devastating floods of 2013. An online source, The Salon, estimates more than 200 miles of highways, about 50 bridges, and more than 2,000 homes have been destroyed or severely damaged. And the rebuilding may not be your typical construction undertaking. “Many of those roads go through challenging mountain terrain and are vital to connecting communities, now largely isolated,” the article explains. These projects will take years to complete, keeping both large government contractors and local contractors busy.
Overall, the consensus appears to be brighter in 2014 for the construction industry than in any years following the Great Recession. Here’s to a “healthy” construction New Year!
Where are the Workers?
Awesome! Things are finally turning around, and you’re ready to commit to adding headcount. You’ve placed ads on job boards and on construction industry websites, so where are the applicants?
Houston, there may be a problem. Many former construction administrative employees have transitioned into other positions in order to maintain steady incomes. And what about skilled laborers and craftsmen? Baby boomers are retiring with no generational rollover in sight. Today’s youth has been taught that college diplomas are preferable over trade schools.
NPR published a great sound bite from Jan Maly, CEO of a specialty contractor in Houston, “My father used to tell me, ‘You gotta go to school [or] you’ll be a ditch digger,’” says Maly. “Well, right now we need ditch diggers.”
According to Manpower, Skilled Labor has topped the category for annual talent shortage survey consecutively, in 2010, 2011, and 2012. Expect more of the same from the 2013 survey, and perhaps beyond.
How to cope with this hiring dilemma? Here are a few tips to ensure you can handle the uptick in projects:
- Expect to pay more. I’m sure this is NOT what you wanted to hear, but the truth is, it’s going to get competitive out there. You don’t want the workforce you’re investing in to jump your project midstream for a few bucks an hour from a competitive builder.
- Invest in software. Most construction software integrates with other software applications to increase efficiencies. Adding $5 or $10k in additional functionality is far less costly than adding a $40k full time employee. And if you DO add new modules, invest in training the staff to USE it.
- Re-do (or create) an organizational chart. Interview your existing staff to see if there are other proficiencies they are capable of, and if they have the bandwidth to expand their roles. Give them a promotion and a new title, and a bump in pay for not having to add headcount.
- Be flexible as an employer. You will increase loyalty within your current staff if you can allow them to telecommute or work around their kids’ school events. Time off for a soccer game should guarantee they will be more open to answering off-hours emails. This is also a great recruiting tool!
- Get involved with your local CFMA. They offer tons of training, scholarships, and monthly meetings to network potential talent.
If you want to learn how LAI bundles integration products with Sage 300 CRE, talk to us. For example, adding Timberscan, Connector, and My Assistant is like the equivalent of adding two back end office admins. Software can truly be the “bridge” between hiring gaps!
Why pay $40k for a new employee? Here are Three Ways to Increase Efficiency…
Most construction software integrates with other software applications to increase efficiencies. Adding additional functionality to your systems through extended software modules or training is far less expensive than adding a $40k full time employee. Here are three Sage 300 CRE modules you can use to increase efficiency:
Subcontractor Compliance Management
The subcontractor compliance management capabilities in Sage 300 allow a more proactive approach in managing things like lien waivers and help ensure subcontractors remain compliant with state laws and company policies.
Ignoring the importance of compliance is like driving without a seat belt. Odds are, it isn’t going to make any difference,except for that one time when it does.
Keeping on top of today’s compliance requirements is virtually impossible if you are handling the paperwork manually. Don’t set yourself up for failure – get SCM training to be prepared! Develop a process that automates as many steps as possible, including ways to prevent paying subs before you receive proof of insurance, lien waivers, and certified payroll reports.
Inquiry Designer enables you to customize the presentation of the information contained in each of the 100+ standard Sage 300 CRE inquiries, so that you can access the data most relevant to you or create your own from scratch.
Customizing inquiries allows you to control what information you collect and to see it all at one time. You can even set up a simple push button on the toolbar for processes that you do frequently. The ability to streamline your work flow can reduce time spent on certain tasks.
By reducing time required, and the headache of sifting through tons of information to get the specific data set you need, you can reduce your company overhead costs.
Financial Statement Designer
Sage 300 Construction and Real Estate Financial Statement Designer is included as a component of Sage 300 CRE General Ledger. It allows you to modify predefined financial statements or create your own custom statements from scratch quickly and efficiently.
The financial reporter uses Excel for all of its reporting. You can use all of the functions, formulas, graphs, and features that are in standard Microsoft Excel, and as a result, less training may be required for employees whom have a base knowledge in Excel. However, with just a little training you can generate particular Financial Statements from Report Specifications, drill down to associated transactions after you create a financial statement, switch between actual and provisional report types, as well as manage your income and expense details.
Knowing these skills helps reduce administration expenses of time-consuming hard copy based financial tasks and may give you a more immediate comprehensive view of your business.
The Cost of Hiring a New Employee
The cost of hiring a new employee involves more than just salary. These associated costs of recruiting, training, benefits, and workplace integration can range from 1.5 to 3 times the salary of that employee you are thinking about hiring! This is a good article that helps explain the cost of hiring an employee. So, with this in mind, wouldn’t it be more economical to increase efficiency of current employees? A little software training can go a long way and it is far less costly.
To find out if you are using your Sage 300 CRE software investment to its fullest potential, see how you might improve your business efficiency, and help us determine how to help you achieve your goals, please click here and fill out this quick, 10-question survey. Your response(s) will help us determine our online training classes!
Come visit Ledgerwood Associates at the World of Concrete event in Las Vegas – January 21-24, 2014 at the Sage booth – #C3739!
In the past couple of years, a number of Sage 100 Contractor users have “hunkered down” and sought to cut overhead costs during the economic downturn. During this time, we counseled our clients to look for ways to use this time to streamline operations and optimize their use of existing resources, such as their investment in Sage 100 Contractor.
Recently, we have seen an increase in calls from users of Sage Master Builder looking for help in improving how they use the program. Some of the calls have been for:
- Improving estimating techniques and the integration of estimating with other areas of the program.
- Improving purchasing processes, through use of the subcontracts and purchase orders modules.
- Improving post completion job reviews (or job autopsies) to fine tune estimating and production processes and improve profitability.
These users are positioning themselves to be more productive, effective and profitable as the economy improves and their business volumes grow!
If you aren’t preparing your systems and processes today for an increase in your workload, you may already be “behind the power curve!”
Submitted by Walt Mathieson, firstname.lastname@example.org, Ledgerwood Sage 100 Consultant
Building a Happy New Year
Happy Holidays from Ledgerwood Associates! The best gift for all of our clients this season may be the bright economic outlook for the construction industry. The recently released 2014 Dodge Construction Outlook report predicts steady growth for construction in the New Year, particularly in housing and commercial building. In response to this news, we’ve been witnessing the steady ramp-up of our clients in preparing for greater success.
Looking back on 2013, we can see the shift. Companies that were forced to lay off accounting personnel and postpone indefinitely any expenses not immediately critical to their operations have been contacting us. It has been our privilege to assist these clients in strengthening their foundation for growth by optimizing their Sage 300 Construction and Real Estate (formerly Timberline) software. New version upgrades, custom reports, database cleanup, process review, and new user training are back in the budgets of companies seeking to be well-positioned for reaching that next level of profitability.
Your Sage 300 Construction and Real Estate software is a critical part of your company’s financial infrastructure. Here are some tips for making sure your software is up to the challenge of building your business in 2014:
- Renew your Sage Business Care Plan. If you don’t have one, go to na.sage.com to find out how to obtain one. A Sage Business Care Plan provides you with software enhancements and upgrades, tax table updates, and alerts that help make sure your software is running at peak performance (call our Sales Department at 480-423-8300 to get help with renewals or upgrades) . You will also get access to the Knowledgebase and customer support options to help you resolve technical issues with Sage Business Care Plan.
- Look closely at your Sage Annual Renewal invoice for potential cost savings. Do you have more uses of any application than you need? Do you have uses of applications for folks that require read-only access to reports and inquiries? Could some of these be replaced with less-pricey uses of Information Assistant?
- Explore other software applications that integrate with Sage 300 CRE, such as Timberscan, FAS fixed asset software, and others that can streamline processes and simplify the workload of your accounting personnel.
- Get to know your Ledgerwood Associates Certified Consultants and let us get to know you. As a Sage Business Partner, we not only sell Sage products, but our Professional Services team is authorized by Sage to support your business through all aspects of your software purchase, from planning and implementation to training and ongoing maintenance and support. The more we learn about your business, the better we can be at helping you configure and use Sage 300 CRE to best meet your organization’s needs. We would love to build a relationship with you so that we can help you build your business!
Submitted by Kyle Zeigler, Sage Certified Consultant
Final Regulations Issued on Capitalization of Tangible Property Costs
In September of this year, the IRS released final regulations on the capitalization of tangible property costs. The final regulations provide an important opportunity—the de minimis safe harbor election—that allows eligible businesses to immediately expense certain property that would otherwise have to be capitalized. To qualify for the safe harbor, businesses must have nontax accounting procedures in place at the beginning of the year, under which they expense amounts paid for property costing less than a specified dollar amount or that have a useful life of 12 months or less.
The amount that can be expensed under the safe-harbor election depends on whether the business has an Applicable Financial Statement (AFS), which includes financial statements filed with the SEC or provided to a federal or state government or agency (other than the SEC or the IRS); and certified audited financial statements used for credit purposes, reporting to owners, or other substantial nontax purposes.
- Businesses with an AFS must have written accounting procedures in place to make the safe harbor election. If so, they can expense property that costs up to $5,000 (per item) if, in accordance with their written accounting procedures, the property is expensed on their AFS.
- Businesses without an AFS must have accounting procedures in place at the beginning of the year. If so, they can expense property costing up to $500 (per item) if, in accordance with those procedures, the property is expensed in their books and records. The procedures apparently do not need to be written. However, we strongly recommend that all businesses commit their accounting procedures to writing.
The regulations do not define accounting procedures or describe what the procedures should include. But, the IRS is really talking about a capitalization policy. Many businesses establish a minimum dollar amount that must be spent before a cost is capitalized. Otherwise, the cost is deducted.
Please contact us as soon as possible if you would like to discuss this tax saving opportunity, since the accounting procedures (capitalization policy) must be in place by the beginning of next tax year (by 1/1/14 for calendar-year businesses) to make the safe harbor election.
Contact your CPA for further details.
Submitted by Bryan Eto – CPA, CCIFP, Shareholder Accounting and Assurance Services