The past 12 months have thrown an immeasurable amount of curveballs at the construction industry. From the adoption of Covid-related PPE in the field, to working from home, to PPP loans, and a hectic election, 2020 certainly kept us on our toes. We gathered finance and tax experts to share their insights and expertise on how financial professionals can better prepare their companies for profitability in 2021. Briq Chief of Staff, Ellis Talton, got together with Moss Adams CPA and Partner, Scott Swearingen, and Moss Adams CPA and tax expert, Matt Gilbert.
Our noted panel covered topics like:
- Top factors impacting construction financials
- Federal stimulus, tax policy, and PPP
- Managing backlog and cash flow
- And more!
There’s a lot of valuable information in here, so we’ve summarized the interview with timestamps to help you find what interests you most.
Let’s dig in!
Get to the point with the below timestamps:
Our host, Ellis Talton, goes through some housekeeping notes, and introduces our panelists, Moss Adams CPA and Partner, Scott Swearingen, and Moss Adams CPA and tax expert, Matt Gilbert. Our experts give brief backgrounds on themselves, how they came up in the industry, and their respective businesses.
Top factors impacting construction financials (~7:00)
“When the clock struck midnight on December 31st everyone couldn’t wait to move on to 2021. Unfortunately though, we’re ending 2020 the same way we’re starting 2021. But there is light at the end of the tunnel. There are tailwinds from a macroeconomic perspective. Economists are expecting even up to 5% GDP. There’s so much liquidity out there that we are set up to have a really good year.
As it relates to construction, the same issues will plague construction that did in 2020. Covid and the efficacy of the vaccine are still being discussed. Materials prices continue to increase. Qualified labor continues to be a challenge. And of course managing backlog. Some sub and small sized contractors are beginning to fall behind in backlog. But there’s still a lot of opportunity out there.” -SS
Federal stimulus and tax policy (~11:00)
Matt Gilbert reviews the ins and outs of both the CARES and Consolidated Appropriations Acts.
“It’s been a wild ride. It started with the CARES act which enabled us to get PPP as well as some payroll tax credits. There were also some significant income tax provisions in that bill as well as potential refund opportunities. Ask yourself if there is potential to get some cash flow back from refunds on prior returns.” - MG
Matt discusses qualified improvement properties and how contractors can claim bonus depreciation on them.
“We’re seeing a lot of contractors who are able to benefit from those provisions. Certainly a lot of things that have happened over the past nine months as far as relief legislation that will carry over into this year.” -MG
More tax! (~15:00)
“We’re really not certain what's going to happen with the upcoming bill and when, and that's important to keep in mind when making decisions about your business. I don't think people should be making decisions around potential legislation in the 2021 year or going forward.” - MG
Managing backlog and cash flow (~18:00)
“That safety net that we call backlog has been at a historical high for the past few years. It’s good to understand that that was an anomaly. It’s going to be important to be able to deploy assets and capital as quickly as possible. There's going to have to be a lot of pivoting at times too. But this industry has the ability to do that. So I’m optimistic.” -SS
Scott touches on the labor shortage again and discusses the employment levels still having not recovered from the previous recession.
“Everyone is different depending on what business you're in. Utilizing the PPP and the tax policies that Matt outlined is going to be important.
I think the key as it relates to subcontractors is to see where you are leveraged. Where are some opportunities that you have to deploy. Things like joint ventures. There’s a lot of decisions that could be made. I’ll also say cash flow is important. You need to be able to track. But there’s a lot of tools out there to help manage.” -SS
“For GC’s you need to stay really strict on your prequalification process, and I’d also say with some of the supply disruptions we've seen in the market it's important to go through vendor prequalification to ensure your prices and deliveries are where they need to be. We’re seeing ‘just in case’ models instead of ‘just in time.” -SS
It was a roller coaster with the federal tax implications.
Matt Gilbert discusses the changing rules and provisions of legislation in 2021 that directly affected contractors.
Our panel dives into the topic of working from home in the construction industry.
“People are existing where they didn’t exist anymore. People are moving and as a result of people being in different places there are different tax implications.” -MG
“We’re getting a lot of questions from contractors as it relates to state residency. You're hearing about migration out of high tax states to low tax states, like California (moving) to Texas.” -SS
“From a remote perspective, whether people are at home or in the office, we have contractors all across the board. So technology is a big part of it. It’s fast forwarding some of the trends we’ve seen over the years. To be able to be paperless and have that information available is really important. But this is also an important year in my mind for everyone to get back to the basics and really figure out what’s important. Pull out that old strategy plan. The virus isn't going to last forever and neither is the economic upturn.” -SS
Be prepared for 2021 (~32:00)
Matt and Scott give their best words of wisdom for CFMs to be prepared in this new year.
“Meet with your financial advisors, your CPA, your tax return preparer. Make sure you're getting updates from them. One thing we’ve learned is that everything is fluid. You want to make sure you're not spending cash where you don’t need to. Checking in with your advisors really helps mitigate that.” -MG
Audience Q&A (~36:00)
Our expert panel answers burning questions from our audience!
Thank you! (~56:00)
The Briq team would like to thank our guests Scott Swearingen and Matt Gilbert, and everyone who joined us for our Financial Planning live webinar.
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