Boosting Your Construction Backlog During Disruption

Dec 17, 2020

The ongoing pandemic environment has wreaked economic havoc, impacting every sector, some more dramatically than others. From project delays and cancellations to increased competition as a result of stimulus funding (PPP), the construction industry has experienced its fair share of COVID-related issues. Still, for many contractors, the impact will not be fully felt until well into 2021, when backlogs begin to dwindle. According to the Associated Builders and Contractors’ (ABC) Construction Backlog Indicator fell to 7.5 months in September, a decline of 0.5 months from August’s reading. This backlog report is 1.5 months lower than in September 2019.

Those who proactively adjust their business practices will be the ones who survive this unforeseen disruption. Here are some strategic opportunities to improve your backlog to remain competitive and emerge stronger post-pandemic.

Diversification
Since the start of the pandemic, there has been a significant decline in retail and restaurant-related projects and an increase in healthcare contracts. Contractors who have padded their backlogs with retail and restaurant work may be facing considerable losses during the slowdown. The more a construction firm diversifies its project types, the better equipped it will be to weather a disruption. Diversifying can mean taking on multiple construction project types, like public or private jobs or branching out into service work, or picking up a new trade or skill to add your construction repertoire. If you find your company has gotten into a rut when it comes to the type of projects you are doing, now is the time to consider expanding your focus. Whether it is public/private, residential/commercial, or a different industry or building type, diversification is the key to protecting the health of your backlog.

Strategic Mindset
It may seem counterintuitive, but during uncertain times being strategic and selective about the work you take on may be the leg up you need. Increasing profitability should be top of mind rather than padding your backlog for volume. Taking on new work for the sake of volume could be detrimental as it only takes one bad project to damage your organization and its reputation. More importantly, strategic business planning should look at 30/60/90 days rather than the typical 2-5 year plan. Scenario planning will also help you be flexible should another disrupting event occur.

Reduce waste
Hand-in-hand with strategic a mindset is looking for ways to reduce waste and become more efficient. Reviewing your current processes and looking for methods to slim down your operations will save capital in the long-run. Technology can be a great means to enhance efficiency and provide a clear picture of your costs. Business intelligence solutions like Microsoft PowerBi are providing contractors with an in-depth look at key metrics with the ability to customize reports and spot anomalies as they arise. Harnessing the power of data allows for better business decision making.

Talent Retention
Labor shortages have consistently plagued the industry and now more than ever, retaining your current talent is crucial. While the construction sector was deemed essential at the onset of the pandemic, the health and safety of workers was a concern. According to the Associated General Contractors of America’s 2020 Workforce Survey Analysis found the pandemic “contributed to conditions that make it difficult for a majority of firms to find craft workers.” Continuing to invest in the wellbeing of your current workforce and demonstrating their value will help attract and ultimately retain employees. Finally, assessing your leadership to ensure you have the right people in key positions will aid in your ability to source new projects.

Client Relationships
Leveraging your top clients can be a differentiator. After all, they know the quality of work you do and can speak to their satisfaction. Investing the time to revisit your clients and understand their current needs may prove to be more fruitful in securing new work.

As 2020 comes to a close and we look into the future, now is the time to proactively adjust your business strategies to emerge stronger post-pandemic. Those who take steps now will gain a competitive edge in today’s rapidly evolving climate. Our William Vaughan Company Construction team can provide guidance and offer value-added recommendations on this very topic.

Connect With Us.
Ryan Leininger, CPA
Construction Practice Leader
Ryan.leininger@wvco.com
567.402.4841

Categories: Construction & Real Estate

Processing Delays Within the IRS Generates Balance Due Tax Notices

Aug 28, 2020

The Internal Revenue Service and State tax departments have experienced delays in tax return processing due to the COVID-19 pandemic. A current delay in the processing of payments received is affecting both Individual and Trust income tax filings. Taxpayers across the country have received tax notices from both the IRS and State tax departments that are citing tax amounts due with penalties and interest tacked on even though the taxpayers timely paid the tax amount due with their filings. Situations have occurred where the payment due was electronically withdrawn or check cashed, but the payment has not been applied to the account appropriately. Other situations have occurred that the payment check was received by the taxing agency but not yet cashed. Either way – the tax payments being applied to these accounts have a definite lag time. The lag time, however, was not stopping the tax departments from sending out balance due notices.

On August 21, the IRS posted an update on their website about these notices and that they are suspending future mailings until they have caught up on processing the mail and payments they have received. In addition, they will be providing penalty relief for any dishonored checked that they’ve received from March 1 to July 15 due to the processing delays. While the policy to suspend these future mailing has been put in place, there could still be mailings that were sent out prior to this policy that are still moving through the USPS system.

What Should You Do if You Received One of These Notices?

• Let your tax preparer know if you’ve received one of these notices so they are aware of the situation.
• Make sure you have documentation of the payment that you made. It should equal the balance the notice is showing due before penalties and interest. If this is not the case, your tax preparer can assist with looking into the variance for you.
• If you sent the payment via certified with return receipt, hold onto the receipt records.
• Finally, closer to the due date of the notice unless the IRS has released additional guidance, either the tax preparer with a valid Tax Power of Attorney or the taxpayer should call the tax agency to confirm the payment is finally applied to the account and nothing further is due.

The tax departments are currently inundated with phone calls and their call centers are not able to keep up with the volume. Our advice would be to give time for them to apply the payments and for the departments to clear up their processing delay.

Categories: COVID-19, Other Resources