Raising the Bottom Line

89% of Manufacturers Are Optimistic for the Future

Posted by Edward Thompson on Wed, Sep 20, 2017 @ 11:02 AM

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Despite slower than expected movement on the legislative front, manufacturers in the United States continue to show historic levels of optimism. In the most recent National Association of Manufacturers’ (NAM) Quarterly Outlook Survey, which covers data from April – June 2017, over 89% of manufacturers said they had a positive outlook for their own company. This is only a slight drop from a few months earlier, when manufacturers reported an unprecedented 93% rate of optimism.

NAM contributes this continued positivity to the expectation of “pro-growth policies” from the Trump administration, which many manufacturers hope will address some of the existing tax and regulatory burdens. When asked about the regulatory actions taken by the Trump administration so far, over 80% of manufacturers said they approved, with 57% saying they believed the actions taken thus far would reduce overall regulatory burdens.

However, with nearly 29% of survey participants reporting they were “unsure” if the country was headed in the right direction, NAM says it is possible some manufacturers are “grappling with political uncertainty.” Despite this, more than half of manufacturers said they believe the country is headed in the right track.

When it comes to top business challenges, manufacturers said rising healthcare and insurance costs (75%); attracting and retaining a quality workforce (64%); and an unfavorable business climate (56%) remain top concerns.

Maryland Manufacturers

In Maryland, 96% of manufacturers reported their recent sales have been “good,””very good” or “extremely good,” according to a survey of nearly 100 Maryland manufacturers by the Regional Manufacturing Institute of Maryland.

It is concerning, however, that close to 20% of survey respondents said they were unfamiliar with the More Jobs for Marylanders Act, which provides tax incentives for manufacturers who create new jobs in Maryland. For a complete overview of the More Jobs for Marylanders Act and how it affects manufacturers, check out this blog post.

Get more data

While NAM’s Manufacturers’ Outlook Survey is released on a quarterly basis, manufacturers can get up-to-date news and articles delivered straight to their inbox when they subscribe to our manufacturing blog.

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Tags: Manufacturing & Distribution, Ed Thompson, manufacturing

Beginner’s Guide: How to Find New Construction Employees Online

Posted by Steve Ball on Tue, Sep 12, 2017 @ 07:01 AM

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While construction companies have historically relied on word of mouth to find new employees, the internet is changing the way job candidates discover new opportunities. 

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Between 2013 and 2015, a staggering 90% of Americans said they went online to search for jobs, with 84% having applied for a job online1Despite this, according to the 2017 Maryland Construction Industry Survey, only a third of Maryland construction contractors said they find new employees using online job boards like Monster or Indeed.

As the demand for qualified construction employees continues to rise, companies who continue to rely purely on word of mouth will undoubtedly miss out on the growing number of individuals looking for jobs via the internet. Luckily, posting your company’s open positions online doesn’t have to be hard.

Where to post your company’s positions

The secret to getting the most eyes on your online job ad is posting the information in more than one place. You’ll want to start with creating an account and posting the position on websites like Indeed and Monster. For some examples of what kinds of positions other Maryland construction companies are posting online, check out the search results for construction positions in Maryland or check out this sample listing:

Utility Construction Laborer
ABC Construction Company
$## - $## an hour

We are seeking experienced laborers to join our team in Baltimore, MD. This is a full-time, year-round position, with a competitive benefits package.

Laborers will be responsible with utility construction work, including, but not limited to, digging, heavy lifting and operating power tools, in all weather conditions.

All work will be completed in a team environment, but employees must be able to follow directions with minimal supervision.

Requirements
2+ years of construction experience
High school diploma or equivalent
Valid driver’s license
Pass pre-employment drug screening and background check

Benefits
Health, dental and life insurance
Seven days paid vacation and three days of sick leave per year
Employee bonus incentive program

If you have a company website, consider creating a career page and keeping a running list of all of your company’s open positions (check out our open position page as an example). By making this list available, future job candidates looking at your website can see what positions are currently open, making applying that much easier.

Social media accounts like your company’s Facebook or LinkedIn page are also great places to post information about open positions. It’s free, easy and often results in people sharing your posts far and wide.

What’s this going to cost me?

Just like the classified ads, posting jobs online isn’t always free. Listings can often cost companies a pretty penny, especially if you are posting one job at a time versus several at once. At the moment, Indeed still offers free listings, but sites like Monster can charge up to $300 for a 30-day listing.

This kind of expense can be staggering to smaller companies, and especially those looking to limit overhead costs. However, there are discounts for companies who post more than one job at a time. So, if you’re looking for laborers, a project manager and a new bookkeeper, you would receive a discount by posting all three jobs at once.                   

The don’ts of writing a good job description

1. Don’t forget how competitive the market is

The goal of posting job openings online is to entice candidates to want to apply to your company. It’s important to remember that while the people applying are looking to sell themselves as the best candidate, your company must also be selling itself as a desirable employer. Construction workers have more job opportunities than ever before, and when posting a job online, you want to distinguish your position above the other job postings in the same list.

While you don’t want to write too much, you do want to explain what the job entails and the responsibilities involved. Not only will this save you from fielding a tsunami of calls from unqualified applicants, but you’ll be better positioning your description to stand out among others and attract the right kind of candidates.

It’s also important to use your job posting to mention why your company is different from your competitors – like those free lunches you provide on Fridays or the employee bonus program that you offer.

All in all, you want to avoid positing a position like:

Laborer
ABC Construction Company

Construction laborers needed. Competitive pay. Call 555.555.5555.

2. Don’t pick an overly general job title

When it comes to clicking on a job description, most candidates click based on the title of the position. For example, if you have the choice between clicking “Laborerand “Heavy Construction Site Laborer,” which would you choose? Specificity about the type of position, experience level, etc. can make the job more attractive to candidates and can potentially attract more eyes to your posting.

3. Don’t forget to use keywords

Without going into the rabbit hole of how internet searching works, it’s important that the word “construction” appears in the majority of your job titles. Put yourself in the shoes of a job candidate. If you were looking for jobs in the construction industry, chances are your search would contain the word “construction.” In fact, “construction” may be the only search term a candidate uses in their search, meaning your job posting may not even show up in their results if you didn’t use the keyword in your position description.

Despite this, while it makes sense to have position titles like “Construction Laborer” or “Senior Construction Project Manager,” there is no need to have titles like “Construction Bookkeeper” or “Construction Administrative Assistant.” A good rule of thumb is that if the job isn’t directly related to the industry, you don’t need an industry keyword in the job title.

Need a hand?

Finding qualified employees is no walk in the park. If you’d like to have a sounding board to figure out how to find good employees, retain your best team members for the long haul, or improve your online presence, we can help. Contact Steve Ball, CPA, online or call 410.685.5512.

technology trends seminar for construction contractors


1Pew Research Center of Internet & Technology

Tags: Steve Ball, construction, 2017 Maryland Construction Industry Survey

How to Respond to a Bad Review About Your Construction Company

Posted by Steve Ball on Thu, Aug 31, 2017 @ 07:02 AM

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If you’ve never googled your company, you might be surprised at what you find. Chances are, your company’s website (assuming you have one) will rank high in your search results and, more likely than not, so will a few online reviews of your business.

In a 2017 survey of Maryland construction contractors, 43% of contractors said they believe the reviews posted about a construction company online don’t impact whether a customer will do business with that company. This, however, cannot be further from the truth.

Online reviews have become standalone marketing tools for (or against) businesses, and if you’ve ever decided to make an online purchase based on the reviews about that product, you know how powerful a well-written review can be. Online reviews are not only booming in popularity but in their strength of influence, with over 84% of people in a 2016 BrightLocal survey saying they trust online reviews just as much as a personal recommendation.

The problem most contractors run into in dealing with online reviews is how and what to say in response to reviews, and especially the bad ones. Responses can range the gauntlet from arguing with the reviewer (bad) or failing to respond at all (equally as bad).

How should your company respond to a bad review about your business?

1. Take a breath

Criticism about your company can be a bitter pill to swallow. When you come across a scathing review of your business, it’s normal to feel angry or upset, which is why – regardless of how mad you are or untrue the review is – you need to take a breath before responding. If you’re really angry, it’s best to take several days to cool off or, better yet, ask someone who is more impartial to respond.

It’s important to remember that responses to reviews are public, which means every word you publish will be accessible to anyone who stumbles upon that page. That means your response is a direct reflection on you, your business and the type of relationship you have with your customers.

Learn what nearly 200 Maryland construction contractors said about their company’s outlook, marketing strategy and more.

The things you write can come back to haunt you. Even if you cool down and delete an angry response you’ve written two days later, your comments may still be out there. The person who you replied to or another page visitor may have taken a screenshot of your response can repost your words wherever and whenever they please.

Bad reviews can sting, but losing business because potential customers think you’re a hothead will sting a lot worse.

2. Take the time to truly understand what happened

Just like our children, pets, spouses, friends, etc., we all want to believe the best about our business and staff. Unfortunately, no business or person is perfect, and mistakes will be made – mistakes we might not always know about. Before responding to a review, it’s important to find out what actually happened and, namely, if the reviewer’s story is true.

For example, if you receive an angry review about how rude and unprofessional your foreman acted on a job, it’s your responsibility to check in and see what really happened. Chances are, your staff acted just as they should, but before you reply to the review, you’ll want to know how accurate the reviewer’s version of events actually is.

3. Claim your page

If this is your first time responding to a review, you’ll most likely have to claim your business through the website by creating a company account. This may have to be verified through phone or email, but once your account is created, you are free to respond to the reviews on your company’s page. Check out these pages to claim your business on Yelp and Angie’s List.

4. Be positive

When it comes to writing your review, the point is not to play the blame game. The goal in responding is to either:

  1. apologize
  2. explain

In the first case, your goal in responding is to admit a mistake was made, apologize and potentially make amends. For example, you might write:

“Sarah, thank you for writing. I spoke with the foreman on your account, and you are absolutely right that mistakes were made, and we truly apologize for the inconvenience it caused you. While I know it can’t make up for the time you lost as a result of our slipup, I’d like to waive the balance on your final invoice in hopes you will consider doing business with us again.”

In the second case, your goal is to explain the situation from your company’s perspective in order to put the review in context for anyone else reading the review. This is typically the route you would take when you receive a review with some debatable facts. For example, you might write:

“John, thank you for writing. I apologize you had such a negative experience with XYZ Construction Company. Unfortunately, the carpet you mentioned was the sample you picked and signed off on. We always want to prevent mistakes like these from being made, which is why we had you sign off on the carpet right before it was installed, after you were permitted to make a first-hand inspection.”

5. End the response with your contact information

Even if the reviewer has written the most scathing, untruthful review ever written, you want to appear the bigger person. Staying cool, calm and collected will show those reading your reviews that they will be doing business with professionals. By offering contact information, you put yourself in a position where you are showing the public that you take reviewers’ comments seriously and care about your customers. You might do this by ending your response with:

“If you have any other questions or concerns, please don’t hesitate to contact me at 555.555.5555 x55.”

Other marketing and business development tactics

To learn what other Maryland construction contractors are saying about their company’s marketing and business development tactics, download a free copy of the executive summary of the results of the 2017 Maryland Construction Industry Report.technology trends seminar for construction contractors

Tags: Steve Ball, construction, 2017 Maryland Construction Industry Survey

Learn What Grants Are Funded By Agencies In Your Area of Interest

Posted by Taylor Dean on Thu, Aug 24, 2017 @ 09:16 AM

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Have you ever wanted to know what grants are funded by agencies in your area of interest?

Well, now you can.

There’s a searchable database – called Federal RePORTER – of scientific awards from different agencies.

This easy-to-use database is an excellent resource for organizations that want to:

  • Learn more about different grants and to whom they are being awarded.
  • Get to know the research interests of federal science-funding agencies.
  • Understand different organizations' sources of support.
  • Prepare better grant applications based on additional knowledge.

Search Federal RePORTER now.

Updated annually, the database includes about 900,000 projects from 17 agencies, including the Administration for Children and Families (ACF), National Institutes of Health (NIH), and National Science Foundation (NSF).

Need Help?

If you have any questions, please call Taylor Dean, CPA, CGMA, director of Gross Mendelsohn's Government Contractors Group, at 800.899.4623 or contact her online.

overhead rate calculator for FAR audits

Tags: government contractors, Taylor Dean

The Future of the Maryland Construction Industry [Infographic]

Posted by Steve Ball on Wed, Aug 16, 2017 @ 04:11 PM

Things are looking up for Maryland’s construction industry. In early 2017, we surveyed nearly 200 Maryland construction contractors on their take on the future of the industry, their individual company and top concerns for the year, and found high levels of optimism abound.

The following infographic highlights outlook and trend data from the 2017 Maryland Construction Industry Survey. If you'd like to view a larger copy of the infographic, click here. (Psst…to get more data, download your free copy of the executive summary of the survey results.)

2017-Maryland-Construction-Industry-Future-Infographic

Get more data

For more data and insights from the 2017 Maryland Construction Industry Survey, download a free copy of the executive summary of the survey results.

2017-maryland-construction-survey-executive-summary

Tags: Steve Ball, construction, 2017 Maryland Construction Industry Survey

Everything You Need to Know About the Rebasing of Maryland’s Medicaid Rates

Posted by Jennifer Rock on Tue, Aug 15, 2017 @ 02:01 PM

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If you have ever felt like your Maryland skilled nursing facility cannot catch a break when it comes to the state’s Medicaid rates, you are not alone. Many facilities struggle to control costs and remain profitable, even at the current rates, especially as costs in areas like nursing and salary and benefits continue to rise. And even with the most recent 2% Medicaid rate increase, the big news facilities should be keeping their eye on is the upcoming rebasing of Maryland’s Medicaid rates.

As of July 1, 2018, Maryland intends to “rebase” (set a new base level for) the state’s Medicaid rates for fiscal year 2019, leaving many facilities uncertain as to whether their individual facility’s rates will drop (or rise) and, if so, by how much.

Why is the Maryland Medicaid rate being rebased?subscribe-healthcare-blog-button

When the current rate system was implemented, it was created with the expectation that the rate would be rebased every four years in each of the five Maryland regions, which include:

  • Baltimore Metro (Baltimore City and County)
  • Central (Anne Arundel, Carrol and Howard Counties)
  • Washington Metro (Charles, Frederick, Montgomery and Prince George’s Counties)
  • Western Maryland (Allegany, Garrett and Washington Counties)
  • Non Metro (all remaining counties)

The rebasing process evaluates how average costs have changed from the rate base year (2012) to the present date, while also accounting for inflation. This will be the first time the rate has been rebased since the system’s implementation of the new reimbursement methodology effective January 1, 2015.

According to Michael Snarski – an expert in Maryland Medicaid cost reporting and owner of Snarski Consulting, LLC – rebasing will have a net zero impact statewide, but there will be individual facilities that could see significant changes in their rates.

What factors are being considered in the rebasing?

Even with Medicaid’s Budget Adjustment Factor (BAF), facilities will most likely see modifications to their rates. Snarski says factors that could affect facilities include:

  • A significant increase in a facility’s Case Mix Index (CMI) from the base year (2012), but a disproportionate, lower actual increase in actual nursing costs versus indexed nursing costs.
  • The rebasing of regional geographic median costs for routine and administrative, and other patient care costs. If the region’s rebased median costs are less than the original base year costs as indexed forward, it could result in lower rates.
  • The nursing “price” will also be rebased. The nursing “price” is adjusted, based on facility specific acuity, to set a nursing “floor” (which is then used to limit nursing profit to no more than 5% of nursing price). If a facility’s calculated nursing profit is above the 5% threshold, then the nursing rate is reduced.
  • The BAF, as of July 1, 2017, is .90348. This factor is updated on a quarterly basis. This means facilities are currently paid at 90.348% of their calculated rate. Depending upon results of the rebasing, it is possible the BAF may increase by several points to perhaps .95000.

What can I do if the rate drops?

Trying to match total costs of care with Medicaid rates often puts facilities in a catch-22. If facilities can reduce their costs in order to beat the rate, and thereby increase their profits, the regional average cost begins to drop. And because the Medicaid rate is calculated by average regional costs, the rate then drops to accommodate the decrease in average cost.

Get the latest updates in skilled nursing facility news and best practices delivered straight to your inbox when you subscribe to our healthcare blog.

Since most facilities are already taking steps to rein in their costs, facilities will have to think out of the box when it comes to ensuring they stay profitable. If the rate does drop, nonprofit facilities can turn their focus to boosting their fundraising efforts, using donations to offset the loss of Medicaid dollars. Both nonprofit and for-profit facilities may need to take a critical look at their rates for their private patient mix and may need to consider increasing their own rates in order to remain profitable.

Snarski offers the following tips to skilled nursing facilities looking for new ways to maximize their Medicaid rate:

1. Nursing

Ensure your facility gets credit for all services. You should know the answers to questions like:

  • Are your Medicaid CMI scores accurate?
  • How are they trending?
  • How does your trending compare with industry?

It is important to note that the statewide Medicaid CMI scores have increased from approximately 1.00 to 1.12 since January 2015.

2. Appraisal Valuations

Every three years Medicaid appraisers appraise your facility. Make sure that you are prepared for those tours and that the appraisal reports are reviewed for accuracy. Review prior reports in advance of scheduled tours so you can identify any undervalued items beforehand

Appraisals are used to establish the Capital Cost Center Rate (which is approximately 10% of the overall Medicaid Rate.) The maximum allowable appraisal value is $110,000 per licensed bed. That means if your facility has been valued at or above $110,000, you are achieving the maximum allowable appraisal value.

Are there any other Medicaid issues I should be looking out for?

It is worth noting, Snarski said, that Maryland’s utilization agent, Telligen, is performing audit verifications of facilities’ CMI data. The audits began in 2017, and if a facility fails the audit with more than 20% error rate, a follow up audit will be scheduled.

The 2017 audits are informational only, meaning there are no penalties for inaccuracies. However, take the audit process and its findings seriously. As of July 2017, Telligen has completed 135 MDS Validation Audits, 22 of which required an expanded audit, with 11 of those 22 having failed the expanded audit.

Beginning in 2018, facilities that fail the expanded audits will be subject to a penalty audit and potentially a penalty/reduction to the facility’s Medicaid rate. This penalty amount has yet to be determined.

What should I expect for Medicaid in the coming months?

With the unprecedented amount of uncertainty currently facing the healthcare industry, it’s hard to tell what the future holds. While the rebasing of Maryland’s Medicaid rates is important, if the federal funding of Medicaid is eliminated or reduced, as has been recently proposed by the current administration, rebasing will be the least of the industry’s problems.

In the case that federal Medicaid funding is cut, states would assume full responsibility of funding for their Medicaid programs. This could create a myriad of issues; namely, whether states like Maryland can afford to increase their Medicaid spending by 100% without the dollar for dollar match of the federal government.

Need help?

Jennifer Rock, CPA, CITP, is a member of Gross Mendelsohn’s Healthcare Group. She enjoys helping long term care facilities understand how they can be strong both financially and operationally. She co-publishes an annual benchmark report for skilled nursing facilities in Maryland.

Let’s talk. Our long term care experts can help. Contact Jennifer here or call 800.899.4623.

Tags: healthcare, Medicaid, Jennifer Rock

Quick Guide: Unallowable Costs in Government Contracts

Posted by Taylor Dean on Thu, Aug 10, 2017 @ 03:02 PM

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If you’re struggling to understand the difference between “allowable” and “unallowable” costs related to your government contracts, you are not alone. Even the most experienced government contractors struggle from time to time when it comes to identifying which costs can be allocated directly, indirectly or not at all to a government contract.

While FAR Sub Part 31 (FAR 31) provides numerous examples of allowable and unallowable costs, it does not cover all potential costs that may be incurred by a government contractor in the normal course of business or in performance of a contract that might be outside of their normal course of business.

FAR 31.201-2 provides a framework for determining the allowability of a particular cost using the following guidelines:

  1. Reasonableness
  2. Allocability
  3. Standards promulgated by the Cost Accounting Standards Board (CASB), if applicable, otherwise United States Generally Accepted Accounting Principles (GAAP) and practices appropriate to the circumstances
  4. Terms of the contract
  5. Limitations noted in FAR 31.201-2

Let’s take a closer look at each component of these guidelines.

What are “reasonable” costs?FAR Overhead Rate Calculator

Reasonableness is defined under FAR 31.201-3 as a cost that does not exceed that which would be incurred by a prudent person in the conduct of competitive business. There is no presumption of reasonableness just because a contractor paid the cost. Instead, reasonableness is determined through consideration of a variety of facts and circumstances, including:

  1. The cost is ordinary and necessary to the conduct of the contractor’s business or the contract performance;
  2. The expense meets generally accepted business practices, arm’s length bargaining, and federal and state laws and regulations;
  3. The contractor meets his or her responsibility to the government, other customers, the owner of the business, employees, and the public at large and;
  4. There are no significant deviations from the contractor’s established practices.

For example, if a contractor declared three Ferrari’s and an SUV as necessary to running his business, it would raise some eyebrows at the Defense Contract Audit Agency (DCAA). The costs related to the sports cars would almost certainly be deemed unallowable, including lease payments, maintenance and repair, gas and insurance. The SUV and its related costs, however, may be deemed allowable, depending on the circumstances of the car’s use.

How is allocability determined?

The determination for allocability is based on the following:

  1. Cost must be incurred specifically for the contract;
  2. Cost must benefit both the contract and other work, and the cost can be distributed to the work in reasonable proportion to the benefits received, or;
  3. Cost must be necessary to the overall operation of the business, although a direct relationship to any particular cost objective cannot be shown.

For example, the question of allocability often comes up when dealing with business development costs. Consistent business development activities (excluding those defined as expressly unallowable) are vital to an organization and can be allocated over all the contracts of the organization, both commercial and government. However, if an allowable cost only benefits some of the contracts and not the organization as a whole, only the contracts obtaining the benefit would be allocated the costs in question.

How do the terms of the contract impact the allowability or unallowability of a cost?

The terms of the contract may include costs that are specifically unallowable. All contractors must thoroughly review their prime and subcontracts to ensure that they know what costs are unallowable on a specific contract.

For example, a contract might require a contractor’s staff to perform work at a government site. However, the contract might assume that the staff are local, and therefore no travel costs would be allowable under the terms of the contract. Another example is a limitation on the number of hours individuals work on a contract to avoid overtime costs.

What happens to unallowable costs?

Costs that are expressly unallowable or mutually agreed upon to be unallowable, including mutually agreed to be unallowable directly associated costs, must be identified and excluded from any billing, claim or proposal applicable to a government contract. A directly associated cost is any cost that is generated solely as a result of incurring another cost. When an unallowable cost is incurred, its directly associated costs are also unallowable.

For example, let’s say a government contractor holds a party for its employees. As part of the costs of the party, the firm reimburses travel to the event and pays for overnight accommodations. The party itself is unallowable, which means the travel and lodging costs are also unallowable as they are directly associated with the party.

Another good example is the purchase of alcohol as part of a business meal. The business meal is deemed allowable; however, the cost of the alcohol, an expressly unallowable cost and any sales tax or tips allocated to that cost must be separately recorded as unallowable costs.

The practices for accounting for and presentation of unallowable costs must be those described in 48 CFR 9904.405, Accounting for Unallowable Costs.

How does the allowability or unallowability of costs affect certain types of contracts?

Firm fixed price contracts

If the contractor is required to provide cost and pricing information as part of the contract negotiation, the contracting officer is responsible with ensuring the pricing takes unallowable costs into account. The officer must be certain these costs are not included in the indirect rate calculations as it will impact the proposed cost of the contract.

If a contracting officer questions the contractor’s ability to account for allowable and unallowable direct and indirect costs, the contractor is likely to lose out when competing with other firms that have a known ability to track costs properly.

Time and materials contracts

If time and/or certain materials are mutually agreed to be unallowable, the contractor cannot bill for those costs. In addition, if the contractor is permitted to bill and mark up other direct costs (ODCs), the markup will reflect the indirect rate of the contractor. The costs used to calculate the indirect rate can be audited and disallowed, which can result in a contractor having to repay the government for certain claimed costs. Penalties may also apply. In addition, criminal charges can be brought under the False Claims Act.

Cost plus fixed fee contracts

All mutually agreed to be unallowable costs, expressly unallowable costs and unallowable directly associated costs cannot be billed to the contracts, either directly or indirectly. These contracts require certification of the indirect cost rates proposed for final payment purposes. If unallowable costs are included in final indirect cost settlement proposals, penalties may be assessed and the company will have to repay the government for any discovered unallowable costs. As noted above, criminal charges can be brought under the False Claims Act.

How can a contractor avoid improperly classifying an unallowable cost?

No system is 100% perfect, but contractors can take steps to mitigate the risk of improperly classifying costs:

  1. Implement an adequate accounting system that has the capacity to track allowable and unallowable costs.
  2. Develop and implement formal written policies and procedures for your company and within the accounting department to note what types of costs are allowable or unallowable and procedures for determining the allocation of such costs.
  3. Train and periodically retrain all employees on company policies and procedures. Consider more routine training for accounting personnel in policies and procedures, and how to properly report and record allowable and unallowable costs.
  4. Ensure that accounting personnel have appropriate oversight provided by experienced internal staff or external government contracting specialists.
  5. Review costs as part of month-end close processes to ensure proper classification.
  6. Test policies and procedures periodically to ensure understanding and compliance with established governmental policies and procedures. Remediate when required.
  7. Routinely review established policies and procedures to ensure that they meet current standards, guidelines and are applicable to current and projected contract types.

Need help?

To make sure your I’s are dotted and T’s are crossed when it comes to allowable and unallowable costs, contact Taylor Dean, CPA, CGMA, at 703.537.0576 or online.

Tags: government contractors, unallowable costs, state and local government, Taylor Dean

How One Construction Company Saved a Bunch of Money By Outsourcing the Accounting Function

Posted by Steve Ball on Tue, Aug 08, 2017 @ 08:44 AM

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In a recent poll of Maryland construction company owners, more than one-quarter said profitability is their #1 concern for 2017. Even more construction company owners – 62% to be exact – told us that finding and retaining good employees is their biggest concern.

What if we told you there is a way to add money to your bottom line AND alleviate the pain of finding and retaining a good employee?

That’s where outsourcing the accounting function comes in.

A Tale of Two Bookkeepers

Let’s look at a hypothetical story, based on our past experiences, of a Maryland general contractor that had two in-house bookkeepers in its accounting department. With their combined salaries plus benefits, the two bookkeepers accounted for $170,000 of the company’s payroll. Although the two bookkeepers did a decent job, that was a lot of money for two employees.

Learn five technology trends construction contractors can't afford to ignore. 

When one of the bookkeepers decided to retire and the other left the company to stay at home with her children, the company was suddenly left with an unstaffed accounting department.

The owner of the company, Grace, immediately advertised the two open positions, never stopping to consider whether she could approach her company’s accounting needs in a different – and potentially less expensive – way going forward. Her company’s accounting department had been staffed by two bookkeepers for so long that it just seemed natural to hire two more.

Geez, Where Are All the Good Bookkeepers?

Grace, along with her HR manager, spent gobs of time wading through the resumes of dozens of unqualified job candidates. Some had no bookkeeping experience at all, while some were seasoned CFOs demanding a six-figure salary.

If you’ve ever been involved in the hiring process, including writing an ad, reviewing resumes and interviewing, you know how much attention it can take away from your regular duties.

After a disappointing round of initial interviews with bookkeeper candidates, Grace’s college friend told her that he outsources his company’s accounting function to his CPA firm.

Grace was intrigued about this idea and took the time to learn more about the benefits of outsourcing the accounting function.

Time For An Accounting Department Makeover?

Like many business owners, Grace assumed that bringing in a CPA firm to handle her company’s day-to-day accounting needs would be too expensive. She was skeptical. But as soon as she finished yet another horrible interview – this time, with a trainer of exotic animals who claimed to have bookkeeping experience – she called her CPA firm. Enter Plan B.

Grace was glad she made that call. Plan B ended up saving her business $74,000 a year in salary and benefits. Here’s how … 

Grace’s CPA explained how it can be hard to know when it makes good business sense to outsource your accounting function. After he listened to what Grace expected from her bookkeepers in terms of day-to-day tasks and reporting, he came up with a plan to deliver that, and more, to her.

After getting her CPA’s unbiased feedback about how her bookkeeping staff had been doing things the same way for years, Grace realized that she wasn’t getting nearly the bang for the $170K that she thought she was getting. For example:

  • Her bookkeepers weren’t producing reports that helped Grace and her management team with decision making.
  • Some of the accounting department’s day-to-day tasks that were essential a decade ago were no longer relevant due to changes in the company’s structure and operations. Yet the bookkeepers performed the tasks anyway because no one told them to do otherwise.
  • With the two long-time bookkeepers firmly entrenched in the company’s accounting department, internal controls weren’t as strong as they could have been.
  • One of the bookkeepers didn’t have adequate training on the company’s accounting software system. As a result it took her twice as long as it should to get her invoices out.
  • The company’s accounting function probably didn’t need two full-time employees to adequately support it. Had the bookkeepers’ job descriptions been more in line with the company’s current accounting and reporting needs, and if they had better knowledge of the accounting software system, two full-time employees was overkill.

Outsourced Accounting to the Rescue

Grace hired her CPA firm to streamline the accounting function in her company. Together they mapped out a plan to ensure that the accounting function only perform tasks that are absolutely essential to (1) operating the business day-to-day and month-to-month and (2) supporting her management team’s decision making.

Next, an accountant from Grace’s CPA firm assumed responsibility for handling her company’s accounting function. The accountant got quickly up to speed on the company’s accounting needs and settled into his role. In addition to compiling monthly financial statements and handling quarterly payroll filings, the accountant is available to Grace and her management team for questions and guidance any day of the week.

The Cost Savings

The cost of outsourcing the accounting function to her CPA firm was $8,000 per month. At $96,000 annually, outsourcing the accounting function saved Grace’s construction company $74,000 in wages and benefits (by outsourcing, the company no longer had to cover the cost of health benefits, parking and dental insurance). 
Grace loved seeing the $74,000 she saved in salaries and benefits go straight to her company’s bottom line. It was an instant boost in profitability! And she didn’t have to meet with anymore trainers of exotic pets claiming to have bookkeeping experience.

The Next Step

Next on Grace’s agenda as she plans big things for next year? She’s going to consider bringing in an outsourced CFO to prepare cash flow projections, improve reporting for her management team, and form a strategic plan for significant growth in the next three years.

If you’re in Grace’s boat and want to explore how you can get more out of your company’s accounting function, talk with our Smart Accounting Support Solutions team to see if outsourced accounting makes sense for you. Contact us online or call 800.899.4623.

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Tags: Steve Ball, construction, accounting, 2017 Maryland Construction Industry Survey, outsourced accounting, Smart Accounting Support Solutions, outsourced CFO

4 Soft Skills Your Construction Company Should Offer Training On

Posted by Steve Ball on Thu, Aug 03, 2017 @ 10:08 AM

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Don’t stop reading. This article isn’t about participation trophies, role playing or sensitivity training. It’s about how you can improve and retain your employees, and hopefully, grow your construction business through soft skills training.

There’s no doubt that most employees see job sponsored training as a nice benefit. It helps workers keep their skills current and fresh. If you’re a construction company owner who offers job sponsored training, you’ll likely retain your best employees because the perceived benefit of training will increase their loyalty to you.

Construction is a technical business, but when you get right down to it, it’s a relationship business. Good relationships with customers, co-workers and suppliers call for effective communication, leadership and conflict resolution. Are your employees equipped with the “soft skills” required to manage good relationships?

There is a growing trend of construction companies offering soft skills training. In fact, 43% of people who took our 2017 Maryland Construction Industry Survey reported offering soft skills training, up from last year’s 37%. This increase is promising.

If you are already offering any kind of training to your employees, pat yourself on the back. But if you don’t offer training in soft skills to employees, there’s room for improvement. Here are a few soft skills your construction company should be offering training on:

1. Communication

This is a big one for all employees. Without good communication, you really don’t have a whole lot to work with. Good communication is essential to maintaining relationships with co-workers, supervisors and subordinates. It’s necessary to deal effectively with customers and generate new business.

Soft skills training should not only include verbal communication, but also non-verbal skills like the use of body language. Let’s face it – it does no one on the job site any good to have a project manager staring down the new guy with crossed arms and a tight-lipped glare.

2. Conflict resolution

It’s no secret that the construction industry has a reputation of being rough and tumble. Employees come from varying educational and cultural backgrounds. Work can be physically demanding, and on a 95 degree day in the humidity, tempers can flare. Job sites are ripe for potential conflicts. Conflicts and disagreements between co-workers, and even employees and your customers, can sometimes arise from even seemingly benign scenarios.

Learn five technology trends construction contractors can't afford to ignore. 

Conflict within a workplace is normal and even be healthy. It’s often how problems come to the surface and get addressed. But are your employees equipped to react to disagreements in a productive way?

Give your employees the soft skills training they need to resolve conflicts before they escalate into full-blown incidents.

3. Teamwork

Teamwork is more than being a reliable shortstop on the slow-pitch company softball team. Good teamwork means you have the ability to work with others in a professional, respectful manner to accomplish a mutual goal. It’s not about everyone liking each other. It’s about trusting others, being accepting of coworkers’ ideas and knowing how to use each employee’s strengths to maximize efficiency and productivity.

4. Leadership

What if your foreman has to leave the construction site early to deal with a family emergency? Will a member of his team step up and fill his shoes for the day? Will he do so with commitment and good communication skills, and motivate the rest of the team to stay on task?

Your company’s current and emerging leaders should receive leadership training that encompasses effective delegation, listening, giving performance feedback, offering constructive criticism and motivating others.

Make no bones about it: getting employees on board with soft skills training can be like herding cats. While you might see some eye rolling when you introduce soft skills into your training program, make sure all your employees get the memo that soft skills are just as valuable as technical skills like bricklaying, dry walling and carpentry.

Need a Hand?

Sometimes it’s helpful to have a sounding board to figure out how to develop your best employees and keep them on board for the long haul. Contact Steve Ball, CPA, online or call 410.685.5512 to talk about how hold onto your best employees.

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Tags: Steve Ball, construction, employee retention, 2017 Maryland Construction Industry Survey

4 Common Misperceptions About Lost Profits Claims

Posted by James Kern on Thu, Jul 27, 2017 @ 09:04 AM

Lost Profit Claims

Claims for lost profits arise in many types of cases, including contract disputes, business torts, insurance claims, personal injury and antitrust claims.

Measuring lost profits damages would seem to be a relatively straightforward concept of determining the difference between the amount a business could have reasonably expected to earn during the relevant period as compared to the amount the business actually earned during that period.

However, determining the amount that the business could have reasonably expected to earn typically requires comprehensive analyses and projections supported by reliable evidence.

I have worked on hundreds of lost profits cases in my career. During many of those cases, I have had to address misperceptions that parties involved in the case had as to the determination of lost profits. 

Let’s discuss some of the most common misperceptions and explain the appropriate considerations in determining lost profits.

1. Lost Profits Equal Lost Revenues

Many business owners estimate their claim for lost profits to be equal to the amount of revenues that the business lost. Lost profits damages are lost “net” profits, not loss of revenue or loss of gross profit.

Proof of loss of revenue, by itself, is not sufficient to prove a lost profits claim. Using the amount of revenues lost to make a claim for lost profits ignores consideration of costs and expenses that would have been incurred to generate the revenues that were lost.

Damages for lost profits should be computed by determining lost revenues and then subtracting avoided (saved) costs and expenses. Avoided (saved) costs and expenses are those costs and expenses that would have been incurred in connection with the generation of lost revenues, but were not incurred during the damage period.

2. Businesses That Lose Money Don’t Sustain Lost Profits

There are businesses that report net losses as a result of expenses exceeding revenues. Some parties believe that since those businesses don’t report profits, those businesses will not have a basis for claiming lost profits. A business operating at a loss can sustain damages from lost profits.

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Once again, the computation of lost profits should be based on the amount of lost revenues minus avoided (saved) costs and expenses. If the amount of lost revenues exceeds the total of the avoided (saved) costs and expenses, the resulting difference is the amount of lost profits. That lost profits amount will result in the business reporting a higher net loss amount than it otherwise would have incurred.

I’ll use an example to illustrate the loss of profits sustained by a business that has been operating at a loss. A business was completely shut down for a month as a result of the actions of the defendant. Based on an analysis of the business, the projected revenues and expenses of the business were expected to be the same as the preceding month had the business remained open.

In the prior month, the business had revenues of $100,000 and expenses of $105,000 resulting in a net loss of $5,000. During the month the business was shut down, there were no revenues and the expenses totaled $40,000, resulting in a net loss of $40,000. The lost profits should be based on the lost revenues of $100,000 minus avoided (saved) costs and expenses of $65,000 (projected expenses of $105,000 minus actual expenses of $40,000), therefore lost profits are $35,000. Note that the net loss sustained by the business during that month of $40,000, as compared to the expected net loss of $5,000, reflects an increased net loss of $35,000, which is due to the lost profits.

3. All Decreases In Business Should be Included In the Lost Profits Claim

Claims for lost profits frequently assume that all decreases in revenue during the damages period should be included in the lost profits calculation, even when other factors may have caused or contributed to the decrease in revenue. The lost profits calculation should only include lost profits caused by the actions of the defendant. 

In computing lost profits damages, other factors that could have affected profits during the damage period should be taken into consideration, and evaluated to exclude the lost profits attributable to such other factors.

4. New Businesses Lost Profits Claims Are Speculative and Therefore Not Recoverable

In years past, many courts applied what is referred to as the “new business rule,” which is that claims for lost profits of a newly established business are inherently speculative and, therefore, cannot be recovered.

However, in recent years, most courts have moved away from this general rule and instead have considered the quality of the evidence presented to determine whether or not the plaintiff has demonstrated a supported basis for a reasonable estimate of its damages. The recent trend by courts recognizes that a business should not be precluded from recovering lost profits just because it is a new business.

The recent trends recognize changes in the types of evidence and analyses available to financial and economic experts, such that strict adherence to the “new business rule” is no longer necessary. Reasonable evidence needs to be presented by the plaintiff to demonstrate with reasonable certainty that it would have made a profit. Damages may be established with reasonable certainty through economic and financial data, market surveys and analyses, business records and experience of similar businesses, experience of the business owner, and through expert testimony.

In summary, lost profits damages should reflect the lost “net” profits, generally calculated based on lost revenue reduced by avoided (saved) costs and expenses. The plaintiff must demonstrate that the lost profits damages caused by the defendant are reasonable, calculated using reliable factors, and not based on speculation.

Need Help?

Our Forensics & Litigation Support Group can help. Jim Kern, CPA, CFE, CVA, specializes in damage calculations including lost profits, extra expense, business valuations, fraud and embezzlement investigations, and evaluations of financial condition and earnings of individuals and businesses. Contact him online or call 800.899.4623.

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Tags: forensic accounting, litigation support, attorneys, lost profits claims