And The Sooner The Better
Construction is a risky business. Things can go wrong – even with the best-managed companies. Hoping the problem will work itself out is a natural knee-jerk reaction, but such delay may exacerbate it. Additionally, other situations and concerns may arise in the ordinary course of business. Some of these issues may necessitate outside assistance.
We’ve listed five occasions that warrant the immediate attention of your external CPA. But, of course, the best way to find out is to give a phone call to your trusted advisor and get their opinion.
- You are surprised by a significant fade on a huge contract. It happens. The prior year, your uncompleted job schedule presented a contract at 80 percent complete with a sizable gross profit. As it turns out, your project manager provided misinformation regarding the percentage of completion. As a result, the estimated cost to complete the contract was significantly understated, and the gross profit was overstated. The job is now showing a disturbingly significant gross loss and is still a long way from completion. The project manager has been fired, and you are scrambling to plug the profit leaks and complete the project.
It doesn’t occur very often, but it could bring the company to its knees. So let your CPA know early on. They can assist in analyzing the fade and structuring the best way to present the situation to your banker and surety.
- You are the victim of financial or asset fraud. The trusted CFO is caught in an embezzlement scheme. Or, perhaps the long-time project manager has been cost-shifting for several years to overstate gross profit and his year-end bonus. Your CPA can assist in quantifying the losses and plugging the holes in your internal control system that facilitated the fraud.
Fraud occurs all too often and causes untold grief. And I have seen it many times over the years. From CFOs making unauthorized “loans” to themselves with intentions of repayment, which, of course, never happened, to unsubstantiated expense reports, to payments made to fictitious vendors, to project managers shifting costs between contracts. The list, unfortunately, can go on and on.
However, solid internal control procedures can help, though not entirely prevent, financial and asset fraud. Your CPA may be able to make recommendations on strengthening your company’s system of internal controls and place some restraints on potential fraud.
- You receive notice from the Department of Labor regarding non-compliance related to your Form 5500. These notices definitely should not be ignored. The notice may concern failure to timely file all or any part of Form 5500, including the financial statement that may be required with the filing. Failure to give timely attention to these notices can result in substantial daily penalties. Therefore, it is prudent to notify your CPA upon receipt of the DOL notice so that appropriate action can be taken.
Of course, the same applies to tax notices received from the IRS and the state departments of revenue.
- You are considering a sale of your company in the near future. It’s a big decision. It takes planning long before, even years before making the placement for sale. You should let your CPA know if you are considering a future sale of the company. They can assist you in what can be done beforehand to enhance the company’s valuation and provide smoother due diligence when the time comes.
- You have had a great year, but the tax burden may be pretty heavy. It’s always an excellent strategy to do tax planning several months before your company’s tax year-end. This is a prudent thing to do every year. Cooper, Travis & Company recommends that the company and its members’ tax planning be done approximately two to three months before its tax year-end. There are several strategies available at that time that are unavailable after year-end.