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povertywhyInternet and Web Development

Nov 18, 2013 (3 years and 8 months ago)

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Cash Flow Management



Look at jobs to see where they are


if they are coming in where they should. Don’t wait until
the end of the project.



Keep an eye on your balance sheet


make it as positive as you can at your year’s end.



Proactive Plan


get a line
of credit from the bank when you DON’T need it


have it in place for
when you do need to use it


Q & A

1.

How do we monitor our cash flow? Budgeting and forecasting, understanding your financial
statements and your costs

a.

Make cash flow projections

b.

Have a mon
thly budget spread out over 12
-
18 months, then update with actuals


2.

Growth of my business is often constrained by the amount of cash I have. What are some things
I can do to loosen up cash flow and allow me to seize some of the opportunities presented to
m
e?

a.

Cash In Flows


billing (over billing)

b.

Must bill as quickly as you can



Tax Deferral Strategies

a.

Method of Accounting


defer tax burden

b.

Obtain financing

Good times to borrow


buy long term assets with financing



Examine the Balance Sheet for opportun
ities


3.

What are some of the easiest things I can do that will have the largest positive cash flow impact?

a.

Taxes are often the largest expense, review tax strategies

b.

Speed up the billing process

c.

Use long term liabilities to purchase long term assets


4.

What
should I be doing if cash flow isn’t a current issue?

a.

Review Lines of Credit and make sure they will be able to service current and future
needs

b.

Pay down debt and SAVE if appropriate

c.

Budgeting and Forecasting

d.

Staying on top of receivables


Knowing where yo
u stand and what you need


Understanding your costs and cost structure


Strong Budget 12
-
18 months


use all year round


Payroll Cycle


Unusual requirements


Ongoing monitoring of cash flow


Factors That Cause Cash Flow Crunch


Labor intensive work; Delays

on projects; Retainage; Suppliers/vendors payment terms; Cash
purchases of Fixed Assets; Slow billing; Slow collections; Owner cash requirements; Litigation;


Operations


Overbillings; Payables; Inventory/supplies turn; Collecting receivables; Close out
completed
projects quickly


Tax Deferral Strategies


Long term contracts treatments; Basis of accounting (cash vs accrual); Accelerated depreciation
(section 179/bonus/etc.); Section 199 production deduction and other credits (Fuel tax, R & D, Small
Employ
er Health Care, various others); Repairs and Maintenance regulations


make sure repairs are not
treated as 39 year assets and being depreciated as such; New building


cost segregation study; Like
kind exchanges; Timing of profit sharing contributions; En
tity structure


Financing


External financing (banks)



Establish early and Plan long term


when you need financing, it is often hard to obtain



Term debt vs demand debt/ LOC



Asset financing


appropriate terms and structure


Other third party loans



Owner Capital



Contributions



Timing of distributions


Outside Investors


Investing


Sell unused assets


For more information contact Dan Wahlberg, Hertzbach & Company, P.C.

410
-
363
-
3200

dwahberg@hertzbac
h.com

www.hertzbach.com



















LENDING TO CONTRACTORS/SUBCONTRACTORS


Subcontractors
-
More Specialized line


GC usually controls when they get paid adding extra layer of risk for subs


Managing estimations, reducing cost over runs


Lack of
Collateral (lending based on WIP, therefore unsecured)


How does your business look in regards to:

Profitability, Liquidity, Solvency, Leverage


Important information bankers look for:

1.

The correct and clear presentation of financial data

a.

Balance Sheet

b.

Inco
me Statement

c.

Accounts Receivable and Inventory Agings

d.

Job Status Reports

e.

Cash Flow Projections

f.

Contract status reports

2.

What are your billing terms & policies?

a.

Frequency

b.

Front end billings (ties up cash)

c.

Over/Under Billings

3.

Customer Concentration

a.

Is

a high percentage of your jobs coming from one GC?

b.

Is all your capital tied into one job?

Common Loan Products


Line of Credit


used for short term working capital, bridging the gap between AP and AR, does
not tie up cash



Loan Limits/Term Loans


used
to purchase equipment, vehicles etc.


Discussion Points:

Lending to subs is difficult because of cash flows, stability of contracts and business diversity

Banks don’t scrutinize any more than a bonding company does

Reporting


WIP reports, interim financia
l reports and three years of tax returns and profitability
statements should be used


Credit Lines

Small Business Administration and M & T Bank partner…M & T Bank is a preferred lender and SBA
approves M & T’s underwriting


Collateral


WIP


Contracts


Equi
pment/Materials


Receivables


sub
-

90 day level including retainage


Retainage is a crap shoot

Accounting Software


QuickBooks reports are okay, larger companies may want to have their accountant prepare
financial statements


Types of Project matter


Government funded, though slow paid will be paid, hot sector projects and the strength of GC’s
are all taken into consideration


It’s all about your comfort zones and evaluated on a case by case basis


For more information contact Michelle Haws, Business B
anking Relationship Manager, M & T Bank

410
-
952
-
2769

mhaws@mtb.com

www.mtb.com



































BUSINESS SUCCESSION AND EXIT STRATEGIES


The first step is to identify potential successors inside and
outside the firm. What will they want to see


what will they never buy. Start to think of your company as a “product” for the buyer. Would you buy
your company?



START EARLY!

o

10 years out, no later than 5

o

Succession should be part of your normal b
usiness planning / strategic conversations.

o

Have early conversations with possible partners, investors, family members. These can be
casual and start “theoretical”
-

i.e. “What if…..”

o

To get a high price you must have business Systems and Procedures
so the business can keep
generating earnings without you.

o

You must have high earnings at the time of the sale. For cyclical contracting businesses that also
means timing the economic cycle. For most owners it is emotionally hard to sell when everything

is
going great (“I am having so much fun and making so much money


why would I sell”). Of course, you
often can’t sell when things are going poorly.

o

Sometimes it makes sense to form separate divisions within the company to allow potential
internal buyers such as family members and managers a place to grow and have true profit and loss
responsibility.


SUCCESSION ISSUES

o

For many small business owner
s much of your retirement funds may come from the sale of your
business.

o

This gets more complex because for many of you your business is a part of you and it is hard to
separate the two.

o

Giving up control at the right time (usually earlier while th
ings are going well) is not easy to do.


ESOPS

o

Lots of requirements but in the right situation they can be a way to “have your cake and eat it
too”

o

Retirement plan for employees / exit strategy or at least a way to diversify investments for
owner.

o

Wo
rks best when owner intends to stay around for 5 to 10 more years. Can be used to keep
larger businesses under family control.

o

Very tax advantaged.



For more information contact: Greg Caruso, Esquire, CPA, CVA, Harvest Business Advisors

410
-
507
-
5441

gcaruso@harvestbusiness.com

www.harvestbusiness.com




SOCIAL MEDIA


MARKETING YOUR COMPANY


Put your social media links on your website


Facebook


LinkedIn


PinInterest


Google +


Twitter


YouTube


Video is a great tool. A 1
-
2 minute message is worth 1.8 million words


YouTube is the 2
nd

largest search engine


Tag


need to utilize for search optimization


Recognize the value of news recognition


if you get
in a 10 second news clip, it can be broadcast to the
world on YouTube


Create company Facebook, LinkedIn accounts and advertise events that you are attending or projects
that you do


LinkedIn is the best business to business medium


If a company can’t be f
ound online, it is like it doesn’t exist


For more information contact Greg Marsh, SLM Multimedia

410
-
207
-
8806

gmarsh@slmmultimedia.com

www.slmmultimedia.com




















INSURANCE


WHAT IS YOUR GAME PLAN TO MANAGE YOUR ANNUAL
WORKERS COMPENSATION

COST?


Mismanaged Modifiers


why employers are overcharged


Schedule Rating Plan


max available 25%; offset rate increases



Maryland Construction Credit (CCPRP)


file w/NCCI
no later than 180 days after policy renews.
Based on prior policy 3
rd

QT
R payrolls for eligible class


Carrier pays credit



Drug Free Workplace Credit


at time of employment; past workplace injury (including auto)
claims


Upfront written policy statement


By independent medical facility


Sign a Release and Consent Form



Increased Limit Factor


umbrella


over 3.6


employers liability



Claim Management


Subcontractor1


Employee vs Independent


3A vs 3C


Get ROI for WC

& GL


Statutory Employer



Premium Audit


OT/2X/


Split coding


keep accurate records; offer exec.


fill out/file forms


Don’t just turn payroll reports over to Auditor, they default to governing or highest rated class


(IRS audit)



Experience Rating Plan


Now split point on Pri
mary vs Excess


Claim review


managing claims


resolve within 180 days


7% Maryland only


For more information contact Richard Bagby, Dana Heatwole or Boyd Martin at Insurance Partners, LLC

410
-
828
-
8840 Ext 100

rbagby@insurancepartnersllc.com

www.insurancepartnersllc.com















Contracts Discussion (
revised
):

“Paid if Paid”



“Paid if paid” clause


this is a common contract clause found in many construction contracts,
including AIA forms. A “paid if paid” clause means that there is condition precedent in the
obligation for a contractor to pay a subcontractor (i.e. if the gener
al contractor does not get
paid by the owner then the subcontractor is not entitled to payment until the general contractor
gets paid). A “paid if paid” clause in Maryland is enforceable; however this clause will not
prevent a contractor from filing a mech
anic’s lien or suing on a bond (Md. Real Prop. Code Ann.
§ 9
-
113(b)).

Attorney Fees



Generally you are not entitled to legal fees for a breach of contract action unless the contract
specifically provides for attorney fees. Usually, a prevailing party wil
l only get attorney fees
based on the courts discretion.




Exception


Under the Maryland Prompt Payment Statute, Md. Code Ann., Real Property, §9
-
302(b)(3) requires owners or contractors to pay all undisputed sums owed to contractors,
subcontractors or su
ppliers with a contract, within seven (7) days after the date specified in the
contract (if the contract provides for a specific date). If a court finds that owner, contractor or
subcontractor acted in bad faith by failing to pay undisputed amounts the cou
rt can award the
prevailing party reasonable attorney fees. Md. Code Ann., Real Property, §9
-
303(b).

Dispute Section in Contracts



Jury Trial
-

Waiving your right to a jury trial is a common provision found in construction
contracts and is enforceable.




Lo
cation of Dispute Resolution
-

when reviewing your contract you want to make sure that the
contract states that any disputes should be governed by the laws of the states of where the
project is located.

Statute of Limitations

Depends on whether the proje
ct is public or private.



Public
-

If it’s public project then governed by Maryland’s Little Miller Act. Under the Little Miller
Act public projects are required to have a bond. A lawsuit against the bond must be filed within
1 year after the owner accepts

the work performed under the contract.




Private
-

If it’s a private project then bonds are not required under the law; however, many
private projects do have bonds. If the project does have a bond you are stuck with the terms of
the bond as
-
is. This type

of bond will also tell you when and how you can file a claim against the
bond. Strict adherence to the terms of the bond or your claim can be rejected.

o

It is important to contact the owner of a private project to get a copy of the bond. Most
owners will
usually send a copy directly to you. However, do not wait until a dispute
arises because the owner may not be as willing to give it to you. Also, you could be
losing precious time waiting for a copy of the bond.

Scope of Work

Read the scope of work in th
e contract!



If you find that the scope of work in your proposal is different than the scope of work in the
contract you may find yourself agreeing to more work. Consider an ‘order of precedence’ clause
or incorporating your proposal into the contract. An
order of precedence clause would state
that if there is an inconsistency between the scope of work in the contract and the proposal that
the scope of work in the proposal prevails. This clause will ensure that you only agree to the
work contained in your p
roposal.

Main Point: Make sure you read and understand the entire contract before you sign it.

For more information contact:

Charles Yumkas, Esquire
-

Offit & Kurman

443
-
738
-
1525

cyumkas@offitkurman.com

www.offitkurman.com


Amanda Peterson, Esquire


Harrison Law Group

410
-
842
-
0145

apeterson@harrisonlawgroup.com

www.harrisonlawgroup.com