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Leasing vs. Buying Equipment
 
According to recent historical purchasing data, the construction industry's investment in equipment is expected to steadily increase in the upcoming year. Whether it's best to lease or buy is a question many companies are asking, and it can be a difficult question to answer as it depends on each company's unique financial circumstances.
 
Leasing arrangements are often utilized when the company's cash flow is an issue. Additionally, a company should consider leasing if the equipment will soon become obsolete or will need to be replaced often. Buying gives the company the benefit of control over the equipment. It does require more capital up front, but buying allows the company to take various deductions for depreciation in order to reduce taxable income.  
 
Historically, leases could be structured with certain terms that allowed those leases to be classified as "operating" so that companies could keep leasing liabilities off the balance sheet; however, soon, most all leases will be required to be recorded on a company's balance sheet. In 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, Leases, Topic 842 that will now effectively remove many of the financial statement differences that have traditionally varied between companies who buy equipment and companies who lease.
 
The new standard will require all leases that have a term greater than 12 months be recorded on a company's balance sheet as a right-to-use asset and a lease liability. The new leasing standards for nonpublic companies will take effect in 2020, but companies should begin reviewing their current leases to see how their financial statements will be impacted by this change. To read the full article, click here.
 
For additional information and answers to your questions, please contact a member of your client service team or Greg Elpers, CPA, CCA at gelpers@hsccpa.com or 800.880.7800 ext.1352.
Should Construction Companies Offer Financial Incentives to Promote Safe Working Habits? 
   
Every construction company must take steps to promote job site safety. Safety incentive programs are benefiting some businesses, while others are struggling to figure out why a safety incentive program does not work for them.
 
Incentive programs can be set up in multiple ways depending on the company. The first step is for the contractor to set goals and objectives. Next, as employees reach these set goals, they receive various different rewards. For example, it could be as simple as recognition on a bulletin board or company-wide email. As the objectives/goals increase, the recognition could increase to tangible rewards such as gift cards, time off, cash, apparel, or a banquet.
 
Receiving incentives has the potential to help employees focus on making safety a priority, decreasing OSHA or other regulatory compliance issues, and increasing morale and teamwork. Increased teamwork and decreased safety compliance issues could accelerate projects and eliminate delays often strengthening the bottom line. Bonding insurers may also look favorably on a good, clean safety record.
 
While incentive programs sound like they could only benefit a company, there are disadvantages that come along with everything. Accidents happen, and this could worsen productivity and morale if employees realize they will not be receiving rewards. Another risk that employers face is employees not reporting incidents or keeping quiet about incidents, because they want to preserve their rewards later on. This risk could increase if it is a team based reward and teammates are told to keep quite so everyone will receive their reward. Overall, companies with established strong safety records are the companies that benefit most from incentive-based safety programs.  
 
For additional information and answers to your questions, please contact a member of your client service team or Paul Esche, CPA, CCIFP, CCA at pesche@hsccpa.com or 800.880.7800 ext.1335. 
Need Money? Contractors Have Options. 
 
For contractors, it can be difficult to obtain traditional financing options due to time-consuming approval processes often ending in denial. However, alternative financing options are widely available to those contractors who are willing to accept the higher cost and risk. Consider the following alternatives to traditional financing:
  1. Invoice Factoring: Contractors can sell their unpaid invoices to a factoring company. The factoring company will pay a majority of the invoice upfront and the remainder, less a processing fee, after collection. The factoring company is responsible for invoice collection.
  2. Merchant Cash Advance: For contractors with high credit card sales, merchants can provide cash advances based on future sales. The merchant will automatically withdraw a fixed percentage of future credit card sales from the contractor's bank account until repaid.
  3. Automated Clearing House Cash Advance: Contractors who often receive payment through checks may want to consider using an Automated Clearing House (ACH). ACH's will provide cash advances based on future bank deposits, then automatically withdraw a fixed dollar amount on a regular basis until the advance is repaid.
  4. Leaseback Programs: Contractors who own equipment or property can sell their asset to a lender for cash, then rent their asset back for use. If agreed upon, there can be the option to buy the asset back.
  5. Lines of Credit: Lenders approve a specified balance of cash that the contractor can withdraw at any time, then charge interest on the amount withdrawn only. This option is best for contractors who need a smaller amount of cash.
Due to the high cost and risk of alternative financing, it is best to consult with your CPA on any options you might be considering.
  
For additional information and answers to your questions, please contact a member of your client service team or Paul Esche, CPA, CCIFP, CCA at pesche@hsccpa.com or 800.880.7800 ext.1335.
Upcoming Events   
 
ESOP Roundtable

We are proud to host ESOP Roundtable events for ESOP companies and those companies who are exploring the ESOP opportunity. As you might expect, the ESOP Roundtable agenda is member-driven and provides a place to share experiences, questions, best practices, lessons learned and successes.
   
 
This program qualifies for up to 1 hour of A&A and 1 hour of Tax CPE credit for CPAs. Choose a location and register today!
 
Evansville, IN
Tuesday, November 13, 2018
11:30 a.m. - 1:30 p.m. CST
Harding, Shymanski & Company, P.S.C.
21 SE Third Street (lower level)
Evansville, IN 47708 
Louisville, KY
Wednesday, November 14, 2018
11:30 a.m.- 1:30 p.m. EST
Madrid Building Conference Center
545 S Third Street
Louisville, KY 40202
 
  
ABOUT OUR CONSTRUCTION, REAL ESTATE, AND MINERALS ACCOUNTING INDUSTRY TEAM
  
Because Harding, Shymanski & Company, P.S.C. is committed to providing quality service to our construction, real estate, and mineral industry clients, we have selected a team of dedicated professionals to serve as your industry's consultants. These individuals understand the language and key issues unique to your industry and possess the drive and determination to help you manage your company on a proactive basis. 

If you are interested in additional news or event information, stay connected through our website and industry newsletters or follow our LinkedIn Company page.
 
 
 
 
 
 
 
SEE WHAT OUR CLIENTS ARE SAYING...
 
Inefficiencies and roadblocks were preventing our company from moving to the next level of success. We had tried working through various issues on our own, but found that day-to-day operations and other pressing matters took precedence over planning for our own future success. We found ourselves at a cross-roads of trying to determine a successful strategy for the business and finding ways to build upon the many successes we had already experienced...we knew we needed guidance to achieve future success. We have even switched our audit and tax services to HSC! I would highly recommend HSC for all your consulting, audit and tax needs. 
 
~Greg Koberstein, CEO, Koberstein Contracting, Inc. 
Disclaimer: The information contained in this email is for general guidance on matters of interest only. The publication does not, and is not intended to provide legal, tax or accounting advice.
 
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Harding, Shymanski & Company, P.S.C.
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