Construction in Texas: Building Lasting Success Beyond the Boom 

Based on the latest U.S. Census data, Texas is home to nine of the 10 fastest-growing cities between 2020 and 2023. Accompanying that growth is an ongoing construction boom rife with opportunities for Texas-based construction companies. The question remains whether this boom is actually a bubble destined to burst. 

While construction companies should take advantage of this current market, they should also be tactical in preparing for an uncertain future. With the right approaches for managing cash flow and optimizing tax strategies, construction companies can achieve resilience regardless of economic fluctuations.

Prioritizing Cash Flow

Cash will always be king in construction, and its importance is largely derived from just how challenging it can be to maintain a healthy cash flow in this industry. 

Construction billing is unreliable and can quickly lead to negative outcomes for productivity and profitability. The unique challenges with cash management in the industry require distinct strategies while bidding, executing, and closing jobs to try to achieve effective financial control and support continuity. 

From the outset of pursuing a job, planning a flexible cash budget is an important first step. This can help mitigate negative cash flow periods, increase liquidity for corporate growth, and determine borrowing requirements for both the short- and long-term. 

It is equally important to develop cash flow strategies related to the execution and completion of a job. Companies can help accelerate cash receipts by billing on time, monitoring receivables and implementing deposit controls, such as adopting a check truncation system. 

Meanwhile, companies can decelerate cash disbursements by paying vendors on the last possible day, using company credit cards, adopting a “just in time” inventory purchase system and hiring outside labor. Finally, every job should be formally closed out as soon as possible to prevent cost overruns due to lack of oversight.

Other strategies that may help increase cash flow:

• Utilizing cash flow forecasting by examining past and future billings, costs, and overhead;
• Negotiating contracts for early payment discounts and other payment clauses;
• Maximizing interest income with short-term investments;
• Introducing technology solutions, such as artificial intelligence tools for billing tasks; and
• Conducting credit checks on new clients.

Optimizing Tax Strategies

Success and resilience for construction companies can also depend heavily on strategic tax planning tailored to the specific needs of the industry. Committing to proactive tax planning with the help of a forward-looking CPA can unlock access to financial benefits only possible through an advanced understanding of tax laws. Skillful application of tax credits and deductions can help increase cash flow, while strategic compliance efforts can help reduce a company’s overall tax burden. 

Tax advisors specializing in the construction industry can help with a wide variety of tax considerations, including:

• Operations and Accounting Internal Controls Reviews to establish and improve cost controls and processes related to operations, accounting functions, and financial reporting;
• Financial Statement Audit and Assurance for delivering accurate financial statements for lenders, vendors, regulators, and investors;
• State and Local Tax Consulting to quantify and mitigate sales tax obligations;
• Tax Credits and Incentives such as R&D tax credits and energy incentives from the Inflation Reduction Act;
• Tax Planning and Compliance to maximize tax deductions, plan for like-kind (1031) exchanges, conduct cost segregation studies, and/or design benefits packages and retirement plans, etc.; 
• Succession Planning to explore transition options to partners, family, and third parties; and
• Outsourced Construction Accounting for assistance with managing day-to-day accounting functions and access to advanced financial insights.

Optimize your tax strategy with Aprio’s business tax advisors. From securing valuable tax credits to navigating complex regulations, our holistic approach helps businesses grow. Let us help you minimize tax liabilities and create opportunities for reinvestment. Schedule a consultation today and achieve what’s next at Aprio.com.

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