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6 Ways to Help Your Construction or Real Estate Business Weather the Economic Storm

November 3, 2020

By Scott Mason, CPA

Weathering the Economic Storm

Nearly every industry has felt the economic impacts of the coronavirus pandemic. The real estate and construction industries are no exception. Although certain sectors, such as home remodeling and building, are going gangbusters, supplier sourcing remains an issue. On the commercial side, building owners are fielding rent deferment requests from tenants while appraisal values, for the most part, continue to decline. With more uncertainty and the winter season ahead, many in the industry are concerned about what their cash flow—not to mention, their business—will look like next year.

The good news is, there are things you can do right now to position your real estate or construction business to weather the storm. Here are six actions to consider.

1. Take a close look your business’ future financial health.

In other words, consider projecting, or forecasting, your cash flow. A cash flow projection can help you understand what your business’ financial health will be tomorrow, so you can make better decisions today.
Normally, I tell my clients to look 12 months out when projecting cash flow. Given today’s uncertainty, however, consider reducing your projections to six months. Also, as you conduct your projections, be sure to account for the repayment of any abatements or deferrals you may have been granted.

2. Maintain good communication with your lenders.

Lenders are concerned about cash flow, too. As tenants request rent deferments and property values fall, some lenders are asking building owners for additional funds to decrease loan to value ratios. Keeping your lenders abreast of your situation could help you avoid a surprise request for a cash commitment.

3. Have a plan? Share it with your employees.

In these challenging times, employees want to hear from their employer—they want to know if their job is secure. If you haven’t already, consider sharing the current state of your business as well as your management’s plan for the future with your entire team. This might mean having a frank conversation if your business isn’t doing well. Either way, it’s important for you to be transparent, as your employees are critical to your ability to recover.

4. Evaluate your systems and people.

Now is not the time to be inefficient. Now is the time to look for ways you could increase efficiency and lower costs in your business (that don’t involve layoffs). You don’t have to overhaul your processes or staffing configurations all at once—even a small improvement can make a big difference.

5. Understand how the latest tax rules could affect you.

The tax rules surrounding the Coronavirus Aid, Relief, and Economic Security (CARES) Act are constantly in flux. There are also new tax rules related to depreciating property improvements and business interest that are more favorable to owners to consider.

6. Equip yourself with the right tools and resources.

No one can say what the next year will bring to the real estate or construction industry. Taking action today—to better understand your financials and taxes, strengthen your relationships with lenders and employees, and operate more efficiently—can help you make the most of it.

If you’re having trouble taking action or unsure of where to start, we’re here to help. Our business advisors and tax experts can offer the guidance and tools you need to move forward. We can also support you with our AEM Recovery Readiness Check-in, which provides business owners with a short questionnaire to determine what their unique needs and challenges are. We then customize an action plan to help your organization address these challenges as you move through the business recovery phase. To learn more, contact us today.

Take the COVID-19 Recovery Readiness Check-In

Scott Mason, CPA, is a Business Partner at Abdo, Eick & Meyers and enjoys the challenge of solving client’s problems. Beyond tax preparation and financial reporting, he helps clients in all types of industries, as well as nonprofit organizations, overcome issues such as cash flow management, financing and budgeting, and tax, succession and estate planning.

You can reach Scott at (952) 449-6215 or click here to contact him via email.

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