How to Overcome the Challenges in the Construction Industry
Construction is one of the fundamental industries in Canada when regarding economic growth. When assessing the construction industry in 2010, data from Statistics Canada shows that “residential, non-residential and engineering, repair and other construction services accounted for 6.0% of Canada’s gross domestic product (GDP), contributing $73.8 billion.”
Having examined the current forecasts for the construction industry, the future looks very promising as Media Planet Industry and Business suggests that “by 2020 Canada will represent the fifth largest construction market in the world.” Although the current forecast depicts a bright future for the construction industry, the latest numbers released in September 2016 show that new construction growth in Ontario is beginning to stagnate, slowing down to just over one percent. According to Media Planet Industry and Business this data represents the slowest year-over-year gain since 2009, however, the over growth of Ontario as a whole will keep the industry a float.
With the current status of the construction industry it is important for businesses to take the extra steps to secure their place in the industry by taking preventive measures in order to stay on top of their profitable growth. This can be done by implementing a business plan, which will help organize their business, allowing them to grow healthy and be equipped to face these current challenges.
A significant challenge I have discovered within the industry is a lack of proper systems being installed in the organization. These systems are critical for tracking all costs, while generating regular financial analysis for both projects and contract jobs. The systems will also benefit them by accurately evaluating their profitability and deficiencies to improve their bottom line.
Secondly, through my lengthy experience working with the construction industry I believe it is vital to incorporate both a corporate structure for tax planning and a corporate finance structure. Implementing these structures will protect the assets of the corporate owners, which is especially important if they are looking to retire within the next five to ten years.
Finally, many construction business owners are needlessly paying penalties and interest to CRA for late payments or by missing filing deadlines. These fees are often occurring not because of a business’s inability to pay the CRA, but simply due to delinquency of complying with the deadlines. This is another reason why systems are so valuable to business owners because missing deadlines will cause CRA to double-dip in your well-earned profits, since penalties and interest fees are not deductible for tax purposes. This means you are responsible for paying the taxes on top of those fees you have accumulated and is why keeping records accurate, planning your growth, and implementing corporate structures are the keys to a successful business.
CPA, CGA, LPA
Partner, Assurance Services
Filomena is an Assurance & Advisory Partner at BGD. She is a Chartered Professional Accountant with over 20 years’ experience, servicing clients across a range of industries, such as consumer packaged foods, construction & real estate, manufacturing, mining, retail and professionals. Her diversified and extensive experience includes leading projects at a national Canadian grocery and […]
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