How TGG Helped a Construction Company Evaluate a Costly Workforce Decision
When a construction and field-services company considered switching from 1099 contractors to W-2 employees, the financial implications went well beyond wages. The decision had to account for payroll taxes, workers’ compensation, benefits, and changes to gross profit.
TGG Accounting developed an employee-by-employee cost comparison model to help the company evaluate its options. But the financial review also uncovered another concern. We discovered 721 open reconciling transactions between the company’s accounting system and its bank.
These findings brought two priorities into focus:
- Understand the true cost of the staffing change and its potential impact on profitability.
- Resolve outstanding accounting discrepancies to establish a reliable financial picture before moving forward.
Understanding the True Cost of Moving Contractors to Employees
From residential contractors to commercial construction companies, businesses across the building trades can face significant changes in labor expenses when moving workers from 1099 to W-2 status.
Comparing contractor payments with employee wages alone doesn’t capture the full financial impact.
TGG built an individual comparison model incorporating additional employment expenses, gross profit dollars and percentages, and employee take-home pay.
The model was designed to give leadership a clear, side-by-side view of the financial implications for both the company and its workers before making a decision.
Looking Beyond Labor Costs to the Bigger Financial Picture
An employee-level cost comparison was only the beginning.
TGG also outlined a financial planning process that would use the combined gross profit impact to develop an income statement forecast, followed by a cash flow forecast.
For construction companies juggling multiple crews, projects, and financial obligations, these forecasts can help leadership anticipate changes to profitability and cash requirements before committing to a workforce transition.
Weekly Reporting
keeps everyone on the same page
Forecasting
allows for informed decision making
Attention to Detail
guards against pitfalls
Sophisticated Insights
give our clients the cutting edge with investors
Identifying Risks and Establishing a Path Forward
During the same engagement, TGG identified 721 open reconciling transactions between the company’s accounting records and its bank.
The finding added another layer to the staffing decision. A workforce transition could create new financial obligations, but unresolved accounting discrepancies made it difficult to assess the company’s existing financial position with confidence.
By developing a detailed staffing cost comparison and identifying critical accounting issues, TGG Accounting helped leadership evaluate workforce options while creating a plan to address financial discrepancies that could affect the decision.
What TGG’s Consulting CFO Said
“This is the biggest concern I have. This will be the focus of the next six weeks. This can materially affect your financial results.”
— Charles Cecil, Consulting CFO, TGG Accounting
