The PICPA’s inaugural manufacturing conference was held on December 14, 2021, and covered a variety of thought-provoking topics. As a member of PICPA’s Manufacturing Thought Leadership Committee, I had the privilege of taking part in the discussion of the challenges manufacturers in Pennsylvania are facing. That discussion culminated in the following topics which were covered by excellent presenters with a depth of knowledge in each of their respective topics. Below is a summary of my key takeaways from each session.
Session 1: Talent Acquisition and Retention
- A major focus of this presentation was on becoming an “employer of choice” by offering nontraditional benefits paired with a fantastic culture. Do not wait to see what your competitors are offering in terms of benefits, and then try to match that. Instead, lead the way!
- Enhance your recruitment by developing relationships with local CTE/Trade schools, community colleges, and universities.
- Invest in a paid internship program as a feeder system for talent.
Session 2: Economic Outlook
- Expect inflation between 3-4% in 2022.
- Labor gap of 3 million workers due to 1) baby boomers not re-entering the market – early retirement; and 2) 1.4 million women have left the labor pool since the start of the pandemic.
- Labor shortages will continue through 2022, adding more pressure for wage increases for another year.
- Both immigration and automation must play key roles in filling the US labor gap since population growth is well below the replacement rate.
Session 3: Who Do You Trust?
- Don’t rely on your auditor to find fraud, as that rarely happens.
- Fraud is typically brought to light through a tip. Does your company have a tip line and do your employees know how to access it?
McKonly & Asbury’s recent blog post covers the top fraud risks for manufacturers to look out for.
Session 4: Cybersecurity
- Out of all industries affected by data leaks, manufacturing is 2nd to industrial/engineering.
- The top control to protect manufacturing companies from cybersecurity attacks is security awareness and skills training.
- A significant portion of the training focused on the need for cyber insurance, and the recent challenges in obtaining it at a reasonable cost.
- It is a relatively new type of insurance, so insurers are reacting (overreacting?) to the increased cyberattacks by increasing your premiums, requiring a more advanced internal control environment at your company, and increasing policy limitations and exclusions.
- Legacy systems which are prevalent in manufacturing companies are oftentimes excluded from cyber insurance.
- Expect major increases to your premiums when you renew your cyber insurance policy.
McKonly & Asbury’s Cybersecurity team can help you understand risk profiles, recognize potential threats, determine risk tolerance, and create a cybersecurity program. Our support team includes highly skilled and trained professionals who work in collaboration with our clients every step of the way to assist in identifying and remediating vulnerabilities in your environment and minimizing risks to your organization.
Session 5: R&D Tax Credits – 5 Ways to Optimize It
- Investigate all relevant buckets of expenses, especially supplies
- Evaluate historic base methodology, as the “regular base” method is oftentimes overlooked
- Determine eligible state credits as requirements vary dramatically by state
- Conduct a statistical sample to consider all eligible projects and expenses
- Use the payroll tax offset if your company is eligible
Session 6: A&A Issues Impacting Manufacturing
- The biggest accounting standard change is going to be leases.
- 75% of companies have found implementing the lease standard is as complex as or more complex than revenue recognition.
If you’re interested in learning more about ASC 842 Lease Implementation, listen to a recent webinar which provides our analysis of topic 842, as well as an introduction to a lease accounting software that McKonly & Asbury utilizes for our clients. Our team is also able to assist in the adoption of the new lease standard by reviewing lease agreements and extracting relevant information.
Session 7: Cost Segregation
- Cost segregation is all about cash flow and the time value of money. By accelerating tax depreciation, manufacturers can take advantage of this benefit.
- Ideal to have a cost segregation study done on new construction or new leasehold improvements.
- Manufacturing facilities average accelerating 30-70% of the facility cost through a cost segregation study.
If you would like to discuss significant challenges your manufacturing company is facing or if you have questions about the information outlined above, our seasoned and experienced manufacturing professionals are here to help. For additional information, call us at (717) 761-7910 or click here to contact us. You can also visit our webpage to learn more about the Manufacturing Services our team provides.