When the construction season gets into full swing are you taking time to work on the business? Staying current on billings? If not, it’s time to regroup. Sometimes it’s easy to let things slide when we are busy. Here are some things to keep in mind as you navigate your business through the busy construction season.
Safety – Are you emphasizing safety or in your haste to keep the schedule moving, are you letting (or ignoring) cut corners which could bite you hard in workers’ compensation claims and ratings and insurance premium increases?
Safety (Again!?) – Are you taking care of your employees on hot/long days? This helps with motivation, work product and employee retention. Make sure they know that you value their health first and stand behind your word. Reward them with an unexpected day off somewhere when you are able. Give gift cards to those who go above and beyond. Employees are hard to find. Do the little things to help retain the good ones.
Billing/Invoicing Practices – Are you billing timely and completely? Do your processes allow you to get field data when you need it in order to get billing completed timely? Are you capturing all change orders? Are project managers taking the time to update revised estimates so you really know where you stand on jobs (for progress billings)?
Lien Waivers – Does your lien waiver process work well or are you scrambling to pull these documents together so that you can get paid? Send conditional waivers with your billing and be ready to trade unconditional waivers for checks. Get downstream waivers and affidavits ahead of time as well.
Retainage – Do not forget to bill it. Many forget to do this. I recommend billing retainage with your last invoice. It gets it in the payor’s system and gets it into your regular accounts receivable for tracking. Feel free to push the due date out if you have a sense of when it should pay.
Adjusted Labor Rates – Many of you are having to pay more for labor. Make sure your bid costs reflect your most current pay rates.
Overtime and Downtime – These must be factored into your bid cost. If you are working a lot of overtime, as many are, make sure that your hourly bid rate is more than a calculation of average loaded hourly rate per class. You need to capture overtime rates and non-job time in order to make money.
Make Money – Speaking of, how close are you to covering your breakeven costs? That’s when the fun begins! If growth has caused a substantial increase in overhead costs, have you recalculated your projections? Remember, don’t just hope that you are making money, plan to make money. This planning often needs some midseason adjustment.
Don’t Trade Checks – I hope you are not just working to trade checks. Now, I have been told and I do understand that there may be times when you need to take work at slim, very slim margins in order to keep employees happy and working. Labor is the number one issue most contractors have mentioned this year when I ask about challenges. You do not want to lose the good ones.
Paid When Paid – Do not get upside down with accounts payable and accounts receivable. Make sure your subcontractors are getting paid when you are paid. Having a subcontractor file a lien against your project is not where you want to be. Enough said.
Manage Your Cash Flow – Many of you have turned the corner on cash flow at this point. Even if you are not paying down your line yet, you are at least able to operate without having to draw on it any further. I totally understand that this dynamic depends on job mix and timing but, as an owner, you should have intimate knowledge of how the line is moving and what it is being used to fund.
Communicate With Key Advisors – Your bank, your bonding agent, your Certified Public Accountant (CPA) firm should all be kept in the loop as to how your company is performing. You do not like surprises; nor do they. And if the surprises are good ones, your CPA (tax advisor) should be kept in the loop so you can benefit from thoughtful tax planning. And, as one of my favorite clients says, “you don’t have to be able to spell a million to make a million” so, surround yourself with the talent that compliments you, and go make a million!
Brigid M. Huber, CPA is the president and owner of Contractor Strategy Consultants. She has spent the last 25 years working in both public accounting and industry, specializing in the construction industry for the last 15 years.