Construction professionals at work


The snow has melted, the weather is getting warmer, and the sun is shining higher. It’s spring time, and the construction industry is kicking into high gear. With more projects available to work on, contractors are staffing up and buying building materials to prepare for the increased workload. This is great news. However, a sudden onset of more work has its own complications.

More projects means more laborers and more materials. Laborers and materials require cash, and cash flow for contractors isn’t the best during the winter months. Thus, the transition into spring can be difficult, as many contractors are being hired for work, but don’t have the money on hand to pay for the labor and materials needed to complete that work.

This isn’t so different from the risks that many contractors have had to deal with during the rebound from the recession. When your volume of projects decreases, so does your cash on hand. When your volume of projects inevitably increases, you need more cash – often more than you have.

So how do contractors prepare for the increased velocity in business when the weather gets warmer? Operate with decreased risk and the confidence that you’ll be paid on time. Here are a few tips to help you take on more work with little cash:


1. Don’t Bite Off More Than You Can Chew

Just because new business is available, it doesn’t mean your company should take on more work. Look at what cash you have on hand, what cash is owed to you (accounts receivable) and determine what your company can afford to take on given the payment cycles common in the construction industry.


2. Protect and Perfect Your Mechanics Lien Rights

Liens are your ticket to ensuring payment for every project. You can’t guarantee that everyone else on the project is smart about managing cash the same way that your company is. So the best way to protect against late payment, or non-payment, is to protect and perfect your mechanics lien rights (or bond claim rights) for every project.

With sound lien security, your business can take on more work with the confidence that you’re much more likely to get paid on time. If you aren’t paid on time, you have the most effective tool for recovering payment in your back pocket.


3. Make Smart Credit Decisions

You know your customers, and you should understand the challenges your customers will be facing. It’s too easy to get burned in the construction industry just because your customer has mismanaged cash. Your company might be mindful of the uptick in construction project volume, but your customers might not be as wary. Stay informed about your customers, and try not to lend credit where there is too much risk. After all, you aren’t a bank, and you shouldn’t be lending money like one.

As we continue into the warm weather months, keep an eye out for more articles with tips and tricks that will help your company succeed this season.

Want to learn how to protect your mechanics lien rights? Learn the simple process that Fortune 500s and small businesses alike use to secure their lien rights and get paid.


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