If you want to take on new customers and grow your business, you have to constantly assess the financial risk or reward involved. As your business grows, you will need to implement processes that can help lower the risks associated with taking on new clients, extending credit, invoicing, and collecting payments on time. Without these processes, you may be putting your cash flow in danger.
The key is to be proactive in these processes. A subcontractor and an equipment rental company both started being more proactive — and found that they are able to keep payment risk at bay.
Subcontractor Arrow Lift shares advice for being proactive
Pete Newstrom, the Vice President of Finance at Arrow Lift, has found that being proactive at the front end of jobs is key.
“I think the best thing I could say in terms of how to handle the [payment] aspect of this work is that you want to be prepared. You don’t want to wait until after something unfortunate happens. It’s like anything else — you wanted to be prepared and anticipate any challenges that might come rather than being reactive. Be proactive,” said Pete.
What steps does Pete take to be proactive? He sends preliminary notices through Levelset at the beginning of almost every job. These notices show his customers that he has an airtight billing process and is protecting his right to file a lien and get paid should problems arise later on.
“I think the primary benefit of sending those notices on the front end of projects is that it’s risk mitigation, but not in the sense of going to court. We haven’t had to do that, ever,” Pete explained.
In Pete’s experience, sending notices doesn’t set off any alarms. Instead, these notices help inform his customers that he is taking the proper steps to ensure his business gets paid on time.
Equipment rental supplier Texas First Rentals avoids financial risk
Don Myrick, the General Manager of Texas First Rentals, has also found that he can decrease risk by being proactive.
As an equipment rental company, risk is always a factor for Texas First Rentals.
“We open up 275 accounts each month, so with that comes some risk,” said Don.
However, by reviewing contractor history and sending notices before a job, Don can decrease his level of risk.
Don uses Levelset’s Contractor Payment Profiles to research contractors before signing contracts.
“With features that Levelset brings to the table, we’re able to go look at contractors when we open up the accounts and look at the payment history and establish some credit limits,” Don said.
Additionally, Don uses Levelset to automate his process for sending notices on jobs to decrease financial risk.
“For us, having a partnership like Levelset is a fantastic asset to our team. What is amazing is that the automation that this platform brings to the organization is unbelievable. We have reduced our risk. We can still say yes and take that [open] mindset with the customers, and we don’t need a super strict credit policy,” said Don.
By proactively doing research and sending notices at the beginning of a job, Don now has the confidence to take on more customers without opening his company to financial risk.
Even though Don and Pete operate in different corners of the construction industry and different parts of the country, they both use the same process to mitigate risk: They regularly check the payment history of customers and send preliminary notices to protect their lien rights and payments.
Levelset makes it easy for thousands of construction businesses to decrease financial risk.
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