3 Common Cash Flow Issues That Plague The Construction Industry
August 20, 2019 —
Patrick Hogan, HandleThe construction industry has its fair share of serious cash flow problems. The nature of the industry with long periods between billing and collection, the unpredictability of some business factors, and even the day-to-day decisions of stakeholders have a huge effect on cash reserves.
So how can you protect your business from these cash flow problems? Having a greater awareness of the most common cash flow problems is the key to maintaining your financial stability. Here are some of the top cash flow issues that construction companies need to watch out for.
1. Uncontrolled business growth
The growth of a business as a cash flow problem sounds unintuitive. It is supposed to be a positive thing. So how could it hurt your construction business? When it goes out of control.
During the growth phase, the company will need to expand its operations to meet the increasing demand. This means renting a larger office space, hiring more staff, and buying more inventory, all of which can burn through the company’s cash quickly. The more substantial the level of your growth is, the more your cash flow is affected.
Growth is a good thing, but it is important to be aware of the pitfalls that you could encounter that can lead to cash flow problems. If you are dealing with a volatile growth instead of a stable one, you have to think twice before expanding your operations. A quarter with a large number of construction project deals does not guarantee the same happening in a subsequent quarter.
2. Change of scope or scope creep
The scope, or the statement of work, is the foundation that guides a construction project from start to finish. It specifies all the deliverables needed by the project as agreed by all stakeholders. When the existing requirements are altered, new features are added, or project goals are changed uncontrollably, what happens is scope creep and it can hurt a company’s cash flow.
Construction projects can take a long time before they are finished. A lot of factors can result in changes in the scope. There may be changes in the market strategy, market demand, and other unpredictable variables that make changes in the project requirements a necessity. These changes build up and the project may shift away from what was intended, causing delays, loss of quality, and the rise of planned costs.
One way to prevent scope creep from affecting cash flow significantly is charging a fee for variations of the scope of work. However, having a solid and clear scope baseline is still the best way to combat scope creep. Reminding clients of what you signed up for by referring to the baseline is a good strategy to deal with pushy clients.
3. Payment delays and nonpayment
As previously mentioned, the construction industry tends to have a lengthy period between sending an invoice and collecting payments. And if you are too passive in your collection, clients are more likely to extend pay periods and delay paying you.
Unexpected delays in payment and other payment issues can have a devastating effect on companies that have little to no cash reserves. Without a cash cushion to fall back on, payment issues can threaten the existence of the business itself. If you are unable to manage your receivables, you will not have enough cash to pay the bills, pay employees, and fund your growth.
Payment delays and nonpayment can happen for several reasons. They can be simple like mistakes in the invoicing or the person needed to approve the invoice is unavailable. More serious reasons like a client unsatisfied with your service or, worse, trying to scam you are also possibilities. For these reasons, it is crucial to communicate with clients properly and see if you can agree with a payment structure or pursue legal action.
The construction industry operates slightly differently from other industries. Different projects produce different cash flow issues and require different strategies. By being aware of the top cash flow problems that can hurt your construction business, you will be better equipped in dealing with them in case they happen.
About the Author:
Patrick Hogan is the CEO of Handle, where they build software that helps contractors, subcontractors, and material suppliers secure their lien rights and get paid faster by automating the collection process for unpaid construction invoices. Read the court decisionRead the full story...Reprinted courtesy of
Patrick Hogan, CEO, Handle
COVID-19 Vaccine Considerations for Employers in the Construction Industry
July 11, 2021 —
Maggie Spell - ConsensusDocs1. Can employers in the construction industry require employees to receive a COVID-19 vaccine as a condition of employment?
In short, it depends. Back in December 2020, the U.S. Equal Employment Opportunity Commission (EEOC) explained that, generally speaking (and under federal law), employers can require employees to receive the COVID-19 vaccine. However, there are a few caveats.
First, certain employees may need to be excused from a mandatory vaccination requirement as a reasonable accommodation unless it will present undue hardship. Under the Americans with Disabilities Act (ADA), employers must provide reasonable accommodations to employees with a covered disability that prevents them from receiving the vaccine. (Fact sheets for the COVID-19 vaccines include examples of some of the underlying medical conditions that may result in an accommodation request.) And under Title VII of the Civil Rights Act of 1964, employers are similarly required to provide reasonable accommodations to employees with sincerely held religious beliefs, practices, or observances that prevent them from getting the vaccine. Employers requiring the vaccination would be wise to consult with an experienced employment lawyer before denying an accommodation. Accommodation issues stemming from administration of the COVID-19 vaccine (and COVID-19 more generally) are likely to plague employers for a while, so getting ahead of this issue is key.
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Maggie Spell, Jones Walker LLPMs. Spell may be contacted at
mspell@joneswalker.com
Putting for a Cure: Don’t Forget to Visit BHA’s Booth at WCC to Support Charity
April 28, 2016 —
Beverley BevenFlorez-CDJ STAFFBert L. Howe & Associates, Inc., (BHA) is excited to announce the return of their very popular
Sink a Putt for Charity at the 2016
West Coast Casualty Construction Defect Seminar. This year, participant’s efforts
on the green will help benefit the Susan G. Komen Race for the Cure. As in years past, sink a putt in the BHA golf challenge and win a $25 gift card, and for every successful putt made, BHA will make a $25 cash donation in the golfer’s name to the Susan G. Komen Foundation.
But it doesn’t stop there. Breast cancer touches so many lives, with wives, mothers, sisters, aunts, cousins and daughters all affected by this insidious disease. To further assist in their noble fight, BHA is doubling down. During three Championship Rounds on Thursday morning, afternoon, and evening, BHA will up the ante. For every putt ATTEMPTED (sink or miss), BHA will make a $50 donation to Susan G. Komen, and for every putt MADE, the golfer will also win a $50 gift card.
These Championship Rounds will occur during the Thursday morning break, the afternoon break, and during the first hour of the Thursday evening cocktail party. Bert L. Howe & Associates, Inc., strongly supports the goals and principles of the Susan G. Komen Race for the Cure, and is honored to assist in fulfilling its mission of supporting research, community health, global outreach and public policy initiatives.
While at the booth, don’t forget to test out BHA’s industry leading data collection and inspection analysis systems. BHA has recently added video overviews to their data collection process, as well as next-day viewing of inspection data via their secured BHA Client Access Portal. Discover meaningful cost improvements that translate to reduced billing while providing superior accuracy and credibility.
Attendees can also enter to win Dodger baseball tickets or one of three new iPad Pros! Other BHA giveaways include USB charging blocks, pocket tape measures, multi-tools, laser pointers, foam stress balls, and Callaway golf balls.
For more information on the Susan G. Komen Foundation, please visit their
website.
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High Court Could Alter Point-Source Discharge Definition in Taking Clean-Water Case
March 18, 2019 —
Mary B. Powers - Engineering News-RecordThe U.S. Supreme Court's decision to review lower court rulings on whether a permit is required under the federal Clean Water Act when pollutants originate from a point source but are carried to navigable waters by a non-point source such as groundwater could set some new parameters for compliance, observers say.
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Mary B. Powers, ENRENR may be contacted at
ENR.com@bnpmedia.com
Indiana Appellate Court Allows Third-Party Spoliation Claim to Proceed
August 01, 2023 —
Ryan Bennett - The Subrogation StrategistIn Safeco Insurance Company of Indiana as Subrogee of Ramona Smith v. Blue Sky Innovation Group, Inc., et al, No. 22A-CT-1924, 2023 Ind. App. LEXIS 157, the Court of Appeals of Indiana (Appellate Court) reversed a trial court ruling that granted the motion to dismiss filed by Michaelis Corporation (Michaelis), a restoration company. The Appellate Court ruled that the trial court erred in dismissing the plaintiff’s spoliation and negligence claims against Michaelis, who discarded evidence relating to the cause of the fire at issue.
The plaintiff’s insured owned a home in Indianapolis, Indiana. On Halloween night in 2019, a fire occurred at the property. The plaintiff’s representatives preliminarily determined that the fire may have been caused by a digital dehydrator within the kitchen. Michaelis had a representative present at the site inspection and was allegedly told to preserve the kitchen area. That area was taped off with “caution” tape. Michaelis also placed a tarp over the kitchen to prevent weather damage. Despite the instructions and precautions, Michaelis demolished the kitchen and discarded the dehydrator along with other fire debris.
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Ryan Bennett, White and Williams LLPMr. Bennett may be contacted at
bennettr@whiteandwilliams.com
It’s Time to Include PFAS in Every Property Related Release
June 01, 2020 —
John Van Vlear & Gregory Tross - Newmeyer DillionWhile the federal government and states (including California) are working on establishing standards and how to manage the toxic chemicals known as PFAS (as defined below), certain states and banks are requiring testing for PFAS to approve no-further-action (NFA) determinations or to underwrite loans. PFAS do not easily fit within standard definitions of hazardous substances used in today’s agreements. Thus, if you want to ensure you and your successors are released for PFAS which later environmental testing may reveal, ensure such is specifically listed in your releases.
What Are PFAS
As depicted in the recent major-release movie Dark Waters, PFAS are a group of very stable man-made chemicals that are both toxic and ubiquitous. They are long-chain chemicals which means they do not naturally degrade easily.
Reprinted courtesy of
John Van Vlear, Newmeyer Dillion and
Gregory Tross, Newmeyer Dillion
Mr. Vlear may be contacted at john.vanvlear@ndlf.com
Mr. Tross may be contacted at greg.tross@ndlf.com
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Do Not Forfeit Coverage Under Your Property Insurance Policy
February 22, 2021 —
David Adelstein - Florida Construction Legal UpdatesIf you have read prior articles (see
here and
here as an example), then you know that when it comes to first-party property insurance policies, an insured must comply with post-loss obligations in the policy. Failure to comply with a post-loss obligation gives the insurer the argument that the insured materially breached the policy and, therefore, forfeited rights to coverage. Naturally, this is avoidable by ensuring post-loss obligations are complied with, ideally under the guidance of counsel and qualified public adjusters to ensure your rights are being preserved and maximized.
[W]hen an insurer has alleged, as an affirmative defense to coverage, and thereafter has subsequently established, that an insured has failed to substantially comply with a contractually mandated post-loss obligation, prejudice to the insurer from the insured’s material breach is presumed, and the burden then shifts to the insured to show that any breach of post-loss obligations did not prejudice the insurer.
Universal Property & Casualty Ins. Co. v. Horne, 46 Fla.L.Weekly D201b (Fla. 3d DCA 2021) quoting American Integrity Ins. Co. v. Estrada, 276 So.3d 905, 916 (Fla. 3d DCA 2019).
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Narberth Mayor Urges Dubious Legal Action
June 15, 2017 —
Wally Zimolong - Supplemental ConditionsWhen I left Philadelphia, I thought I had largely left NIMBY zoning disputes behind. However, I quickly learned that the Main Line NIMBY is simply a tiger of a different stripe (and better financed and represented than their Philadelphia brethren).
One dispute that recently caught my attention concerns the proposed demolition of a 120 year old church in Narberth. A developer wishing to demolish a church and develop apartments and drawing the ire of certain neighbors is something that is routine in Point Breeze or Fishtown. However, apparently the same is true on the Main Line. At issue in the case, is a restriction contained in a 1891 deed that apparently states that only a church can be built on the property. (The article discussing the case does not quote the precise language of the purported restriction.)
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Wally Zimolong, Zimolong LLCMr. Zimolong may be contacted at
wally@zimolonglaw.com
