The rapid economic slowdown brought on by the pandemic has made for trying times for construction contractors with even robust recovery and business continuity plans.
While the industry is not out of the woods yet, thoughtful, pro-active business leaders have had success in weathering the last few months. The steps they took and the lessons they’ve learned are instructive when preparing your construction business for the next unexpected upheaval, whenever that may be.
Here are a few:
- Build a solid relationship with lenders. Access to adequate credit is always important, especially in difficult times. The Paycheck Protection Program (PPP) provided a solid example of this. In many instances it was financial institutions that led the way, reaching out to their best clients to help them access PPP funds.
- Keep billings and collections current. Keep an especially close watch on under billings and change orders. Being able to quickly convert potential accounts receivable into actual billings—and then into cash receipts—can be a lifesaver for contractors.
- Keep technology up to date. Many companies had to rush to set up systems that enabled administrative and management personnel to work from remote locations efficiently and securely. Any future crises are also likely to require quick action from IT, so keeping hardware and software up to date can help companies adapt more readily.
- Implement a strong and effective safety program. If safe operating practices are ingrained as part of the company culture, it will be much easier to adopt those practices to accommodate any new crisis-specific responses that may be needed.
- Develop collaborative contractor-subcontractor relationships. Many subcontractors were able to survive the initial COVID-driven shutdowns because their general contractors made an extra effort to keep them working. Conversely, many GCs were able to keep their doors open because their subs were patient and flexible. Everyone benefits when GCs and subs are allies. This is especially true when delays or complications arise due to factors beyond either company’s control.
- Maintain accurate, current, and reliable accounting systems. Accurate, up-to-date financial information is essential during a crisis. When financial pressures mount, contractors often must produce current information on short notice.
- Reconsider long-term commitments. With many administrative employees still working remotely, some contractors are revisiting their long-term lease contracts for office and warehouse facilities. Because the circumstances of future crises are, by definition, unpredictable, prudent managers should consider whether certain standard, long-term contracts could become burdensome.
- Examine or amend contracts. What was sensible contract language previously may not be workable any longer. If a project is suffering from a year-long delay, a 10% retainage could incur significant financial strain on your business. While it may not be possible to renegotiate existing contracts, now is the time to consider changing language in future contracts that will allow for a more flexible approach should the economy face more upheaval.
Dembo Jones’ construction industry experts can provide the insight for short- and long-term profitability for your business and ensure you’re well-positioned to withstand the current disruption and the next. Speak to our team today.