Boots on the Ground

Subcontractors, The Heartbeat of Construction

How’s Your Project’s Cash Flow?

TenaciousFirst Posted September 2, 2013

In an uncertain economy, a positive cash flow is imperative. Your goal should be to exit the recession with the same amount of cash you entered with. If you don’t have cash, you won’t be able to fund the materials and labor necessary to take on additional work when the economy recovers. Your accountant furnishes you with a periodic cash flow statement at the end of the period, but very few subcontractors do a cash flow statement on their individual projects. A project cash flow statement will let you know how each job is affecting your overall cash flow.

You can download an Excel template for a simple cash flow statement at . You should have your project manager furnish a monthly cash flow statement on each project. You only need to do the top section, Cash Flows from Operational Activities. It is only 7 lines long and you are only concerned with the top three lines, cash received, cash paid for materials and cash paid for wages, benefits and other operating expense. The template will calculate your cash flow for the project.

Why do a project cash flow statement? The project manager has the most influence on cash flow and contractors fail when they run out of cash.

Tips for improving your project cash flow:

  1. Front load the Schedule of Values. This is critical to maintain a positive cash flow on the job.
  2. Get the billing in on time and done correctly. Re-work on the billing is deadly to cash flow.
  3. Negotiate for payment of stored materials.
  4. Negotiate lower retention terms. Make sure the contractor passes through any reductions he gets from the owner.
  5. Email your invoices. Even if you are still required to mail an original, the contractor will still be able to include your billing for the month if the mail is delayed or lost.
  6. Utilize ACH payments. The money is sent directly from their bank to your bank.
  7. Get a check scanner from your bank and immediately scan any checks received.
  8. Have one person dedicated to collections. Must be tenacious.

Forecast for 2014… A Lot Like 2013

Martha-Ann Marley First Posted September 1, 2013

Long-time members of ASAC-Charlotte, now NC Subcontractors Alliance, will remember a program in 2008 by Martha-Ann Marley, called “A Contractors Diet: How To Get Lean.” The program was a segment of her 2 hour seminar and based on an article she wrote for the CFMA magazine, “Building Profits,” January-February 2006 issue. Based on her 24 year experience as a surety underwriter with a major surety company, poring over thousands of financial statements, audits and economic data, she realized certain common attributes of companies that survived and thrived during down economies, versus those that failed. The main attributes being, maintaining liquid assets, cash flow and a plan for controlling costs during the downturn.

Based on her study of economic data, she predicted that the coming recession, now known as The Great Recession, would be deep and would not begin to show improvement until 2013. She gave a detailed list of things that contractor’s needed to do to survive and thrive during the recession. In her latest seminar based on her article “Stuck in Neutral?” “Building Profits”, May-June 2012 issue, Martha-Ann shows the data that indicates the bottom of the recession was reached in early 2013. But, there are not yet any indicators showing that the economy is pulling up off the bottom. She has now revised her prediction. Now, she predicts that the economy will not show improvement until late 2014.

There is still a lot of uncertainty in the economy. What is the Fed going to do with interest rates? What is going to be the cost to your business for Obamacare? What will be the impact of pending federal regulations from OSHA and EPA? Remember, the EPA director in speeches has promised to “regulate the coal industry into bankruptcy.” What will that do to energy prices?

If you can’t attend one of Martha-Ann Marley’s seminars, you owe it to yourself and your company to read her articles. She is now NC President of Gardner Insurance Group. These articles are available on her website, and can be downloaded in a pdf format by clicking on the pictures of the magazine covers.

In The Beginning

Art-1iwMy name is Art Rouse. I have been employed by Binswanger Glass for 39+ years. I have worked as a sales representative, office/operations manager, branch manager and now as the area administrative manager. I have been involved in all aspects of subcontracting, from estimating to project management. My current job is to assist Binswanger locations in North Carolina and western Virginia with the administrative side of subcontracting and requires that I stay current with legal issues that affect subcontractors.

I will be blogging for the North Carolina Subcontractors Alliance. This is the former Charlotte Chapter of the American Subcontractors Association of the Carolinas. In a special meeting of the membership in June 2013, a majority of the membership voted to disassociate itself from ASAC and focus on legislation and construction issues at the state and local level.

The plan is to link this blog to the NCSA website and online newsletter. Since the organization will be using the WordPress templates for the website and newsletter, I have been asked to do my blogging on WordPress as well. My original posts were done on my personal blog on BlogSpot, so my next few postings will be re-posts from BlogSpot.

I hope you find these posts helpful and relevant. I will try to keep them interesting and timely. Comments are always appreciated.