Boots on the Ground

Subcontractors, The Heartbeat of Construction

Tag: cash flow

What Gets Checked, Gets Done!

Inspector with magnifying glassAnother one of Gary Olnowicz’s “Lessons Learned” from his July 2013 presentation was “What Gets Checked, Gets Done.” What he means by this, is that even the best of your employees need to be checked. Without supervision, there is too much temptation to cut corners or work down to the lowest common denominator. Further, labor productivity is critical to the profit margin and the cash flow on the project and needs to be tracked. If there is a problem on the job, the earlier you know about it, the more time you have to create a solution. If you can’t solve the problem, you can at least adjust the markup on your billing so you don’t go negative at the end of the job.

Once again, the Mercedes Benz Truck Assembly Plant in Hampton VA that I mentioned in my previous post provides a personal example. We were about a week into the job of installing the strip windows in the job. The Glazing Superintendent came in to the office and started calling Miami Wall Systems and ordering window components. When I quizzed him about it, he said the window mullions were not lining up with the columns as they were supposed to and he was going to have to make up additional small window units to compensate.

I accompanied the Glazing Superintendent back to the job and started checking the drawings against the installation. These were self-mulling windows; meaning that the vertical jambs had male/female components so that one window jamb was inserted into the jamb of the next one. I observed that the drawings provided by the manufacturer showed a 1/8” gap for expansion between each window, but the windows had been installed tight together. When quizzed as to why he had not followed the drawings, the lead installer (who was also the shop steward) snapped back that he knew how to install windows and that they were supposed to be tight together.

Long story short, the first week’s work had to come out and be re-installed. From then on, everything worked perfectly. At the end of the job we had one item on a 53 page punch list. We had a labor overrun from the part of the job that had to be re-done that cost me $1,200 out of my commission. But, I still had my biggest commission check ever.

From that day forward, as long as I was a commissioned salesman, I made it a practice to visit the jobsite on the first day and last day of work of each job. On the first day, I would show up in the early afternoon to see if the installation was going as expected and diagnose any problems and address solutions. On the last day, I would punch out the job as if I was the customer, including the operation of each door and the door hardware. I also carried a bag of thumbturns and Push/Pull stickers in my car. These were required on all jobs in the City of Virginia Beach and were often overlooked in the fabrication shop and their absence could cause an emergency service call when a Certificate of Occupancy was being held up. I had to look after my personal cash flow as well, you know.

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 http://office.microsoft.com/en-us/templates/statement-of-cash-flows-TC001046101.aspx?AxInstalled=1&c=0 . 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.