Slow payments are way too common in the construction industry, but here are a few cash management tips from financial experts that you can start implementing today to improve cash flow.

Have more construction payment questions? Get them answered by construction attorneys and other industry experts for free: [ Ссылка ].

[best of transcript]
Challenges & risks in construction payment (03:14):
1. Cash flow is the elephant in the room but there are other issues;
2. Ensuring the proper allocation of funds is vital to a project’s success;
3. Monitoring is almost always overlooked until there is an issue;
4. Mitigating risk is everyone’s business.

-Funds control is all about transparency and making sure that funds get to the right hands (14:07)
Allocation of funds is also known as funds control. Everybody wants to make sure that they're going to get paid, and everybody wants waivers from the people below them. Each sub has their respective second tier subs or suppliers. Waivers have to be collected. You've got union dues and a number of other expenses that can encumber a project if they're not paying.
Another key component to project success is the allocation of funds and also transparency: making sure that the supplier knows who the owner is and that the owner knows who the second tier subs are. If an owner or a general contractor knows, or has a high degree of comfort that the parties beneath their subs, or anybody who has the right to encumber the project, pass funds to the right hands, things are going to flow probably a lot faster.
Getting those unconditional waivers to the owner or giving them the comfort that everybody's being paid and the funds are getting to the right place, is definitely a key. It greases the wheels and it keeps these projects on schedule.

-Monitoring your taxes, licenses, insurance, project margins, and overall project compliance is key to keeping your business running smoothly and getting paid on time (19:10)
The next key component is monitoring. It's key that the licenses, insurance, taxes, certainly, payroll taxes, as well as project margins, are being monitored.
It's important that when we have a client on board, we monitor their license or insurance, their workers' comp. We make sure that they're 940s and 941s are being filed and paid. We also monitor the project margins for them, because if God forbid there is a shortage, knowing about it as soon as possible is key. If a client of ours was losing money on a particular line item, we're going to highlight that for them right away.
Also, just monitoring the overall compliance requirements of the project is important. If it's a prevailing wage or certified payroll, you know, we want to make sure that our clients are getting that in on time to the general contractor, the owner or the lender, because again, these are key to getting paid quickly.

-Risk mitigation: strict fund control program makes sure payments flow to the right hands and that GCs and owners collect waivers from subcontractors (24:23)
If we have a subcontractor in our program, when we fund that project, we get a commitment from the general contractor regarding the funds for this particular project. So that sub now doesn't have to worry about the risk of some offset on that pay application later in the process. Likewise when the owner or the general contractor is going to release payment, they don't have to worry if the suppliers or vendors underneath our subcontractor client are paid because we employ a very strict funds control program. The general contractor and the owner know that the right people are being paid, and this avoids delays.

Levelset’s mission is to empower contractors to always get what they earn. Levelset’s products help millions in the construction industry each year to make payment paperwork and compliance easier, get cash faster, monitor the risk on jobs and contractors, and better understand payment processes and rules. The results are faster payments, access to capital, and fewer surprises. Backed by investors like Horizons Ventures, S3 Ventures, Altos Ventures, Operating Venture Capital, and Brick & Mortar Ventures, Levelset is headquartered in New Orleans, Louisiana, with offices in Austin, Texas, and Cairo, Egypt, and is over 200 employees strong. Learn more at www.levelset.com.

Want to become a payment expert? Subscribe to get notified when new construction payment videos are uploaded: [ Ссылка ]

свернуть