Construction Executive Risk Management Publishes Guide to Improve Receivables and Cash Flow

It’s no big secret that the construction industry faces payment challenges, and difficulties throughout the payment chain. When such a high volume of labor and/or material furnished on credit combines with the large number of parties on a project and the complicated payment structure tying them together, there are bound to be some hiccups. Payments become delayed, A/R reports start to look unkempt, and cash flow begins to get squeezed. If left unchecked, these problems can be significant and devastating for construction industry participants.

In a recent article published by Construction Executive: Risk Management, I recently addressed how receivables and cash-flow problems can be managed and improved by leveraging the mechanics lien and bond claim process. By providing visibility, and always remaining in a secured position a company that has implemented a 5-step receivables funnel can make payment problems disappear.

A/R and Cash Flow Can Be Significantly Improved With 5 easy Steps

Construction-Executive-Lien-ArticlesFor lower-tiered parties, one highly effective way to manage and improve A/R, and increase cash flow, is to implement a thorough receivables funnel by leveraging the power of security rights.

Parties who furnish labor and/or material for the improvement of property are granted a security right in the property (or a bond) to protect against nonpayment. While certain steps must be taken to protect and ultimately exercise this right, the ability to do so is built directly into the law. By making sure to be visible to the parties in ultimate control of the money by sending preliminary notices, and making sure that those parties are also aware of the secured position of the noticing party, payment problems can be virtually eliminated.

By following 5 simple steps,

  1. At the beginning of a project, send a preliminary notice to protect security rights and provide visibility of involvement on project.
  2. After the account is in default, send a notice of intent to lien to prompt payment.
  3. If payment is not received after notice of intent is sent, file a mechanic’s lien/bond claim to perfect the security interest.
  4. If the mechanic’s lien not paid , send it to collections.
  5. If collection is unsuccessful after set period, file a foreclosure or bond claim enforcement suit.

companies can completely reinvent their A/R reports, improve cash-flow, and be empowered to pursue more business. Getting paid more quickly and writing off fewer bad debts is good for any business – construction industry businesses have a simple process to make sure it happens for them.

[zlien id=”27649″]


Posted

in

by

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *