In our new YouTube series, Built for Growth, we talk with experts about some of the biggest issues facing the construction and manufacturing industries. For our first episode, we were honored to have Loretta Calvin, Diversity & Inclusion expert and CEO of Monroe Strategic Business Solutions, join us to discuss diversity in construction.
It is no surprise that construction faces a diversity issue. The stereotype of a white, male, middle-aged construction worker has been largely accurate for decades.
According to the Bureau of Labor Statistics, the construction professional workforce breaks down like this, in terms of diversity:
- 9.9% women
- 6.2% Black
- 2% Asian
- 30.7% Hispanic/Latino
Why diversity in construction matters
Calvin spells out why construction business owners need to invest in diversity and inclusion. For one thing, the workforce is aging out of the business. The median age of a US construction worker is 42. Investing in diversity efforts can open up new pools of talent.
Construction is a great career track, with an industry average salary of just over $53,000, plenty of career stability and opportunities for upward mobility. With expertise in a construction trade, construction management, or construction administrative services, you can work almost anywhere in the country, or even the world.
According to Calvin, the industry should invest in training and educational programs for high-school students, women, and other under-represented groups, in order to increase awareness about construction as a career track and build early relationships with future recruits.
- Diversity also opens up new opportunities for government and municipal projects. General contractors and large subcontractors can partner with minority-owned businesses to win government contracts, which often have diversity workforce requirements.
Last but certainly not least, investing in diversity and inclusion supports your business’s productivity, workplace culture, and innovation.
If you are interested in working with Loretta Calvin and Monroe Strategic Business Solutions, click here to send an email.
Construction funding for contractors helps cover the costs of payroll, materials, insurance and more before the project begins. Many subcontractors, and GCs who self-perform, are caught in a cycle of robbing the cash from one job to get started on the next. Why? It is NOT because most contractors are bad with money. They are not. It is because the majority of costs associated with starting new work have to be paid, weeks or even months before the first pay app is issued. Construction financing for commercial contractors alleviates this burden by providing the capital contractors need when they need it most — at the start of the project.
Types of Construction Financing for Contractors
Not all construction funding solutions are the same, and your choice can make a HUGE difference in the success — and the ultimate profit margin — of a new project.
We’ve written previously about many of the lending products available to contractors. Invoice factoring and Asset-Based Lending, for example, are common in the industry, but since they do not provide funds before an invoice is generated, we will not cover them specifically in this article. You can read more about invoice factoring and ABL credit here.
Merchant Cash Advances
Let’s get this monster out of the way first. Merchant Cash Advances are, unfortunately, a very common method for contractors to get the capital needed to start a job. The money is quick and feels easy to get, which should be your first warning. If a lender or broker really understood construction they would not recommend a loan product that has daily or weekly payments to a company that collects money once per month.
MCAs are BAD for construction contractor companies. Even just one small MCA can spiral into a whirlpool of debt that drowns you and your company. Before you take an MCA, we invite you to read our guide: The Real Cost of a Merchant Cash Advance.
Personal Financing
Contractors who cannot secure traditional bank funding but have personal assets such as home equity, personal savings, or retirement funds, may choose to dip into these to cover the upfront costs of a new project.
This strategy works, but it carries a tremendous personal risk. The construction industry is infamous for delayed schedules and slow payments. Be careful when putting your home or retirement fund up as collateral for your business project needs. In construction, a job can go bad through no fault of your own, or because a General Contractor or owner takes 90 days to pay an invoice.
Available Cash
Cash flow in construction is complex; every project has associated costs and an expected profit. In order to keep your company cash flow positive and growing, it is important to treat available cash not as a first resource, but as a last one. Keep a good reserve of cash on hand for emergencies, and leverage other funding options to mobilize on new work that will ultimately result in even more cash on hand.
Bank Lines of Credit
This is the gold standard for working capital lending. The funds in your LOC can be used for anything, including financing the upfront expenses on a new job. Similar to cash, though, it is important to use your LOC to drive business and fund monthly operations while saving some availability for more critical needs should they ever arise. It is also important to pay the LOC back when you receive the cash back each month – banks like and need to see the money used this way.
Materials Funding
There are alternative lenders who specialize in providing funds for construction materials. Typically, this type of funding is not a loan, but an agreement between the contractor, the supplier, and the third-party lender. The lender pays the supplier directly and the contractor pays back the loaned amount after a certain time period.
Payroll Funding
Meeting payroll needs is one of the biggest challenges for construction companies, especially on a new project. The demand for labor is highest at the start of the project, but the cash from the job won’t come for at least 30 days after you submit an invoice.
Payroll financing is a type of invoice factoring, where you agree to sell your AR to the funding company. In return, they provide up to 90% of the AR value in the form of a loan for payroll.
Contract Financing
We believe that commercial construction contractors can succeed at their highest level of performance when they have the funds to hire the right amount of labor, supplies, and materials needed for the job. When contractors have PEACE OF MIND that the costs of insurance, permits, and bonding are covered too, they can dedicate 100% of their energy and focus to the task at hand: safely and successfully completing a project on-time and on-budget.
That is the goal with every loan we make. Here is how we do it:
Our short-term construction funding loans are tied to the specific project. The money can only be used for project costs — materials, supplies, labor, bond premiums, etc. The repayment plan is aligned to your pay apps, which reduces the overall strain on cash for the business and relieves the stress associated with how you are going to pay for the project related costs. The repayment of the loan is in line with when you are paid for the project so you can pay off the loan as you earn the money.
Are we the only game in town when it comes to commercial construction contract financing? No, but we are confident that we are the best option. Let us prove it to you.
Every new project is an opportunity to build your reputation and grow your business. Don’t let the upfront costs of new work keep you from realizing your true potential. Call us today at 813-712-3073 to discuss your construction financing options.
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Why the Commercial Construction Industry Benefits from Alternatives to Traditional Lending
The manufacturing industry was uniquely impacted by the coronavirus pandemic. For the first time in history the industry’s workforce, product demand, and supply chains were all affected at the same time. One of the greatest challenges was cash flow. Manufacturers, much like construction contractors, often operate on tight profit margins and while PPP loans and other government programs helped, many other sources of financial aid dried up.
Manufacturers had to safeguard their businesses and prepare for the long-term consequences of the pandemic while continuously pivoting in response to short-term situations. Even now, as the country reopens, there are new questions and challenges.
The need for information from expert sources familiar with the manufacturing industry has only grown. That’s why we partnered with Dare Capital to create a 3-part webinar series just for manufacturers, Planning for the Present, Preparing for the Future.
In this video, our CEO Scott Peper joined Adam Boyd of Dare Capital and Douglas Arthur of Windsor Capital for a discussion of how manufacturers can survive 2020 and prepare for growth in 2021.
Watch the recap below.
Don’t miss the next webinar in the series, The Future of Manufacturing. You can register by clicking here!
The construction industry is built on relationships. Having a background of mutual trust and respect, on top of a history of solid performance, can catapult your company over the competition when it matters most. If you are new to the industry, this is intimidating. You need the jobs to build the relationships, and you need the relationships to get the jobs. Creating a set of core values for your company and broadcasting them to your customers will signal to a GC or owner that you are a solid worker and an aligned partner. Core values will win you more business, attract and retain the best talent, and give you and your team the most fulfillment from the work you do.
Core Values Defined
Core values are the principles that guide YOU and consequently your company’s actions, the individual actions of your leadership team and employees. They are the foundation of your corporate culture — how you speak and behave toward each other, your customers, your larger community, and the world at large.
Core Values Start with You
In an article from Winning the Business titled Improving the Win Rate for Your Organization, growth consultant Jeremy Brim writes, “the biggest determining factor in win rate and the growth trajectory of organizations … is the behavior and commitment of their leadership and how that is cascaded down through the organization.” You have to create a culture of winning. You do that through established values of perseverance, integrity, and excellence.
It’s okay if your core values are aspirational – they should be. Present them to your team with an action plan that takes you from aspiration to reality. Values must be statements that truthfully and accurately embody your company’s culture. If not, they are meaningless at best and harmful at worst.
Values Matter Every Day
To reap the benefits of core values, you have to actually live them. In the HBR article, Make Your Values Mean Something, the core values of Enron are listed: Communication, Respect, Integrity, Excellence. That sounds great, until it was all revealed as lip service.
You can’t put your core values on the wall, or on your website or letterhead, and call it a day. Just as in the rest of life, words and actions build reputations in the construction industry, not fancy displays with no substance. You have to embody, and live in each day, the core values of your company. This is why they have to start with YOU. Every day, in every decision, you must allow your core values to guide you.
Remind your team to allow the corporate values to drive them when making decisions and acting on behalf of the company. When your core values are a living practice shared by your entire organization, rather than a dead-on-arrival document, you all act according to those values. Acting with integrity and respect earns you a reputation for having integrity and being respectful. Striving for excellence in everything you do creates a reputation of excellence, because it becomes your and your team’s standard.
Establish core values to guide how you will work — then go do the work.
Core Values Drive Sales
Core values define culture, which guides actions. This includes how your sales team approaches new opportunities. Your core values are the cornerstone of your sales culture. When your entire sales team is aligned in their approach to new business, you get consistent results you can bank on.
Your core values set you apart from the competition. They create a positive identity around your company. They become part of what your company is known for. That can be a powerful influencer during the bidding process.
Imagine a steel erection company, we will call them Sam’s Steel, submitting a bid to a GC they’ve never worked with before. Sam’s core values include statements such as:
- We are accountable to our customers, our community, and each other.
- We always communicate with as much transparency as possible.
- We are committed to excellence in everything we do.
The bid includes a schedule of the way they will go about doing the work, how they will invoice for it each month, a cash flow prediction, breaking down the startup costs for the project, estimated weekly expenses, and how they finance their schedule and project costs. It also includes a testimonial from another general contractor. In the testimonial, the GC says that Sam’s Steel was great at communicating, open about challenges and ready with solutions, and that they performed excellent work with no major issues.
The GC can see that Sam’s Steel is already living by two core values: transparency and accountability. The project cost breakdown shows the gaps in cash flow, and the subcontractor has wisely already solved the problem for the GC. The testimonial lets the GC trust in Sam’s Steel plan and gives them peace of mind that the work will meet and exceed their standards. The trust comes in the details that Sam has provided and provides the comfort to the GC that Sam knows what he is doing!
Core Values Drive Hiring
There is a common misconception — in the construction industry and others — that skilled labor goes where the money is. The truth, according to the data, is that money is rarely the primary reason an employee leaves a job. In fact, according to a report from Hays US published in Construction Dive, 65% of surveyed construction professionals would take a pay cut for their ideal job. Even more telling, the #1 reason given for employees leaving was … CULTURE.
Create a culture that is hard to leave. Live your values with your team as much as you do with your customers.
According to a report from Manila Recruitment, 80% of employees leave due to bad hiring decisions. That means their resignation is on You. If a recruit can’t perform the work, you failed to hire the right person. If a recruit doesn’t share your company’s core values, you failed to hire the right person.
Make your core values known at the beginning of the hiring process. Talk through them with recruits. These are our expectations. This is the code we live by. If someone does not align with your core values, they are better off elsewhere, and you are better off without them. Not because they are bad employees, but because they throw your company’s alignment off-balance. It only takes one employee who does not believe in acting with integrity, for example, to frustrate and demoralize the rest of the group.
Core Values Drive Personal Fulfillment
As the leader of your company, I can guess that you spend a LOT of time at work. Why not enjoy that time more, by being surrounded with people who share your principles? They don’t have to share every opinion you have (in fact, that would be boring and limit your creativity), but they move through the world making decisions based on the same set of values that you do.
That is what a team built on core values gives you.
When your team is built on values, their performance, both on the jobsite and off, can be a source of pride. Invest in their ability to live those values in their own personal lives, and the feeling of pride and fulfillment only grows. You are now building a business with a purpose.
When core values guide your company’s actions, you reap the reward of new business, better employee retention, and your own personal happiness.
Like what you just read? Then you will LOVE our newsletter. Our CEO Scott Peper shares his personal journey to live a life and lead a company driven by purpose and guided by core values. We also include industry news, upcoming events, and our latest videos, blogs, and digital guides. You can subscribe by clicking here.
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Since the beginning of the coronavirus, the construction industry has found itself wading through murky waters. Are we essential? Is our project on hold? If we are working, how will we keep our team safe? And if we are not, how will we keep our teams paid?
It has been a LOT to figure out. Luckily, many companies that serve the construction industry have rallied to provide clear, accurate information specific to your industry, your challenges, and your opportunities. We partnered with legal, financial, and other experts to produce our Coronavirus Q&A YouTube series, for example.
Even as the country slowly begins to reopen, there are new questions around construction work. The need for information from expert sources familiar with the construction industry has only grown. When Levelset asked us to join their Coronavirus & Construction Virtual Town Hall, we sent them back an emphatic: WE ARE IN!
Mobilization Funding’s CEO Scott Peper joined Ben House, a construction and commercial litigation attorney in Texas, and Greg Reaume, an attorney with McInerey & Dillon, a construction litigation firm based in Oakland, California.
Listen to the recap to hear their answers to the questions asked by construction business owners just like you!
Questions like:
- What difficulties or challenges do construction business owners face during COVID-19?
- Will there be lien period extensions due to all the courts being closed?
- How can subcontractors do a due diligence check to vet the GCs and owners of their projects?
- What happens if an employee contracts coronavirus and files Workers Comp?
- What are the laws concerning workers who had been infected to return to work?
- How can you protect employees ongoing? Can you ask them to wear masks? Submit to temperature checks?
- And more!
You can also access the video and a full transcript on Levelset’s website.
This construction finance content was produced in partnership with DARE Capital.
You are having success building your construction business. You have blueprints for jobs, but a financial blueprint for your company? Not so much.
If your construction business is growing every year, but …
- your paycheck seems to stay the same;
- you always feel like cash flow is too tight;
- and it is stressing you each week to make payroll;
then it is probably because you lack a financial plan that supports your growth. There are very easy (yet not widely known) ways to control your expenses through a cash flow plan. This allows you to finance your growth – and YES, it was created for and is specific to construction.
You need a goal and a plan that will help you reach it. You need to understand your options to acquire capital when you need it, what to spend it on, and how to pay it back without slowing down your momentum.
Accounting: Your Construction Finance Foundation
Solid financial tracking and reporting is the bedrock upon which you will build your company’s future success. Before you can plan for future profit, you need to know exactly where your money is going now. The only way to do that is to clean up your current bookkeeping and accounting practices.
Separate your personal expenses from your business accounts.
Your personal and business checking accounts must be separate and so should the expenses associated with each. This may seem obvious, but too often we see personal and business expenses in one account. For one thing, a merged account is just not professional and is more likely to result in problems for you – whether it is at tax time or if you are trying to get a business loan down the road.
Your company’s ability to build credit is also negatively affected when you blend business and personal spending.
Keeping your business and personal accounts completely separate will save you hours of work and frustration in the long run.
Open a dedicated payroll checking account.
It is common for business owners in construction to operate their entire business from one bank account, but it is not advisable.
One of the biggest reasons for having a dedicated payroll checking account is cash flow management. In construction, the balance of your bank account is rarely the amount of cash you actually have on hand. Those funds are already ear-marked for vendors, suppliers, and overhead costs like rent, utilities, and debt payments. Don’t double-book funds for payroll on Monday only to discover they are gone on Thursday. Keep your payroll safe and you employees paid on time!
A separate payroll account ensures the money you have assigned for your employee’s paychecks is available when those checks are cashed.
Get more payroll tips in our blog, Payroll Tips for Subcontractors.
Hire an accountant.
You may think hiring a Certified Public Accountant (CPA) will cost too much money, but the reality is a good accountant will save you from making costly mistakes and allow you to focus on growing your business.
It is good practice to hire an accountant right away, but if your company has more than a few employees, your revenue is growing, and you are juggling multiple jobs, it is definitely time to hire a CPA. A good accountant often pays for themselves in a relatively short amount of time. After all, finances need to be current and accurate for you to stay on top of your accounts and plan for growth.
Know the financial warning signs.
Your company’s financial health is much like your own — it needs regular, preventative check-ups to spot warning signs early. Unfortunately, many business owners are only monitoring one vital statistic when it comes to their business – cash. That’s like assuming you are healthy just because you have a pulse.
Here are the financial warning signs you need to watch out for:
Negative cash flow.
If your business is routinely spending more than it earns, it probably doesn’t matter how much new business you generate. That’s because with each new job, more expenses will come too. A prolonged negative cash flow is a red flag that something is very wrong.
Cash flow is tricky in construction, with a large portion of project costs coming out long before any revenue comes in. This is another reason a CPA with experience in construction finances is so essential for your future growth.
Poor profit margins.
This particular warning sign is common in construction, and sometimes can be solved with a simple bidding adjustment. If you are applying a blanket markup on top of project costs to every bid, you may be starving your company of the essential profits it needs to grow and thrive. The total overhead cost divided by your total revenue is the percent you need to add to bids to properly account for overhead in your future estimates.
Falling profit margins may also signal an increase in costs or a decrease in income. This is a warning sign you need to address immediately. Once profit margin impacts cash flow, other complications arise quickly.
Debt payment performance.
If you are constantly extending your payment dates or missing debt payments entirely, your company should head directly to the financial equivalent of urgent care. An inability to pay your debts on time tells creditors you are in real trouble, which will limit your options of recovery.
Late payment or poor payment performance can also lead to even tighter cash flow constraints because it will reduce your ability to get credit from your suppliers. Having to pay suppliers COD will further limit cash and can then lead to the need for even more long-term debt which will further erode your company’s profits.
Assess your financial foundations.
Before you create a plan to grow your business AND make a profit, you need to know where your company stands financially. In order to get an accurate assessment of your finances, you will need to start with good financial reporting. These are the three reports you need to have on a monthly basis to review your company’s financial standing:
- A Balance Sheet
- An Income Statement
- A Statement of Cash Flow
What are you looking for exactly? Just like health warning signs, there are clear indicators when a business is doing well.
- Revenue growth year-over-year, if not month-over-month
- Flat or minimal expense increases as a percentage of revenue
- Positive cash flow
- Ability to service your debt payments and overhead expenses
- A consistent (and hopefully High) overall profit margin
- Steady new business pipeline
- High customer retention
If you don’t have all of these right now, don’t worry. Once you identify the weak spots in your financial foundation, you can work to shore them up — either before you launch your plan for growth or at its start. Your CPA can tell you what each of these financial statements mean for you and how you can make adjustments to best impact your business.
Materials List: Your Construction Finance Solutions
One of the most common mistakes business owners make is to view debt as a thing to fear rather than as a tool for growth. The reality is plenty of business owners borrow money not because they need it to survive, but because it is the smartest way to capitalize on an opportunity.
However, financial solutions are not one-size-fits-all. In order to build a financial plan that will support your growth, it is important to use the right funding option for each opportunity. Here is a list of funding sources your company can take advantage of, when it is best to use them, and when it is not.
Cash
Cash is king, and everybody loves that feeling of paying for something with cash. Too often, business owners get so hung up on the pride of paying with cash that they forget that cash is king for a reason — it can save you when there are no other options. For this reason, access to your cash is very important for actual emergencies.
There are four critical rules for cash to always keep in mind:
- More cash is better than less cash;
- Cash now is better than cash later;
- Less risky cash is better than more risky cash;
- And finally, never run out of cash.
Good for: Ensuring your ability to survive during a pandemic, making sure payroll is covered when your customers pay late, or taking advantage of an opportunity that arises.
Don’t use for: There are no bad uses of cash per say, only when you deplete all your cash.
Selling equity
Equity is the most expensive form of debt so be sure you are getting value for the equity you bring in. That “Value” is not necessarily always a lot of money, but it can be experience and talent in areas of business that you need. You want to avoid “dumb” money, and instead seek equity partners who bring something like industry expertise, access to a customer or set of customers, or have favorable relationships with suppliers.
Good for: Raising cash for working capital to drive the business, pay off high interest debt, bring in expertise that can help your business, or to help fortify your balance sheet.
Line of credit
This is the gold standard for working capital lending. The funds in your LOC can be used for anything, including financing the upfront expenses on a new job. Similar to cash, though, it is important to use your LOC to drive business and fund monthly operations while saving some availability for more critical needs should they ever arise.
The only real downside to a LOC is that is retrospective — it is always determined by your past 24 months financial performance, not the next 24 months. If you are growing fast, you may outgrow your line of credit.
Good for: Working capital. The cash needed on a day to day basis to manage expenses that will otherwise turn into an invoice o your customer (for example: COGS, other material purchases, equipment rental, and payroll).
Don’t use for: Buying Vehicles, equipment, or other capital expenditures that you don’t intent to pay off right away from business operations.
SBA loans
A term loan or working capital line approved and backed by the Small Business Administration is often easier to acquire than a traditional bank only line of credit, if you qualify as a small business. For commercial construction, the SBA defines a small business as one with no more than $39.5 million in average receipts.
SBA loans require a LOT of documentation and a good sponsor. Working with the right bank to sponsor your SBA loan is very important, as it can impact how they present your business. The bank is still taking a risk on your SBA loan and their assessment of your business and the perceived credit risk is just as critical to the approval process. Not every bank that makes SBA loans are created equal and each of them have different criteria for approval. Just because one bank turns you down for an SBA loan does not mean the SBA turned you down!
The downside to an SBA loan is once your company grows too large, it will no longer qualify.
Good for: Working capital, initial capitalization for your business, acquiring or merging wit another business, refinancing debt.
Invoice factoring
Invoice factoring is common in construction, as it significantly shrinks the 60-90 days between you submitting an invoice and receiving payment. A factoring company will advance you a percentage of the invoiced amount upfront. This makes it a powerful tool to balance out unpredictable cash flow streams, which gives you the chance to fund your project for the next month of the job and reduce the amount of cash needed to operate a project. Having access to more of your cash will allow you to do more projects that fit into your strategic growth initiatives.
The drawback is invoice factoring does not get you funding before a job starts or before you submit an invoice. Many high-performing construction contractor companies use invoice factoring combined with another financing solution, funding growth and keeping the cash flow stream moving positively.
Good for: Project-related expenses and operational overhead associated to the project you invoiced.
Don’t use for: Buying equipment or starting another project, or paying off long term debt (you need profit for that or another form of long term debt).
PO financing
Less common in construction is Purchase Order financing, in which the lender will pay your supplier to fulfill the order. The customer or supplier then pays the PO financing company directly. It deducts its fees and sends any remaining balance to you.
Good for: Cost of Goods Sold (COGS) purchases, other materials.
Merchant cash advances
These “quick-cash” daily debit loans can destroy otherwise profitable and healthy businesses. An MCA repayment involves a daily or weekly draw from your checking account, which can make forecasting your cash flow even harder than before. These daily withdrawals are almost impossible for commercial construction companies to keep up with, especially in the months after a project is completed but the loan is still active.
Think about like this – if you take out a loan today because you are short on cash and the repayment of this loan requires daily or weekly payments, but you only are paid monthly and often times that is even more delayed – then how could you possibly think you will be able to keep up with a daily or weekly payment without the money coming from somewhere else it is needed – like payments to your suppliers, vendors, or employees payroll.
MCAs are very easy to get, but can have devastating long-term effects including bankruptcy and personal credit problems.
Good for: I cannot in good conscience recommend an MCA for a construction company as I have seen way too many devastating things happen to great people.
Mobilization loans
This is a short-term loan that is tied to a specific project. It is meant to cover the upfront costs of launching new work — materials, supplies, labor, bond premiums, etc. When working with a partner such as Mobilization Funding, the repayment plan is aligned to your pay apps, which reduces the overall strain on cash for the business and relieves the stress associated with how you are going to pay for the project related costs. The repayment of the loan is in line with when you are paid for the project so you can pay off the loan as you earn the money.
Good for: Any project related expenses – material, equipment, labor, insurance, etc.
Don’t use for: Purchasing equipment, refinancing other debts
Other options
There are other funding options that work well in the construction industry, such as heavy equipment financing and payroll financing. The best thing for a company owner to do is to find financial partners they trust and lean on them when a new funding question arises.
When you know all the tools at your disposal — what they do and in what circumstances they will work for your business — you can make borrowing decisions that not only protect your company from loss but help bolster its growth.
Grow to New Dimensions
Now that you have a clear and accurate look at your financials and know the different funding solutions you can use to balance cash flow and execute on new work, it is time to set goals for your financial growth.
Setting Financial Goals
Your financial goal can start with a revenue number you want to achieve. For example, “I want my company to be a five-million-dollar business.” But numbers rarely inspire a team, especially when facing the inevitable growing pains that will come with growing your business.
Push a little deeper and give that number a purpose. What will it mean for you and your employees if you grow from a two-million to a five-million-dollar company? A purpose-driven goal is more effective at aligning your entire team, getting everyone on the same page and working toward the same goal.
Make sure the goal is ambitious but achievable and tied to a metric of time so your progress can be measured.
Profit
Revenue is important as it’s an indicator of growth. But keep your eye on profitability and set some profitability goals by total number (i.e. $2.5 million in two years) and also as a percentage (i.e. go from 7% net profit to 12% in three years). Sometimes we fall in love with big revenue numbers, but we have to keep our eye on the prize of profit.
Cash Reserves
While this may sound impossible to some people, it’s important to focus on building a cash reserve to weather inevitable (and sometimes absolutely unpredictable) downturns. Have a goal of at least two months’ cash put away. The recent pandemic is likely to encourage companies to build up even more cash reserves. If you can do three, four- or six-months’ cash, that’s great. But start with a small goal – the ability to operate on your own cash for at least one month, or two. Aim to grow it little by little each year. If you are growing each year by 10%, you need to grow that cash reserve by at least 10% to maintain two months’ cash on hand. It’ll help you sleep better at night knowing you can weather a storm.
Customers
While this isn’t a financial goal, it’s worth considering having a goal tied to number of customers. A broader base of customers can reduce risk for a company. If a large customer is lost, it helps to have a significant number of other customers with jobs to which workers can be redeployed. It also makes the future a little less risky, because other customers can make up for the shortfall of losing that customer.
A growing customer base can also show a bank another data point of the company’s health when that bank is considering making a loan.
Your Dashboard
Everyone with a car has a dashboard. It tells us how fast we are going, where RPMs are, how much fuel we have, and our oil levels. This is a snapshot of our vehicle’s performance and ability to perform. A company needs a dashboard, as well. There are a handful of numbers that are really important to help manage the business, and they will differ slightly for each company. But generally, they are simple, though not always tracked for growing businesses.
Customer Satisfaction
Given the importance of reputation in construction businesses and services, this is something to keep an eye on. As online reviews have become more commonplace, it is even more important: the better work you do for someone, and the happier you can make them, the more likely you are to gain additional work. The opposite is also true: unhappy customers are likely to tell five other people and hamper the ability to win new jobs. Seek to collect information on customer satisfaction. A simple “Net Promoter Score” (NPS) rating, “How likely are you to recommend others use us?” is a great way to track this.
Market Share
This one may be challenging to gauge given your particular market or niche, but you want to know how you’re doing relative to the competition. This pertains to how much of the available work you would like to have that you are winning.
Margin
As we said before, profit is what matters most, and the healthier a company is in other areas on this dashboard, the healthier its profitability. This needs to be tracked over time so owners and managers can determine if the company is getting healthier or weaker, or remaining the same. It is also an indicator of how well jobs and the business are being run. Are you gaining margin as you grow?
Labor Utilization Ratio
It is important to track the utilization of your most important asset. For most companies, that is their people. For others, it might be a piece of equipment. But it is crucial to know how much of our labor is working and how efficiently. Once a company knows this, they can set parameters around what that ratio needs to be. For instance, in one company, they might know that as long as their labor is being used 80% of the time, they’re ok and they will be profitable. But if they fall below 70%, they are in trouble. They may also find that if they get to 90% labor utilization, they must turn away other jobs.
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Equipment financing is another powerful tool to help your business grow and succeed. Financing a newer piece of equipment can help you cut costs, avoid delays, and build credit. We sat down with Gerald King, founder of King Commercial Capital, a cash flow solutions brokerage firm that specializes in equipment financing, to learn how equipment financing works, when you should use it, and how to find the right funding source for your needs.
What is Equipment Financing?
Put simply, equipment financing is the use of a loan to purchase a piece of equipment for your business. It is a broad term and can be used for smaller pieces of equipment like a $5,000 stamper and for million-dollar items like bulldozers and cranes.
The terms and details of the loan vary by lender and by the client’s needs, says King. “There are multiple solutions for financing for businesses. It depends on the business. When someone calls and says I need to finance this bulldozer, I talk to them about their needs. Their financing needs. I have to learn from the client what they need to structure the solution properly.”
When to Use Equipment Financing
Many contractors may shy away from obtaining financing and, preferring to pay for equipment in cash. It’s understandable — paying in cash feels like the responsible thing to do, but is it the best use of your cash reserves?
Probably not. There are plenty of instances when your business might need cash on hand — a project delay might put payroll in jeopardy, for example. King advises clients to utilize available financing solutions and save cash for emergencies. “Don’t spend $100,000 on a new piece of equipment in cash and then have nothing in your coffers. Cash is king. Save it for when you need it.
Equipment Financing and Banks
If you have a line of credit with your local bank, you may consider using that to purchase your new concrete mixer. Hold that thought. A bank line of credit (LOC) is similar to cash — it is a finite resource and is extremely valuable in an emergency. Tapping out your LOC on a five-year loan isn’t the best use of that available capital, and you’ll miss having that LOC option if your business suffers a financial pinch in the future.
Another reason an equipment finance broker is a better option than the bank? Exposure. A bank can (and will) only loan so much money. It’s a matter of risk mitigation. However, finance brokers often have a variety of funding sources, which means they may be able to loan more to one individual client than a bank can.
This can be critically important if your business is growing. King says, “A bank won’t grow with you. They will draw a line in the sand. Equipment finance partners don’t run into that exposure problem. They can grow WITH you.”
Finally, a bank looks at an equipment loan much like an auto loan. If the equipment is several years old, they may not consider it to be valuable enough to warrant the loan amount. Equipment finance partners have far more flexibility. “If it makes you money, saves you money, or makes you more efficient,” says King, “I can usually get it financed.”
When Not to Use Equipment Financing
Most equipment finance loans are taken out for used equipment. That’s because new equipment is often purchased from a distributor or manufacturer, and they offer their own competitive finance options.
Other than new heavy items financed through the manufacturer, equipment financing can be used to purchase a number of items your business needs. King says, “Equipment can be anything from computer software to a crane. Bulldozers, dump trucks, whatever it is you need.” He added with a smile, “Just don’t ask me to finance the vending machine.”
Sorry, snack lovers.
Equipment Financing Documentation
What paperwork you need to submit will depend on your lender, your business, and the equipment you intend to purchase. King says that often a smaller-ticket item can be financed based on an “application only” submission. That means you only have to provide bank statements and an application. Larger items, anything over $100,000, requires a full credit package including a few years’ tax returns, and possibly your personal bank statements and tax returns.
But, King advises sending over as much documentation as you have, regardless of the size of your loan. More documentation helps paint a more complete picture of your business — it tells the story of any hiccups on your credit and how this equipment will help you grow.
“I have to paint a picture to underwriting on why this bulldozer is going to be good for their business,” says King. “I need to be able to explain the hiccups on their credit. More documentation makes it a verifiable story.”
Renting Versus Owning Equipment
Are you currently renting a piece of heavy equipment and think buying would save you money? It might, but it depends on usage. King has a formula to help contractors decide when to pull the trigger on a new purchase. “If you are going to use the equipment 30% of the time for business purposes, definitely buy.”
Maintaining Equipment Versus a New Purchase
Let’s say you have an old forklift that you keep repairing because you don’t think you can afford to buy a newer one. Before your next trip to the mechanic or parts shop, sit down and do the math. How much is this piece of machinery costing you to maintain? If the cost of its maintenance is higher than the cost of a payment on a newer, better, more reliable piece of equipment, then it is time to turn that bad boy in.
“The cost is only going to increase,” King says. “If you spent X this year on maintenance for this equipment, what are you going to spend next year?”
There is another cost to consider if the equipment is critical to your business performance. Work stoppage and delays are cash flow problems, and cash flow problems are like snowballs rolling down a mountain. They grow exponentially if you don’t stop them fast.
“If you can’t use the equipment, how does that impact your schedule?” says King. “And how does that schedule impact affect your cash flow? For example, if you are doing underground boring and your older equipment breaks down, you can’t work. Downtime is a cash flow problem. It makes sense to buy and keep your guys working.”
Choosing an Equipment Finance Partner
Not all equipment partners operate similarly, and there are bad apples in the industry just like anywhere else in lending. King cautions contractors to do their research, ask questions, and read the fine print before signing.
There are three practices some lenders utilize that you want to watch out for, says King. They are:
Evergreen clauses. An evergreen clause means if you don’t terminate your financing, it auto-renews. That could mean you get stuck with way more payments than you originally contracted. For example, if you had a 36 month loan or lease, and you get stuck with an evergreen clause, you might end up paying an additional 30-35% on top of the original asset cost.
Payoff penalties. Some equipment finance lenders will include “prepayment penalty” or “sum of total payments” language, which basically means that if you pay off the loan early you still have to pay the interest and fees associated with those future payments. Ask your prospective lender if there are any pre-payment penalties or fees, and if future interest is included in the payoff amount. Then, read the contract to verify their answer.
Interim payments. Think of this one like a home loan and prepaid interest. Whatever time of the month you close, you still owe interest for the rest of the month until your first payment is due. So, if you close on the 25th, you have 5 or 6 days of interest accrued that you will need to pay. The trouble with interim payments, or “interim rent” as it is often called, is when lenders get creative with dates. For example, if you sign a contract with quarterly payments and they tack on an entire extra month to round out the quarter.
King has simple but smart advice when choosing an equipment finance partner. “If it sounds too good to be true, it probably is.”
King takes his responsibility to his clients seriously, which is why he is part of our preferred referral partner network. King Commercial Capital, much like Mobilization Funding, believes in building relationships and doing what is best for our customers. King puts it like this, “I have a fiduciary responsibility to put my clients into the best possible financial situation for their given scenario.”
Equipment financing is one more weapon in your arsenal for growth. Used wisely, it can help you execute on more jobs more efficiently, build your company’s credit, and keep your cash flow liquid.
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The coronavirus has put tremendous pressure on small business construction contractors across the country. Whether their state has deemed construction “essential work” or not, business owners are grappling with tough decisions. Some of these challenges are human — balancing the need to keep a business solvent against the very real pain of letting good people go right now. Others are purely practical, but no less stressful. How will I pay rent and utilities if there is no new work coming in?
Training yourself during this extraordinary time will make the other side of this crisis feel like a breeze in the wind. Getting strong now during this time will allow you to get through it and thrive on the other side.
We have launched a YouTube series to help inform your decision making during this pandemic. We interviewed experts from across the business spectrum and are continuing to add new videos as often as possible. .
Our own leadership has been having these same conversations and making the same tough choices. We see you out there. Being a business owner is a challenging job under ideal circumstances, and things are far from ideal right now.
This article isn’t about finance, payroll, insurance or SBA programs. Those are all important, but there’s something else equally important — your wellbeing and the wellbeing of your crew. That’s what we want to talk about today.
The struggle (and the stress) is real. How you manage and overcome it will determine where your business stands at the end of this crisis.
The first step is simple: admit that you are worried. It is OK to do that. Once you do you can focus on what you are going to do about it – that is the most important thing!
Acknowledge Anxiety
According to a National Small Business Association survey, 77% of small business owners are “very worried” about the economic impact of COVID-19. Here’s the bright side of that statistic: You Are Not Alone.
Anxiety can be an incredibly isolating emotion, especially in business leaders and entrepreneurs. You are used to solving problems, answering questions, and relieving stress from others. Acknowledging that things ARE uncertain and that you DON’T have all the answers can feel uncomfortable, but you need to do it anyway.
Refusing to acknowledge negative emotions is actually harmful to your health and the health of your business. It can lead to physical ailments like insomnia, indigestion, and headaches, and can make conditions like cardiovascular disease worse. There’s also the mental side of emotional avoidance. When you don’t confront stress, you can’t let go of it. Those bottled-up emotions become toxic over time and can lead to depression and other mental health conditions.
How does avoiding stress and anxiety hurt your business? One of the cognitive side effects of prolonged, unresolved stress is a decline in cognitive thinking. It can also lead to forgetfulness, an inability to focus, poor judgement, and overly pessimistic or “doomsday” thinking.
It is harder for you to make the good decisions you need to save your business because of how stressed out you are about saving your business.
So, let it out! But before you start venting to your team or your spouse, keep reading.
Find Your Peer Support Group
Finding a safe, supportive space to talk about your fears, challenges, and frustrations is critical. You want to keep morale up within your team, and you don’t need to compound any stress at home with work stress. You and your partner or spouse have your own challenges right now (groceries, kids at home, concerns over your health and that of your loved ones). You need an audience that can listen with empathy without being emotionally invested, which would add to their stress.
One option is to find a network or community of business owners — on social media, email, or a text chain — who share your concerns and can offer you encouragement and support.
Another is to hire a professional e-counselor or tele-counselor. Psychology Today has an index of counselors who offer virtual conferences.
Take a Break
Turn off your phone. Walk away from the television. In fact, go outside and take a walk. Or, skip your usual news broadcast and watch something that will make you laugh. (Digital Trends has a few Netflix suggestions.)
“I have too much to do to relax,” you’re saying. The reverse is true: You have too much to do, and the work is too important, for you to do it at anything less than 100 percent.
Business owners tend to be “always on” people, and when they feel stressed about their business push even harder. That’s great — that drive is what made your business successful in the first place. But, when facing the stress of a global pandemic, a national recession, the health and wellbeing of you, your family, and your team, AND the financial future of your business …. Yeah, it’s a lot. You need to disengage from that overwhelming pressure every now and then. It allows your brain to reset.
Start a Manifestation Journal
This may sound a little woo-woo, but stick with us. Part of what drives performance is mindset, and part of what establishes your mindset is your thought patterns. A manifestation journal is a simple way to train your brain to think more positively. Write down your anxiety or fear, and then write out the best possible conclusion you would like to see. For example,
- I am worried about making payroll next week.
- I will find a financial advisor who will help me get a PPP loan and make payroll.
Your specific anxiety leads directly into an action item — something you need to do in order for the positive conclusion you want to occur. It gives you a focus point, and it trains your brain to speak in “I will” statements instead of “I can’t” or “I won’t.”
Take Care of Your Health
Mental health is part of your overall health. What you eat, how much (or how little) you exercise, and how many hours of sleep you get all contribute to your overall mental health. Now is the time to start forming healthier habits that will help you stay mentally and physically strong during the crisis.
- Eat whole foods that are rich in vitamins and nutrients. Things like berries, citrus fruits, whole grains, and plenty of lean proteins.
- Set a sleep schedule that allows you to relax in bed — no tablets, TVs, or phones — and sleep for a full eight hours … or as close as you can get to it.
- Find an exercise activity that works for you. It can be a low-impact workout like walking, yoga or swimming, or turn up the heat and go for a run or a fast bike ride.
Talk to Your Team
Now that you have your own mental well-being plan in place, it’s time to spread that energy out to your team. Your team needs you to ease their anxieties, and a great way to do that is by first acknowledging your own.
It may sound counter-intuitive, but a leader who models vulnerability feels more confident and trustworthy than an aggressive bright-sider. Your team knows the situation; they need you to tell them how to feel about it.
Start by acknowledging the uncomfortable reality and your own response to it. “I know times are scary right now. I’ve been worried, too.” Then, lay out your plan. Tell them how you are going to weather this storm.
If you are furloughing employees, laying off staff, or reducing hours, make sure that conversation is in-person (or at least a phone call) and upfront. Start by stating the news directly. Ambivalence, while it feels easier for the speaker, is much harder for the receiver to process. Explain how the decision was made. Let the employee share their thoughts, but don’t debate with them. Stay positive and offer help when and where you can.
Give Your Team Resources to Cope
It’s important to remember that the construction industry has the highest male suicide rate in the country AND the highest rates for alcohol and drug use. As the leader of your team, you can help them survive and thrive right now by offering them resources to deal with their own depression, anxiety, and stress. We recommend checking out the resources available from the Construction Industry Association for Suicide Prevention.
Put Your New Positive Outlook to Work
When we are mentally healthy and thinking positively, we are able to process new information and make smarter decisions. Our ability to plan and strategize increases. All of these skills are critical to your ability to keep your business going during the COVID-19 pandemic.
Exercise your mental outlook every day, and just like a muscle it will gain memory and grow stronger. You will arrive at the end of this long, strange, stressful journey with a toolbox of stress-busting techniques and a powerhouse of positivity to face the future.
In construction finance, many lenders (ourselves included) utilize some type of risk mitigation in order to ensure that the project goes well and that the money lent is protected and will be repaid. Construction, in general, has risks that all parties in the construction process must account for in order to do their jobs properly and achieve the desired outcome. Whether it is a bank lending money to a developer/owner, a government entity spending the tax dollars they collect from their citizens, or a bank lending to a specific company in the construction process (GC or Subcontractor), they all want the project to go well so they can be repaid. The lender you choose — and who you are in the construction process — matters a lot. Each company in the construction process plays a different role and therefore has different risks, needs, and concerns they must manage. The lender for the developer or owner has a different set of circumstances than the lender for the GC, and the lender for the subcontractor has different circumstances than either of the former.
We administer a “funds control approach,” when we make a loan to one of our customers. This means we use a separate and specific “disbursement account” to make sure the money on the project stays on the project, including the proceeds of the loan to our customer. Because the cash from our construction finance loan is provided when the project starts, and before any work is completed and invoiced, it is important to make sure that the money is used for project related expenses. For our customers, the account is in their business’ name, and is used exclusively for disbursements of and payments associated with the project we are funding. Need to pay this week’s payroll on the project? It comes out of the disbursement account. General Contractor sending you a check for work completed? It goes into that same disbursement account.
A funds control approach protects you and the project you are working on, yet many new clients are nervous about it for one simple reason: They don’t want to tell their GC they have a financial partner, even though everyone else in the construction process has one.
We get it. Talking about money on a project can be awkward, stressful, and frustrating. But, it doesn’t have to be.
Be Confident
General Contractors KNOW the truth — that no subcontractor can finance 60-90 days’ worth of work at the beginning of a project without outside funding. We’re talking about hundreds of thousands of dollars for payroll, equipment, insurance, materials, and more, all coming out of the subcontractor’s bank account and with no expectation of making it back for two to three months when work is completed, invoiced and then paid!
In the past, a subcontractor might have had funds from the contract in advance of the project starting or the customer’s bank would often provide the upfront funds a subcontractor needed. That all changed with the Great Recession. So, if funds used to be advanced or provided and now are not, why wouldn’t a subcontractor need and seek out a lender now?
Approach the conversation with confidence. This is business as usual. A construction finance partner is what allows you to execute and perform, which is what the GC cares about most.
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Acknowledge the GC’s Perspective
Just like you, General Contractors must protect their business, the project, and their customer (i.e. mitigate risk). Chances are they have been burned before by subcontractors with bad, or just the wrong, financial partners. When a subcontractor goes under because of crippling Merchant Cash Advance (MCA) daily debit loans, it is the GC who must fill the void. When work slows down because a subcontractor can’t order materials because of bad credit, the GC is the one who has to solve that problem and manage it with their customer.
The best thing you can do is acknowledge their fears and then lay them to rest.
Be Transparent
Reassure your General Contractor by explaining who your financial partner is — their credentials, experience, and how their construction finance program works. (If that information doesn’t help your case, you may want to consider a new finance partner in the future.)
Our clients can tell their GCs that our loan is, “ … only for use on this project and can ONLY be used by us to purchase materials, equipment, and to fund the labor needed. This ensures we can get the labor and material needed to maintain our schedule and protect you and the project overall.”
Once you and the GC are on the same page regarding the need for a finance partner, give them their call-to-action. What do they need to do in order to make this work?
Typically, it means payment must be made — check mailed or deposited via wire or ACH — to the specific, funds-control disbursement account. Be sure to tell the GC, “You are still paying ME directly, not a third party and you are not changing your contract with me.”
Frame the Conversation
Framing the conversation is a great way to let your General Contractor feel positively about your finance partner right from the start. Framing a conversation is simple and can be incredibly effective when done right.
Start by thanking them for the opportunity to perform for them. Remind them that they hired you for a reason beyond price.
Then, name the reaction you want them to have. “You will be relieved/excited/happy” are all good examples. When you tell the listener what reaction you expect, they are more likely to receive the message in a way that elicits that response.
The key part of this is you MUST believe it to be a good solution too. It must be a genuine feeling.
Your final message might sound something like this:
“Hi, [GC Name]. Thank you again for the opportunity to work on [Project Name]. My team is excited to get to work, and you will be happy to hear we have lined up the funding needed to get started. Our financial partner, [Financial Partner Name], allows me as a business owner to meet the performance obligations and schedule this project demands and do our best work for you!
[Financial Partner Name] administers a funds control approach to the project. They manage an account exclusively for disbursement of funds during the project. The capital in the account is for use on this project ONLY and is reserved for project-related uses such as purchasing materials, renting equipment, and to fund the labor needed.
[Financial Partner Name] is aligned with our project’s success. This is the secret to how my company is able to perform and succeed.
What does this mean for you? It means you don’t have to worry about stopped work or delays due to cash flow problems and you can rest assured I will get the project done. After all, we know that the great majority of problems on a construction project are due to a lack of cash. I don’t have that problem and it is because of my finance partner relationship.
The only action you need to take is to mail or wire our payments to [Details of Funds Controlled Account]. Don’t worry — the checks are written out to me. I am not selling my invoices and you are not paying a 3rd party. The checks simply have to go to this address.
Thanks again. Let’s get to work!”
You can see how the message above thanks the GC, names the emotion, and reminds the GC why a financial partner is needed — so you can do your “best work!”
Construction Finance Takes Teamwork
Like everything else in construction, it takes teamwork to finance a project. When you introduce your financial partner as another key member in the project’s success, your GC can view them as an ally rather than a headache.
And if you continue to perform, meet deadlines, and exceed expectations, then your ability to secure funding can raise your reputation as a dependable business partner and help you win even more business. Now that’s teamwork.
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Construction payroll is more complex than payroll in more “traditional” industries. Your payroll can fluctuate when a new project starts, and every week throughout the job right up to its completion. Managing payroll internally is time-consuming, inefficient, and potentially exposes you to mistakes, lost revenue, theft and fraud.
Yet, many contracting companies still choose to keep payroll internal. Worse, they process payroll along with all other expenses from their Operations account.
We sat down with Bruce Patz, President of Associated HCM, to shed some light on common issues in construction payroll and offer a few tips to improve yours.
Why should construction contractors separate their payroll account from their operations account?
One of the biggest reasons to set up a dedicated payroll checking account is cash flow, says Patz. “A lot of business owners operate on what the bank says, not their actual cash flow. That means one person can write payroll checks believing the money is in there, and then another person write a check for supplies, which causes payroll checks to bounce.”
It’s not that subcontractors are inherently bad with money, but managing all of that outgoing cash is tricky, especially when several members of the team have access to the account.
A separate payroll account ensures the money you have assigned for your employees paychecks is safe. With a dedicated payroll account, there is zero chance of someone else writing a check for other expenses which would impact your team’s payroll.
Another reason to separate payroll? Ease of accounting. Whether you balance the books yourself or have a CPA (and you really should have a CPA), separating your payroll from your operations account makes life, and bookkeeping, a lot easier.
Tips for smarter construction payroll.
Plan ahead. With good financial oversight, based on data from the previous year’s payroll and your expected projects and growth rate this year, you can determine an estimated forecast of your payroll expenses.
Don’t forget about payroll taxes. “A lot of contractors forecast labor on a new project, but they forget the employer taxes when they estimate the payroll expense, “says Patz. “Taxes can be 15-20%, so they need to be in your estimate.”
Separate your payroll and operations. Seriously, it’s that important. If you work with a payroll company and have a dedicated payroll account, you know on Monday what your payroll expense is going to be. It gives you a few days to figure it out if you find yourself short. This is better than the 24-hours-or-less panic that often ends with a contractor taking out a high-risk Merchant Cash Advance Loan (MCA).
Do you have questions about payroll during the COVID-19 pandemic? Check out our YouTube video with Bruce Patz and Caroline Catlender.
Cash flow is always an issue in construction. How can contractors best ensure payroll ALWAYS gets met?
“Work with a payroll service that understands your industry and your cash flow cycles, so they can make recommendations,” says Patz. “And hire a CPA, or a payroll service that has accounting as a service, to help with budgeting, reporting, and forecasting. The more you can plan ahead, the more you can get ahead of any problems.”
And planning ahead allows you to better plan for growth and capitalize on opportunities when they arise.
Patz also recommends having a financial partner. “Go with your line of credit first, if you have one,” he says. If you don’t have a line of credit, don’t panic. There are financial partners out there who can help you.
Like us! Check out How Our Loan Process Works to learn more.
What is the benefit to hiring a 3rd party payroll service versus doing it in-house?
A good payroll company can help with a lot of things beyond processing payroll, such as:
- HR Compliance
- Employee Handbooks
- Equal Pay Act Compliance
- IRS forms for talent acquisition
- Worker’s Comp payments processed along with payroll, rather than a lump sum
- Out of state payroll tax calculations
- Calculating exact payroll per project
- Managing the different wages by project (Ex: Davis – Bacon Act Wages)
- Providing Certified Payroll Reporting
Many payroll companies also offer payroll finance programs. Some will also help calculate employer taxes and offer other accounting services.
For Patz, being a great payroll service comes down to that one word: service. “What sets us apart is that we are a small business, and we have a personal relationship with our clients,” says Patz. “We’re very different from the big payroll companies. A lot of the bigger companies don’t care how their clients make payroll. We start at the beginning. We talk about cash flow to understand it and create payroll solutions that work for you. Our services mirror and align with who you are and what you need.”
What should a construction contractor look for in a payroll company?
Finding a payroll service that specializes in construction can be tricky, and there are plenty who say that they understand the cash flow realities of construction subcontractors. Patz recommends starting with a simple search. “Google them,” he says, “and see if they have ever been accused of stealing tax money. That’s an easy and important first step!”
Next, be ready to vet the company by asking a few questions. Do they reconcile their tax accounts daily? This helps prevent errors and fraud. What is their liability coverage? And finally, can they provide referrals or case studies from other construction companies they’ve worked with?
Construction payroll is complex, but it doesn’t have to be painful. Save yourself and your team the headache of processing payroll yourselves and instead focus on what matters most — performing the work and growing your business.
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