The year 2020 brought many challenges to the world economy in the face of COVID-19 pandemic, affecting every sector, especially the construction industry. In many places, construction has come to a standstill with projects on hold or canceled. The situation is drying up all the cash, and businesses are finding it hard to manage receivables.
With outstanding invoices and accounts receivables, business owners are finding it hard to maintain steady cash flow and are struggling with payments. With each passing day, non-payment risk threatens contractors, but don’t worry; there are multiple ways to protect construction payments and make sure payment is made for every invoice.
Steps to Manage Accounts Receivables and Credit in Construction
Are you facing credit management issues, and need to deal with non-payment risk? Here are some of the top construction industry practices that top companies are following to manage their credit and to ensure payments of every single dollar that they are owed for their work.
Track Notice Deadlines
The construction industry and all the sectors around the globe are facing a grave threat of bankruptcy and liquidity. The only way to protect payment at times like these is by filing a lien regardless of the financial health of your client.
For example, if the project owner files for bankruptcy in the middle of the project, and you have not protected your lien rights, you cannot legally fall back to your contract for payment protection. Filing a mechanics lien does not have to be your first option, but you MUST protect your lien rights by sending preliminary notices and notice of intent of lien on every job.
Now is the time to consult with a construction claims expert, track all your notice deadlines for every project, and become familiar with state laws. Carefully track all the deadlines, because missing a deadline could cost you your right to payment for your work. These experts can help you send notices on projects on time and make sure you follow all the steps.
Treat Every Payment as a Risk
As every single job is at risk and construction projects, have been on hold for more than 90 days, treat every client as a payment risk, and take action accordingly. During a crisis as the current pandemic, treat every project with non-payment risk due to uncertainty. The same goes for subcontractors, material lessors, and suppliers.
Send Notices Early on all jobs
A good relationship is vital for contractors and subcontractors in the construction industry because there are many variables that affect your performance. Contractors are hesitant to send preliminary notices to maintain a good relationship with parties, but this practice can hurt your business in 2020.
As the coronavirus outbreak continues, the economy is slowly moving towards a recession, and chances are your clients may not survive this downturn. You are only putting the future of your company at risk by not protecting your payments through preliminary notices. Therefore, don’t waste any more time and get in touch with construction claims consultants in Dubai and send preliminary notices to all the jobs.
Mechanics Lien – Powerful Solution for Non-payment in Construction Industry
If you cannot take legal action towards your customer for non-payment, you will most likely have to wait months to get paid for your work. If you are paid with months’ delay, you won’t be able to pay the subcontractor or the supplier, and the disruption chain continues.
Read More: Seven Elements of Very Productive Employees
However, if you have filed for a lien, the owner will make sure you are paid as early as possible to avoid legal penalties against his property. During times of recession and crisis, your mechanics lien determines whether you will get paid or not and how fast. Therefore, it is essential to consult with a professional to ensure you adhere to all the deadlines and state requirements.
Don’t manage everything “yourself.” Let Construction Company some work
Payment in the construction industry is tricky as in “normal” days. It takes around 90 days for the payment to be released after invoicing. This challenge is heightened in times of uncertainty as more and more companies have started working remotely with limited resources. The risk of non-payment grows as it has become quite difficult to chase down payments from past clients and new ones.
Outsourcing would make it possible for you to get paid for the job faster with fewer resources. Don’t try to manage everything by yourself and outsource as much as you can to keep up with the deadlines and notices. Get services of project management and construction delay expert witnessfor critical tasks that are not only time consuming but also delaying your payment processing.
Manage AR to Protect your Business
Follow the steps mentioned above to make sure you get paid for the work you have done on every single project. This is even more critical, especially in the face of a future recession. Speed up the collection of credit due and accounts receivables to protect your construction business from a downturn. Every person in your company needs to at the top of their game to protect cash flow and face challenges.