By David V. Jean of Albin, Randall & Bennett (ARB)

We are living in uncertain times, to say the least. Prudent construction companies can focus on certain strategies to weather these times. The following are recommended initiatives for companies to implement to help ensure a healthy business.

Look for ways to maximize cash flow. Review your assets and determine whether anything may be liquidated for cash, keeping in mind this may be through a sale, an exchange, or even leasing back the asset. Stay on top of your contracts receivable. With many construction costs paid in advance, monitoring billing and receipt of payment takes on a higher level of importance in maximizing cash flow.

If possible, delay any capital additions, such as pre-planned expansions and large equipment purchases. For unavoidable acquisitions, look carefully at the cost of financing such equipment in comparison to your expected short-term and long-term return on the investment. Explore other avenues, such as purchasing used equipment, when evaluating your available options.

Be proactive in surety and bank communications. Maintaining your bonding relationship with a surety requires you to be transparent. Letting them know up front when things aren’t great is far favorable to an unexpected, after-the-fact presentation. And consider meeting with your bank to discuss lending options, such as wrapping your existing equipment loans into a consolidated loan or requesting an increase in your line of credit for liquidity needs.

Look for ways to minimize cost, such as eliminating discretionary spending. Consider your entire personnel model carefully before making broad cuts. Keep employee morale at the forefront of your planning efforts. Sweeping cuts to employees, their pay, or their incentives affect their job performance and, ultimately, your success.

Consider your expenses for travel, overnight delivery, and meals. Pay close attention to things like employee expense claims, ensuring they do indeed fall under your company policy for reimbursement; and restrict company use of vehicles to business travel only.

Review your contract obligations. Take a careful look at your contract, with the intention of ensuring you are getting the best value possible on things like technology costs, utilities, and equipment leasing. You may be able to renegotiate a better price. And, if you can’t, shop around.

Review procedures, like job costing, for opportunities to increase productivity. Tracking changes in costs at the micro level allows you to make necessary pricing adjustments at the macro level, to account for things like increases in suppliers’ pricing, COVID-19-related costs, and additional labor and equipment costs, so you’re able to make adjustments before taking a loss. Your job costing system should also capture scheduling and delay costs in a timely manner to prepare for possible future claims. Job costing software makes accounting for change orders easier. It also allows you to see what projects are more profitable, so you may expand where you see the most profit, or shut down bidding on underperforming types of projects, as necessary.

If business in general is down, or you have divisions that are underperforming, consider the market and evaluate the risk for alternate products and services you can provide, such vertically integrated construction services, equipment rental services, or a new product\service line. Moving manufacturing, distribution, or labor management in-house, or implementing prefabrication and modular construction can reduce cost, boost efficiency in use of resources, and maximize job profitability. You might also look at bidding on smaller jobs than you’re accustomed to. They come with less risk and occupy shorter durations, so they may keep you in a healthy supply of workflow.

Evaluate if now is the time to acquire smaller, less adaptable companies struggling to continue. The assets obtained through such an acquisition may provide an alternate way for your business to achieve strategic goals that may have been previously unobtainable. And smaller scale growth options are available without purchasing a company in its entirety. Explore your competitors. If they are unable to remain in business, there may be options for purchasing customer lists, inventory, or equipment, as well as a chance to acquire experienced staff.

And call on management to inspire personnel. Reinforce your company’s mission, values, and culture. Be sure you’re nurturing existing client relationships and fostering growth through new ones.

David V. Jean is a Certified Public Accountant, Certified Construction Industry Financial Professional, and Principal of Albin, Randall & Bennett (ARB). He specializes in providing financial accounting, tax, and consulting services to construction and real estate development companies and leads the firm’s Construction Services Group. He can be reached at djean@arbcpa.com or 207.772.1981.