navigating financial risk in a rebounding economy
DESCRIPTION
A rebounding economy and construction market can be financially hazardous because it presents increased cash needs to a cash poor marketplace. How do you grow your business in the improving conditions without committing financial suicide? This presentation answers this question by analyzing your company’s credit risk strategies and credit procedures. How you prepare for the risk of non-paying accounts and then respond to such accounts is the key to a healthy bottom line. The presentation will highlight best practices in the industry and case studies, and answer questions about the costs and benefits of various available legal options when you’re looking to get paid.TRANSCRIPT
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Navigating Financial RisksIn A Rebounding Market
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“Sudden Rise In Home Demand Takes Builders By Surprise.”
http://zlien.us/12fN9Jv
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“Homebuilding busiest since 2008.”
http://zlien.us/18XnIi9
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“Construction is the bright spot for recovering economy”
http://zlien.us/18Xo3RR
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Should You Be Scared Of An Improving Market?
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Part 1: Why A Recovery Carries Risk
Part 2: The Metrics That Matter
Part 3: Be Proactive with Credit Risk
Part 4: Know Your Options
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“No one liked the recession, but some contractors are going to hate the recovery, too.”
Thomas Schleifer, Ph.DDel E. Webb School of Construction
ENR Viewpoints: Beware The Recovery
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“The construction market is going to be a financial struggle for most contractors because growth eats cash and many have been straining financially during the unprecedented downturn.”
Thomas Schleifer, Ph.DDel E. Webb School of Construction
ENR Viewpoints: Beware The Recovery
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Financial Struggle To Meet Cash Demands With Small Cash Reserves
Long Recession Made Companies Cash Poor
Strong Economy Will Require Companies To Grow Into New Demand
Growth Eats Cash
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0%
25%
50%
75%
100%
YEARS: 1 2 3 4 5
failure rates
Recovery Makes Things Worse
3xWORSE DURING
RECOVERYTHAN DOWNTURN
ENR Viewpoints: Beware The Recovery
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debt ratios
0%
10%
20%
30%
40%
50%
E-Commerce Suppliers0%
25%
50%
75%
100%
YEARS: 1 2 3 4 5
failure rates
Debt Ratios: Aswatch Damondaran, NYU Sternhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/dbtfund.htm
Failure Rates: Small Business Trends, Scott Shanehttp://smallbiztrends.com/2012/09/failure-rates-by-sector-the-real-numbers.html
Construction Industry is Already Risky
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Part 1: Why A Recovery Carries Risk
Part 2: The Metrics That Matter
Part 3: Be Proactive with Credit Risk
Part 4: Know Your Options
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Expect Your Customers To Have
Cash Flow Challenges
• Bad Debt• Aging Receivables• Days Sales Outstanding
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Waiting For Retainage Can Add Up
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Back Charges & Little Concessions
Add Up Too
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Part 1: Why A Recovery Carries Risk
Part 2: The Metrics That Matter
Part 3: Be Proactive with Credit Risk
Part 4: Know Your Options
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Don’t Gamble
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Know who you expect to pay you.Do Your Homework
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Rule #1
The Longer You Let An Account Sit, The Harder It Is To Collect.
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Rule #2
It’s Flipping Expensive To Collect Old Debt, & Probably Not Worth It.
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Understand Your Terms of Payment. Stick To Them.Set And Stick To Terms
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Credit Risk Low- Protect Lien Rights
Credit Risk Medium- Protect Lien Rights- Get Personal Guaranty
Credit Risk High- Protect Lien Rights- Get Personal Guaranty- Joint Check Agreementor Letter of Credit
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Smart CompaniesAlways SendPreliminary Notices
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Legal Nuances:
• Pay When Paid• Pay If Paid• Retainage• Delay• Liquidated Damages• Indemnity Clauses• Lien Waivers• Change Directives
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Part 1: Why A Recovery Carries Risk
Part 2: The Metrics That Matter
Part 3: Be Proactive with Credit Risk
Part 4: Know Your Options
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Know The Collection Tools Available To You
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Plan Your Collections & Legal Procedures Like A Construction Project
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Secure your debt witha mechanics lien or bond claim.
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1) Prioritize Your Debt In Event Of Bankruptcy
2) Claim Job site As Collateral
3) Skip Your Client And Sue Third Parties
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Don’t Just Wait.
Follow Up. Prioritize Your Debt.
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• 2 Emails Per Week For 6 Weeks
• Credit & Collection Policy Tips
• How Successful Credit Professionals Increase Revenue And Decrease Risk
Free!http://zlien.us/6week-creditpro
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Questions?