As a nation, we’re preparing for the worst, and hoping for the best. We know construction businesses are some of the first to be impacted by economic downturns, so we wanted to make sure you are preparing strategically for this time. As a construction business owner, you need to prepare for the threat of potential work shutdowns and coronavirus affecting your staff. In this article, we highlight different ways you can get ready to financially keep your company afloat amidst the uncertainty.
With legislation that seems to be changing by the minute, trying to figure out what to do to keep your everyday life balanced is challenging enough. The road ahead is unclear, and no one really knows how long they should hold off planning, what to do with their business, and how to organize what they have for cash. The key is to manage your cash flow right away to improve the longevity of your construction business. It is crucial that you try and gather as much cash as you can right now.
1. Apply For State and Federal Grants and Loans
The Small Business Association has organized Disaster Loan Assistance for small business to offer relief due to the COVID-19 virus. Many other organizations, possibly within your community, could be offering additional assistance for your business. Inquire with your state’s department of health and follow social media as you might find you are eligible for loan or grant programs. Should you qualify and receive the funds, keep them in your bank account so you have some backup funds to help you cover your costs.
There may also be grant programs that offer your business support through technical training or job advancement when your workers are laid off. Some cities or counties will even consider offering you property tax deductions for a year or two to decrease your operating costs and keep you in the region if it means helping you avoid closing your doors.
People you could reach out to may include your local economic development authority, city council, county commissioner, or your state’s Department of Employment and Economic Development (DEED). Facebook even opened a grant program recently to support business owners with getting their business in front of customers. New grant programs and free support are regularly being made available, so stay up to date on what your construction business could qualify to receive.
2. Call On Your Accounts Receivables List
You likely dread this on a normal basis, but this is a great way to accumulate some cash right away. If you use QuickBooks, retrieve an “Accounts Receivable Summary Report,” and start going down the list. Follow up is expected from your clients, and if you don’t call, they know they can get away with holding on to their funds longer.
If they are in overdue status, your customers would recognize they are behind on payment and you’d be surprised how many will make payment immediately. Offer to take credit cards, as this is a great way to get paid fast. There are fees involved but having cash on hand during troubled times is just as important. Pick up the phone and start calling.
3. Subsidize Employee Wages With Unemployment Insurance
Some states offer subsidized unemployment insurance that would allow you to supplement your wages so you can maintain a trained worker on your team. It is typical within the industry to deal with unemployment insurance as it can be expected for workers to be laid off during slow times. However, in this case, you can keep your crews working, and still afford to keep them on staff. This will be beneficial to both your company, as you’ll maintain workers as your employees because they can maintain their full time pay.
4. Talk to Vendors About Delaying Payments
Your vendors may have allowed your company to place purchases on account, and they automatically charge your credit card when the balance is due. It’s not an easy ask, but it doesn’t hurt to inquire if your vendor would be willing to delay the payment on account. Be open with the vendor, and be willing to work out terms that work for both parties. The more consistent you have been with paying your construction company’s vendors in the past, the higher the likelihood that they will be willing to work with you in delaying payments.
5. Write Off Hours As Tax Deductible
Did you know that according to the IRS, “You can exclude up to $5,250 of educational assistance you provide to an employee under an educational assistance program from the employee’s wages each year”? This means that if you are trying to keep as many employees on board as possible during limited work times, their hourly wages can be applied to education if they are learning something or being trained. Now is a good time to get everyone trained on new products, certified through warranty programs, or cross trained within your business.
Maybe you’ve already done some of these things throughout the year already, and didn’t even know you could deduct them. Document the hours, and calculate them into your quarterly tax payments to accumulate cash that you need to keep in your pocket right now. It’s important to speak with a qualified accountant about what is deductible, and counts as documentation for legitimate training. If your manufacturers or vendors trained any employees on software or products this year, look into getting some documentation of this in order to lower your quarterly tax payment.
6. Streamline Processes & Softwares
There may be some major issues within your business that you just haven’t had the time to straighten out yet. Now is the time. Every penny counts. The more efficiently you can run your business, the less time you are paying for wasted hours, inventory, office supplies, etc. Offering opportunities and incentives for your staff to present money saving ideas will keep your business mindful of cost savings as you go through this.
Did you know that within accounting alone, automating accounts payable saves an average of $16 per invoice? If you are running your construction business in quarantine right now, take every opportunity to gain knowledge on how you can increase efficiency or create cost savings. Keep a notebook with you to keep writing down the ideas as they come to you. If you don’t have time to implement all of them now, they give you some good things to develop further when you can meet back together again with your team.
7. Stay Updated On Industry Information & Resources
Keep reading newsletters, tax information, COVID-19 updates, and legislation changes that are happening within your state or on a Federal level. The information is changing so rapidly that it could alter your entire crisis management plan in a matter of minutes.
One good way to stay up to date is to join our Construction Cash Flow Round Table group on Facebook where we’ll be sharing relevant information about managing your business and any news updates that we believe can be valuable for you to be aware of. As we know, some of the most crucial information can come from the boots on the ground, so don’t be afraid to jump in and share your expertise.