At Direct Surety, we empower contractors with strategic tools, knowledge and direct access to the decision maker for contract surety bonds. If you are bidding on new projects and making a push to grow revenue, then developing a strong construction operation and obtaining the highest surety credit are critical to your success.
Get familiar with these “Risk Factors” and begin improving your operations today!
Risk Factor #1
Did you know mismanagement of cash flow is one of the main reasons contractors fail?
- The four main variables affecting cash flow are the amount of work simultaneously performed, profitability on jobs, overhead costs and weather.
- The most successful contractors perform monthly cash flow projections and have sufficient cash reserves. They also rarely use their bank line of credit.
Risk Factor #2
Did you know sporadic collections of receivables could contribute to cash flow shortages and business failure?
- More contractors go out of business from running out of cash than from losing money on jobs.
- The most successful contractors have formal collection procedures in place and consistently follow them.
Risk Factor #3
Did you know inaccurate accounting could cause you to make unwise decisions?
- The most successful contractors have a well-documented process for routinely auditing all individual ledger accounts so data entry into their accounting system is accurate.
- Without accurate accounting, your financial statements won’t tell the truth and your decisions will be based upon bad information!
Risk Factor #4
Did you know failing to consider availability of resources can be detrimental to job profits?
- Labor shortages can cause project delays and material shortages can cause prices to rise. This is an especially important consideration in an unstable economy.
- The most successful contractors consider labor, material and equipment shortages prior to every bid and include protective language in their contracts.
Risk Factor #5
Did you know inconsistent tracking of job costs could lead to lost profits on current and future construction projects?
- Accurate job cost tracking is necessary to measure ongoing project performance and develop historical cost information for bidding future projects.
- The most successful contractors have a well-structured job cost tracking system in place for developing detailed reports. Without this information, whether building or bidding, you are flying blind!
Risk Factor #6
Did you know poor prequalification of subcontractors could cause a major negative impact to your business?
- Prequalifying subcontractors provides assurance that the subcontractor has the necessary insurance, bonding capacity and experience to perform a job.
- The most successful contractors prequalify all their subcontractors prior to bid to avoid subcontractor defaults and potential cost overruns.
Risk Factor #7
Did you know lack of inventory control could cause inaccuracies in your job costs?
- A common problem arises whenever materials have repeat uses and are only charged to the initial project. This will inflate the cost of the first project while disproportionately lowering the cost of the projects that follow.
- The most successful contractors have a structured inventory control system that accounts for all inventory utilized, including inventory with repeated use.
Risk Factor #8
Did you know that a poorly prepared construction budget could result in a contractor failing to identify underperforming activities on a project?
- Construction budgets must be broken down into items of work that can be easily and accurately tracked in the field. Proper conversion of a bid estimate to a budget is a vital step that enables field costs to be readily compared to budgeted costs.Note: Most successful contractors prepare construction budgets in a manner that not only makes it easy to determine progress in the field, but also results in valuable historical cost information.
At Direct Surety, we empower contractors with strategic tools, knowledge and direct access to the decision maker.