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Cash Flow

 
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Old 06-02-2010, 02:57 PM   #1
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Cash Flow


I have a big job comming up that we can easily do and am comfortable doing the work. The problem is payment. They want us in right now (as usual) which isn't a problem. We could have 75% of a 120k job done in two weeks. I have to have my bill in by the 24th but wouldn't get paid until 30 days from then, so 60 days. Not a big deal but things are super tight right now. Does anyone have any suggestions or creative financing. I can talk to my wholesalers fine but fuel, wages etc.... I'd appreciate any feed back
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Old 06-02-2010, 03:08 PM   #2
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Re: Cash Flow


As long as your sure they will pay you in 30 days from the bill date. And as long as you will make money on it. You could use a cc for fuel and see if you can talk to your guys about a little less pay for a few weeks with a bonus at the end.

But bye the sounds of it you would be bankrupt if everything didnt go 100% right on the job.

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Old 06-03-2010, 09:44 PM   #3
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Re: Cash Flow


you could sub the job out to another contractor, they carry the load and you pick up some profit. It's better than not getting anything... Out it in your contract to your sub that he gets paid when you get paid, now you don't have to carry the overhead..

If you do this don't ask what the sub will do it for, just tell them what you are willing to pay this way you control your profits... just a though
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Old 06-03-2010, 10:26 PM   #4
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Re: Cash Flow


If your credits good, why not go to the bank for a line of credit?
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Old 06-03-2010, 10:32 PM   #5
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Re: Cash Flow


Quote:
Originally Posted by pinwheel View Post
If your credits good, why not go to the bank for a line of credit?
Exactly what PinWheel said.
Any contractor that has a good running biz should have an automatic line of credit with one call to the bank.

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Old 06-07-2010, 12:43 PM   #6
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Re: Cash Flow


We do have a line of credit. My banker just got a new boss who is trying to make a name for himself. Not a huge deal but we do geothermal and he isnt familiar with the industry, so he doesn t really help us. We are in the process of looking for a new bank but we all know how much spare time we have to shop around.
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Old 06-07-2010, 08:33 PM   #7
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Re: Cash Flow


i go to my suppliers all the time on larger jobs and tell them look, i can't float this job. if you want the work you'll have to wait 45/60 days. 9.9 times out of 10 they appreciate the honesty up front and will work with me...

or if you have an account with them pay them when you get paid, most suppliers interest/finance charge is peanuts..
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Old 06-07-2010, 08:37 PM   #8
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Re: Cash Flow


That what working capital & lines of credit are for.
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Old 06-07-2010, 09:48 PM   #9
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Re: Cash Flow


I'm not judging, just wondering here. You're doing a $120,000 job with what, no deposit? Your first invoice will be for 75% of the job, which you won't see for 30 days? IMO huge risk here.

I'm starting a $150,000 job on Wednesday, $20,000 down on sighning, progressive invoices every 2 weeks. Invoice to be paid within 3 days. So I am always working on the clients money.

I don't finance projects. Let them go to the bank.
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Old 06-08-2010, 10:17 PM   #10
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Re: Cash Flow


Quote:
Originally Posted by katoman View Post
I'm not judging, just wondering here. You're doing a $120,000 job with what, no deposit? Your first invoice will be for 75% of the job, which you won't see for 30 days? IMO huge risk here.

I'm starting a $150,000 job on Wednesday, $20,000 down on sighning, progressive invoices every 2 weeks. Invoice to be paid within 3 days. So I am always working on the clients money.

I don't finance projects. Let them go to the bank.
Not sure what Play does, but normally we collect 50% upfront at contract signing (or rig up), 50% on completion of drilling/testing.

The commercial work, which is where most of the geothermal/geoexchange drilling is in my area, doesn't normally allow this kind of contractual agreement, since most of the time you're working for the HVAC Co. who is working for the General, who is working for the owner.
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Old 06-08-2010, 10:34 PM   #11
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Re: Cash Flow


I agree that we should not act as a lending institution. State laws, when applicable, will mandate how much you can get up front. But, if you are doing Public Works jobs & some commercial you will not get any money up front & you will sign the owners contract, not yours. Under these conditions it can be very beneficial to have some operating capital & a healthy line of credit. If you don't like or agree with these conditions your only option is to deal with Home Owners.
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Old 06-08-2010, 11:01 PM   #12
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Re: Cash Flow


Well,if he lives in California he can only get 1000.00 or 10% down,whatever is less.And by law you can not get paid for work not yet done meaning you can't get too far ahead on payments.
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Old 06-09-2010, 08:21 PM   #13
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Re: Cash Flow


I hear what you're saying, and agree. I know it's different in commercial work.

I wonder what would happen if no GC would finance the project? I guess the owner would have to do that, correct?

So in a sense, we allow this to happen. Probably a long history of how this came to be the "normal" way, but I for one, will not do it.

If more contractors took my position, it would/could perhaps change the way we contract jobs.

Like I said, for me it's simple - I'm in the construction business, not the financing business. Why do we delve into this area? We ain't bankers.
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Old 06-09-2010, 08:29 PM   #14
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Re: Cash Flow


Kato, unfortunately it's not quite that simple. There are a bunch of state laws governing public works projects. Most commercial is private in nature. Maybe it could start there.
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Old 06-09-2010, 08:36 PM   #15
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Re: Cash Flow


Quote:
Originally Posted by griz View Post
Kato, unfortunately it's not quite that simple. There are a bunch of state laws governing public works projects. Most commercial is private in nature. Maybe it could start there.
Griz - I know. Just throwing the thought out there. Just because something has been done a certain way for so long, doesn't mean we have to keep doing it like that.

I'm glad I'm not in the commercial end of it. Seriously though, the job I just started, the HO has no problem with the financial arrangement. He totaly understands why it is his responsibility to finace the project.

Wish they were all like that.

Maybe I can start a trend.
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Old 06-11-2010, 02:44 PM   #16
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Re: Cash Flow


From a commercial standpoint, there's always a concern if the sub will finish the job, especially if he gets "too much" money up front. Why does he need it? If it's to pay for materials, how do you know he actually pays for the materials?

Two things I have seen in past couple years. One, build "some" financing cost in your quote. Offer a discount if paid, say every two weeks. People tend to get excited about a "discount" and not always figure out if it's a good deal.

Second thing relates to retainage. Offer a "discount" for only 5% retainage.

Granted, you have to know who the ultimate owner is, and how strong financially he is. If you are a small sub on a big project, you may get run over.
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Old 06-11-2010, 06:30 PM   #17
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Re: Cash Flow


When I started my first company, an old timer EC gave me some advice. He said never do a job that is so big that it will put you belly up if it goes South. Unfortunately, I did not listen to him, which is why I am now on my second company.

It is hard to ignore those dollar signs dancing in front of you when you look at the jobs that are really too big for you to finance, but sometimes it is better to wait until you are better prepared.

If you under-bid the job, or the owner runs out of funds, or if a GC or sub screws you somehow, or a large piece of equipment gets ruined that is not covered by insurance or warranty, or your men read a critical part of the prints wrong and have to re-do everything, or any one of a thousand other scenarios pop up, you may end up having to eat a huge chunk of change. Suddenly those dollar signs you saw dancing in front of you turn into red ink signs that don't ever go away.

I am all about taking on risk, but the way I think about it now, taking on a huge job like this is an "all in" type bet. I am already "all-in" as a business owner, so adding another "all-in" bet on top of that goes past risky and into the realm of foolish.
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Old 06-13-2010, 07:26 AM   #18
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Re: Cash Flow


Talking about cash flow - Generaly I get the feedback that most GC don't like cost plus work. But it's money in the bank. Yes, you may not make as much money as a fixed price job, but you will make money, and you know how much you will make from the start.

At least half my work is cost plus, I get 20% up front, and then progressive draws based on what was spent. So I am always working on the HO's money. So there is no cash flow problem.

I would think especially in todays economical climate, more GCs would be welcoming this type of work.

Just my observation, wondering why the resistance to cost plus.
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Old 06-13-2010, 08:18 AM   #19
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Re: Cash Flow


You should turn in an initial billing for Mobilization due within 7 days. Typically this is 10 to 15 % of the project shown on your SOV. This is similar to what Kato is saying above. Even in CALI, with 1000 or 10% down, you can do this. This is considered work performed on site. On a job this size your contracts should include this. If you are working with the customerís contract then I don't know what to tell you other than in essence you are financing their project. Hopefully you are not working for a GC that has a paid when paid clause, this could extend your collections even further.

Mobilization should always be written in the contract due within 7 days.
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Old 06-14-2010, 12:03 PM   #20
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Re: Cash Flow


Thanks for the input guys.. More info.. Gov't job We are subbing the ground loop off of a hvac contractor. There is nothing I can do about the billing. (either take it or leave it) We usually take 50% up front and progress the rest to use someone else's ,money. Crappy thing right now is that we are finishing old jobs and just starting new. Usually not an issue with deposits. But you see my dilema.. Moving forward I have approached my wholesalers and they seem ok with it. I have subbed out the specialty grouting(which I would buy had I recevied a deposit) to someone with the equipment. AS far as the excavation I may team up with a local or else demo a unit for a month.

Another note: I've been registered for quite sometime here but never really posted and kept up with this site. I guess my paranoia of my competition reading my mind. LOL But thanks for all the input and the wealth of knowledge is amazing here. I look forward to getting to know you guys.
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