This Podcast Is Episode Number 0389, And It's About Proactive Contractors Use Lien Services To Protect Cash Flow

It was a different mindset when you became a construction contractor. You wanted to be independent, and part of being independent is that there is no one telling you what to do or when to do it. Your suppliers and government agencies direct you and impose fines and penalties when you get off track.

The current economic climate is challenging for other reasons I will not go into. My point is there is a reason why things occur; trust the Universe, and when you are in the middle of it, that is not the time to make rash decisions.

If you have time to spare, I sincerely encourage you to work on your systems and processes. Think and write down everything done well in the past and review what needs to be fixed, upgraded, discarded, and improved upon.

Be Proactive About "Tactical" Issues - Get your tools and equipment in shape, clean, and ready to roll! Clean out the storage area, return, recycle, and dispose of the material you don't need and will not use.

Be Proactive About "Strategic" Issues - If you have thought about firing your Bad Bookkeeper, you are already 15 minutes too late! Replace that wealth prevention tool with a Strategic Bookkeeping Service. Develop a Business Process Management Strategy so that when the economy turns, you will be ready. Better yet, if your strategy is right, you may not be as affected by the economy. Food for thought, bread for the head!

Let's walk through some scenarios:

You choose the type of work that you do. 

• Are you a General Contractor or a Trade Contractor?
• Do you hire Trade Contractors (1099 contractors) or have W2 Employees?

Additional choices are:

• New Construction
• Residential Remodels
• Service and Repair
• Commercial.

As a brand new contractor, the challenge is getting work to do.

Declare all sales, including the tiny ones that you may be tempted to put into "hip national bank." 

The amount of tax is nominal; the impact of not doing it can be huge. Part of what you are looking at is Customer Headcount documents; you are a real business. Customer headcount can make all the difference globally, especially if you have only a couple of general contractors you work with. 

Hiring an outside bookkeeping firm also counts to prove you are trying to be a "real business" even if you work full time and do contract nights, evenings, and weekends. Starting on the right foot and mindset is essential.

Why? - Otherwise, the state worker's comp may reclassify you as an employee of the general contractor. This can lead to additional payroll taxes, fines, penalties, and higher rates as you advance. Be above board and fill out W9.  If your attitude is "It's Not My Problem," please close your company and get out! 

No one around you needs the additional liability and stress; being in business is hard enough to keep ahead. 

Watch out for the customers who are looking not to pay you the value of your services. 

These can be other contractors where you are working as a trade contractor or retail clients. Understand the rules about Notice To The Owner, and each state may have different laws. 

On larger jobs, make it a habit to do Notice Of Intent To Lien. The notice is not saying you will lien but protects your rights if you are not getting paid promptly. RED FLAG anytime a homeowner or general contractor implies you will not get the job if you do not do this. DO IT NOW – USE A SERVICE.

Run, don't walk. If you are being threatened, then chances are they do not intend to pay you. 

Your supplier, whenever material is delivered, will automatically do a Notice Of Intent To Lien. This is a good thing because they help make sure you and they get paid for the job's material. 

As a construction accountant, I hear stories every day. Some are from contractors who gleefully brag about how the estimates are rejected unless a discount is given (even when they know the price is reasonable). In my opinion, these are not good customers, just professional scammers. A successful contractor knows his pricing and wants to give his customers good value and pay a fair price to their services.

I have heard people bragging about not paying the contractor in social settings unless additional unpaid work is completed. It takes a lot for a customer (I mean scammer) to get on "The Bad List" of fast food places. 

Do you have clients, customers, or professional scammers?

Just a fence create good neighbors; using a lien service helps you get paid. The alternative is you are racking up your credit card and spending lots of interest. It is an incentive to pay you. Those who never plan to scam; do not have a problem. In my opinion, it is the scammers who object the loudest. 

It is hard enough to be a Contractor; this is an easy way to get rid of those who never intend to pay you. 

Reactive needs to engage in a service that factors your Accounts Receivables, and more desperate forms of financing are when you have a Quick, Fast Loan that requires daily or weekly repayments. 

Summary: The least painful is to collect the money from your client. If being a little aggressive to enforce your lien rights is needed – Do It. – Do It Now, because your general contractors are protecting their lien rights.  

In some states, if you are out of business, you can not collect your outstanding Accounts Receivables. 

You can't spend or invest money you do not have. It is unreasonable to expect your suppliers to accept your credit card to pay your invoices, and you refuse to do the same. 

The excuse you can't afford it; the rates are too high; I want you to refer back to the high cost of No Money or get a high-risk loan. In comparison using merchant services is cheap, and funding is usually in 1-2 days. Both clients and customers typically have a credit card tucked away for emergencies. Polite and tactful do not make your client "feel bad" if they need to split up the payment between several cards. 

Final thoughts

Practice what we preach. It is by exception that I take checks even from local clients. We offer a Free One Hour Consultation in which I try to provide value regardless of you purchasing future services from us.

Affectionately, I summarize my role for Outsourced Accounting Clients is Nurture, Nap, and Follow Up.

In other words, I can say the same things other people around you say, but it comes out better. On the flip-side, we have been in construction and construction-related services a long time and know "BS" when we hear it! We are looking to help you, and we expect our clients to follow directions so we can.

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