When the economy gets tougher contractors are put in increasingly more difficult situations financially.
Cashflow becomes critical to contractors completing their projects. And when cash is short, people need to prioritize how they’re going to pay for things.
As owner and investor representatives we need to watch out for contractors taking money from one project and using to pay for some others. Otherwise, this can lead owners to being exposed to liens on their properties or paying for the same services more than once.
When you work with a company like Real Projectives, there are a few things we can do to help monitor a situation like this and manage risk:
- Review each application for payment/invoice.
By reviewing payments and invoices, we want to make sure everything is accounted for: that subcontractors and suppliers are being paid on time and the amounts funded by the owner previously have actually made their way to subcontractors and suppliers.
- Scrutinize lien release documents for actual numbers and potential problems.
When we look at lien release documents we’re really looking to see if the amount on the lien release doesn’t match prior payments. We also want to check if the general contractor is having trouble with getting a lien release from a subcontractor of supplier.
- Examine materials previously paid.
We want to make sure that materials that have already been paid for actually made their way to the website or are being stored properly offsite if not being used.
- Check the subcontractor is providing the number of people expected on the job.
Knowing the number of people on the job will help determine the timeline of the project but also if funds are being appropriately allocated to the subcontractor and even indicate if there needs to be more to get it done.
- Communicate with the general contractor to understand issues as they arise.
Keeping the lines of communication with the general contractor is important because we can learn about ways we can help them and the help the project move along efficiently. If we learn they’re having any trouble with a particular subcontractor on multiple jobs we can know what to expect and adjust our plans accordingly.
Real Projectives® assists real estate owners, financiers and occupiers in making sound decisions for acquiring, renovating and developing income-producing properties. If you could use an outside view with construction and development expertise, we’d be glad to discuss your unique situation. Please give us a call.