By Patrick Hogan, handle.com

Year 2021 has been punctuated with various successes and struggles for the construction industry. While the COVID-19 crisis continues to pose challenges not only to public health but also to the economy, many construction companies have had the time to adjust accordingly and get back on their feet.

However, this public health crisis is far from over. The risks of variants have introduced a completely different challenge. The uncertainty over when this pandemic will end still hovers above us, and construction companies should remain proactive in setting up their plans for the coming year.

Below are some tips for how contractors, subcontractors, and material suppliers can mitigate potential financial risks for 2022.

Be conscientious when taking on new projects

It is tempting to take on more projects to cover any possible losses that you have incurred in the last couple years. However, you must continue to bear in mind the dangerous risks of overbidding.

The economic uncertainties brought about by the pandemic still looms, not only in the country but all over the world. You are therefore strongly advised to bid only on projects that you can realistically manage. Do not overbid as this can cripple your business’ cash flow if left unmanaged. Furthermore, you should be careful not to bid on unprofitable projects as this can potentially lead to big losses in the long term.

Be ready to work remotely

Shifting to remote work has been one of the biggest transitions for many construction office employees. Even though some companies went back to the office as soon as COVID-19 lockdowns were lifted, the possibility of switching back to remote work should still be considered.

For 2022, consider reviewing your current work-from-home policies and assessing any pain points that are causing a decrease in productivity. Implement a robust training process to ensure that all your employees are equipped with the skills, regardless if they are working from home or in the office.

Digitize your work processes

Take advantage of technological advances that are specifically made for the construction sector. This is one of the biggest leaps that you can make for 2022, especially if you have not already done so yet.

Advanced technologies and software can help you automate your processes and avoid the challenges caused by human error. For example, having an automated invoicing software may help you send invoices on time. Using a mechanics lien filing software can also help you file a mechanics lien successfully.

Be wary of cybersecurity breaches

Using advanced technologies has many advantages, but there it also comes with its own risks and drawbacks. As the construction industry continues to utilize more advanced software, the risks of cybersecurity breaches and fraud also increase for construction businesses.

When deciding on which software or technology to adapt into your business, be sure to take security as one of the biggest considerations. A software or tech device with unreliable security measures may just slow you down instead of helping you become more efficient.

Prepare for possible tax increases

Part of mitigating financial risks is anticipating major changes, such as possible tax increases. For example, under the White House’s American Jobs Plan, the corporate tax rate is set to increase from 21% to 28%. The additional tax is intended to be used for infrastructure and clean energy projects, among other things.

You should understand how these new policies will affect your business on the whole. Not only can they help you plan your financial strategies accordingly, but they can also inform you of possible business and project opportunities.

Implement a mechanics lien policy to protect your payment rights

If you have not already done so, you must develop and implement a mechanics lien policy to ensure that you can recover your payments from delinquent clients. Ensuring you file the appropriate preliminary notices required by your state protects your right to file a lien and an eventual claim, if needed. Filing a mechanics lien is the one of the most effective ways to get your difficult clients to pay up, and it can spell the difference between getting paid for your hard work or not.

It is, therefore, extremely important that you protect your lien rights in every project, especially during uncertain times. One way to mitigate a potential risk of non-payment is to serve a preliminary notice as required in your state. Not only will this open communication lines between you and the project owners, but it will also let your clients know that you take your payment rights seriously and you are willing to take all legal means to ensure that you get paid. 

About the Author 

Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors, subcontractors, and material suppliers with late payments. Handle.com also provides funding for construction businesses in the form of invoice factoring, material supply trade credit, and mechanics lien purchasing.