Struggling to Get Timely Financials? You're Not Alone.
Financials are the most important contractor check-in for a broker.
Outdated financials are annoying, but they might be even worse. Like the still eyes of a lurking alligator. Full of risk.
Here's why financials are tough to get:
You kinda suck at communication
Contractors are skating around bad news
Construction financials can be a tangled mess
Let's look deeper.
1. You kinda suck at communication
Little communication leads to contractors trying their best.
No communication leads to contractors making fatal assumptions.
Sometimes it's the most simple communication that brings the biggest difference. Share the financial story because:
Contractors don't grasp how current financials impact maintaining (or increasing) bonding capacity.
Contractors don't understand the details (or even the format) that Sureties need from you.
Contractors need to know about broker deadlines and submission needs.
It's not an administrative burden. Current financials is a priority for their business.
Communicate early, and the understanding will follow.
2. Contractors are skating around bad news
A lit candle is a fire to watch. A burning house needs Engine House 6. Don't wait until it's too late.
People naturally avoid negative information. It's the ostrich effect. A cognitive bias.
Most contractors hate to expose bad news.
Your contractor might be operating on fumes. They think, if I wait one more week to submit financials, I'll have more cash.
A contractor looks polished on the outside, but is an empty shell on the inside. Declining profitability or strained working capital haunts them. Stalling until the financials look better.
Their internal cost tracking is a shoebox of papers. Costs are tracked, but their system's an awful example of organized. The accountant's ready to work, but the raw data is littered across worksites.
Having updated financials starts with the contractor.
Watch for difficult truths.
3. Construction financials can be a tangled mess
If understanding finances is an A team in the minors, understanding construction finances is the BIG leagues.
Job costing, percentage of completion, work on hand, all add to slow reporting.
Contractors (especially smaller ones) likely have an internal bookkeeper that works three other jobs at the company. From day one, they're overwhelmed. Add the complexity of construction accounting and files are delayed.
There's an opposite problem when contractors use external accountants. Now, everything's organized (finally!), but they dictate the schedule. Turnaround is less in the hands of your contractor.
Financials are a critical piece of the puzzle for assessing bondability, managing risk, and projects move smoothly.
Communicate early, break down bigger tasks, give contractors a template to follow. This'll speed up timelines and make your lives in the brokerhood much better.