In an economy where money is tight, contractors can't take getting paid for granted anymore. They have to work at it. "It is absolutely more challenging getting paid," said Joe Kiepp, president of Chesterfield-based River City Drywall.
Because of clients ignoring invoices, "In the past year I've spent more money on attorney's fees than in the 14 previous years combined," said Tim Wies, president of T.J. Wies Contracting in Lake St. Louis. But attorney's fees are just the tip of the iceberg.
Savvy business operators such as Kiepp and Wies have instituted new policies and procedures that help them collect from clients and, if necessary, pave the way for successful court cases. Both companies have accelerated their invoicing, sending bills out the day or week the work is completed instead of waiting for the end of the month. Both have someone on staff responsible for collections.
River City Drwyall also:
But before collection actions, before even the contract, comes the vetting. River City Drywall works for a lot of local and privately-owned companies. One of the new practices Kiepp initiated was to subscribe to, and read, a periodic credit report that lists all the mechanic's liens, tax liens, and lawsuits filed locally in the building and construction industry. "When we see a contractor on the list several times, we chose not to do business with them, and it helps us prepare if we see one of our customers on it," he said.
A company that makes it past the credit report still has to fill out a customer information form giving River City Drywall references and permission to contact their lender and title company.
Michael Wolf, an attorney specializing in construction law at Reizman Berger P.C., called such practices obvious, but added that too many subcontractors have overlooked them.
"Before you go into business with someone, shouldn't you know as much as you can about them?" he said.
"There are AIA and ConsensDocs contracts that allow lower tiered contractors to ask for the upper tier's liquidity," Wolf said.
More information, he said, can be found on the Internet:
A contractor who passes River City Drywall's vetting still isn't cleared to hire the subcontractor. In another new wrinkle to River City Drywall's business practices since the economy went south, "we now require a personal guarantee from the owner of the company," Kiepp said.
That's a practice Wolf approves of when dealing with a new or unknown company. "When attempting to collect a debt, a guarantee often means the difference between success or failure when the entity primarily responsible for the debt is out of business or insolvent," he said.
Wies has another practice that reduces his financial risk on private jobs: he furnishes the owner a retention bond as a substitute for the owner holding retention. On many private jobs, the owner withholds a portion of each payment, maybe ten percent, until the job is completed, supposedly as an incentive for the contractor to finish the work. Under Missouri law, however, if a contractor chooses to post a bond, the owner cannot withhold or retain any portion of payments due for the purpose of ensuring that the contractor completes the job.
"On a private job, you might get three-fourths of the way through when the owner stops paying," Wies said. Without the retention bond, "you'd be out your last payments and your retention. By putting up the bond, the owner can't hold back retention, so it protects you from losing the retention when the owner runs into financial problems," he said.
Even with vetting, reminders of personal guarantees, and quick invoicing and phone calls, there are times when owners run into financial trouble and stop paying their bills. Then it is time to file a mechanic's lien. Kiepp estimated that River City Drywall has filed over 20 in the last two year.
"It is important to have an attorney file your mechanic's lien," Kiepp said. "Some people try to save money by doing it themselves, but if it is not done correctly, the defendant's attorney can get it thrown out," he said.
"The biggest thing you can do (to collect what's owed to you) is don't let your lien rights expire," Wies said.
"The most important thing to do is keep an eye on the calendar and not let the lien time run out," he said. "You have six months from the last day of work, but determining the last day can be tricky (going back to repair something that was defective doesn't count), so if there is any doubt, err on the side of earliness and caution," said Richard Stockenberg, attorney with Gallup, Johnson & Neuman and counsel for the Midwest Council of the American Subcontractors Association. By the way, your last day worked has nothing to do with when you sent out your final invoice.
And don't wait until the final week to ask an attorney to file a lien. Subcontractors and suppliers have to file notice of intent to file a lien on the property owner at least 10 days before filing the lien. It can be difficult to find the real owner, Stockenberg said, and if there are multiple owners, all of them have to be served. If there are 100 partners, all 100 partners have to be served. Lawyers will do this service, but it takes time.
"I typically like to get involved six weeks before the deadline," said Stockenberg.
"To this day, I am surprised when I get a call from contractor, who says that someone owes him money, but he doesn't know the requirements of Missouri's mechanic's lien law. To not know the deadlines is contractor malpractice in my view," said Wolf.
Wolf said the first step for a contractor is to get training in lien law just as he or she would get training in a trade. That means learning such things as learning how a lien waiver affects him; what to do if a higher-tiered contractor tries to get him to sign an enhanced lien waiver; what to put in a credit agreement; and what interest to charge for late payments. The American Subcontractors Association and other industry associations have programs to educate subcontractors and specialty contractors about lien law.
After learning what they are entitled to, then contractors can worry about how to collect.
"If you are not preparing yourself to understand the contract you sign, do you really want to pay an attorney to sue to enforce it, and even if he can, do you want him to sue if you can't collect?" Wolf said.
A judgement, "it is just a piece of paper, if you can't collect on it, what is the point?" he said.
In 2003, Clayton-based Behr, McCarter & Potter, P.C. launched a Judgment Collection Program designed specifically to recover judgments for contractors, commercial real estate companies and construction-related clients. Principal Anthony Behr said that since its inception, the program has recovered more than $10 million owed from court judgments.
"We have found that if a contractor files a mechanic's lien within six months, we recover 85-90 percent of the money owed to him," Behr said.
"The only thing we charge is any garnishment fees we send out on their behalf. They don't have to do any work to collect; they get out their file and any contact information they have. We go to Internet and try to find any properties, banks accounts, or judgments they have in their favor and we file garnishments. On any judgments that are less than five years old, we get 1/3; anything 5-10 years old, we get 40 percent and we send monthly statements to contractors for the garnishments we've made," he said. "If they already have a judgment, they don't pay anything up front and if we don't collect anything, they don't owe us a dime, except for a garnishment fee that is usually less than $100," he said.
"It is hard to believe how many judgments there are out there that don't get collected," said Joseph Blanner, a partner at Behr, McCarter & Potter. "Most contractors have several judgments in their favor that they haven't collected. This could be another revenue stream for them," he said.
For River City Drywall, liens rights are invaluable. Remember those 20 liens they filed in the last two years? "We've been successful in collecting every time, and collecting 100 percent of the amount of owed," Kiepp said. "I have conceded the interest with a few of them, but I have not taken anything less than 100 percent of the invoice amount," he said.
The key elements of River City Drywall's winning strategy are a willingness to wait out defendants and an attorney who specializes in liens. "I had one lien I filed for $36,000, and I wound up getting $42,000, because I got 100 percent of the principal and interest," Kiepp said.
Wall and ceiling contractor finds considerable success blending its industry experience with leading-edge technology.
In the highly competitive world of contracting, success is often determined upon what type of advantages your company holds over others in the market. Older companies rely on experience in order to get a cut above the rest. Younger companies consider technology to be their advantage.
Of course, when it comes to profits and costs, the two generations aren’t very far apart. Both want to increase the former and decrease the latter. Mixing a bit of market experience with some leading technology tools can be the winning combination for achieving this goal with great consistency.
For most of his life, Tim Wies was involved in a family-owned wall and ceiling business. In 1994, he decided it was time to start his own company, T. J. Wies Contracting, www.tjwies.com , in Lake St. Louis, roughly 40 miles outside of St. Louis, Mo. At the onset, Wies ran the startup company out of his basement, acting as the sole staff, management, and operations person, while managing only three field employees.
T.J. Wies Contracting has grown considerably over the years, currently employing five estimators, five project managers, four field superintendents, five staff employees, and 250 field employees. The company office has grown as well, and is now located in a 16,000-sq.ft., state-of-the art office/warehouse located on two acres of land. The office offers visitors a glimpse of creative applications in drywall, ceiling, and construction techniques.
Needless to say, Wies leaves no opportunity unturned to showcase his company’s work and capabilities. This passion for work led to the company being named “Best Specialty Contractor” by the Midwest Council of the American Subcontractor Assn., www.asaonline.com , Alexandria, Va. After being nominated for this award five consecutive years and not winning, T.J. Wies Contracting finally brought home this prestigious award in back-to-back years: 2004 and 2005.
But more than plaques on the (dry) wall, Wies has earned a reputation as a contractor that never shies away from using up-to-date technology to improve the quality and profits on its jobs. It is a quality that pays off each and every day.
On the Frontend The estimate is the virtual lifeblood of your typical subcontracting company. Equally important to getting the costs right is getting the details correct, and subsequently following up as the job progresses in order to be on top of changes and expenses.
According to Tim Wies, “When we started the company 13 years ago, I had a background in manual estimating but was always interested in upgrading to computer estimating. We got online with Quick Bid from On Center Software, [www.oncenter.com, The Woodlands, Texas] right off the bat and I hired experienced estimators to handle the computerized estimating.”
The Quick Bid product enables his estimators to be more thorough and productive by automating many of the functions that are usually performed manually. For example, bids can be adjusted in the system easily and quickly, allowing recalculation of last-minute changes. It also allows the ability to quickly generate new estimates, saving precious upfront time establishing a bid.
With speed, quality, and ease of use being the name of the specialty contracting game, Wies quickly realized an upgrade across more all of its bidding and estimating tasks could take the company even farther. The next plausible step was to begin using On Screen Takeoff (OST), On Center’s tool for digital takeoff of plans.
This product allows estimators at the company to view color-coded drawings on computer monitors to identify conditions and their quantities. Takeoffs of the typical area are done one time and by design it extends the quantities to all the appropriate individual areas with the typical features. When comparing two versions of a drawing, deleted items are in red and added items are in blue. Wies can then print out these documents for use in bidding.
“We just recently added a color plotter and with OST we have the capability of plotting out drawings, taking them in and showing the general contractor,” Wies comments. “We can ‘color them up’ showing what we’ve taken off and, in the pre-award timeframe, that seems to help quite a bit to show that we have expertise and technical knowledge of the individual project.”
Helping to eliminate manual summaries of the takeoffs, this product allows open details, sections, and elevation to be viewed and enables estimators to see a floor plan simultaneously. They then can use the layers feature when completing a takeoff of multiple divisions of work to visibly turn conditions on or off within the plan image while concentrating on certain scopes of work. This increases communication efficiency by allowing them to copy and paste plans with takeoff, notes, and annotations, ready to submit as an RFI (request for information).
T.J. Wies employs a team of five estimators. Each estimator agrees replacing standard takeoff methods with digital takeoff technology has elevated this process to the next level.
“With the availability of the digital plans, we probably do 90-95% of our bids digitally, on screen, and all five of us have been able to pick up on it easily,” claims one of the company’s estimators, Adam Stevener.
And since time and money are closely related in construction, extending the time available to do an accurate estimate can lessen some of the pressure on the estimator. According to estimator, Joe Berhorst, “One aspect about OST is that it cuts down quite a bit on travel time. We don’t have to search out a hard set of drawings, so it allows us to get more bids done in a timely manner.”
A Step Toward Integration Technology has certainly helped streamline the preconstruction process at T.J. Wies Contracting. However, the company has not been as successful linking that efficiency to backend accounting and job costing.
Basing its accounting and job costing activities on Sage Master Builder from Sage Software, www.sagemasterbuilder.com , Beaverton, Ore., Wies currently integrates these applications with its On Center software manually. As any construction professional will tell you, this can be the source of great frustration—particularly for a small specialty contractor where time and accuracy are two of its greatest assets to success.
Within the current setup, data entry must be done twice; a time consuming and labor intensive operation. An assistant can devote hours to transferring the information from a field report into the appropriate program and then additional time and effort moving the same data into the other systems where it is needed.
“The thing that would appeal to us most would be a way to sync in with Master Builder or any other accounting software where it doesn’t require import and export, where it could be done more seamlessly,” adds Wies.
One area in which Wies seems to have a good handle on integration is back in the preconstruction phase. Seemingly always the first to embrace new technology, Wies says the company “jumped in with both feet” when the vendor brought Digital Production Control to market, roughly two years ago. Tim instantly recognized the product would help with tracking and management of its projects—correlating directly with the primary objectives at the company.
Integrating the takeoff and estimating process, Digital Production Control digitally tracks labor production and payroll directly from the field to the project manager’s office. This gives Wies the ability to recognize labor production problems instantly rather then at the end of a job where overruns can be more costly.
“(Digital Production Control) allows us to get a better handle on the job’s profitability and/or possible shrinkage on margins earlier in the process,” says Wies. “We’re able to track the job from the start and know if we’re on budget with the production a lot earlier than trying to do it manually or just watch the job and make a guess.”
Like many of his contemporaries, Tim Wies would rather have his field supervisors focus on doing their work out at the jobsite rather than on data entry.
“It’s a waste of their time and talent to have them punching in information on a keyboard in the field,” he acknowledges. “Taking timecards in on paper, for example, isn’t a serious constraint but ideally we’ll eventually have the systems integrated enough that the office staff won’t have to continuously re-enter that information into various programs.
“Let them enter it once and populate all the programs at the same time. Then we can look at other ways to get the information from the field, such as bar code entry of telephone calls with voice recognition or transcription by the office assistant,” Wies adds. “That’s the future we are looking at.”
Tom Inglesby is a contributing writer for Constructech.
May 25, 2012
Being able to enter critical time and attendance data on mobile devices in the field has added a lot of value on construction projects. But the next wave of information collection can be done automatically—without any time entry at all.
M2M (machine-to-machine) technology, used in many areas of construction to track items such as fleets, tools, materials, and more, is now being leveraged to automatically capture time records and send to payroll—without any data entry from the employees at the jobsite.
Yesterday, ExakTime, www.exaktime.com, Calabasas, Calif., announced it is working with Cinterion, www.cinterion.com , Munich, Germany, a Gemalto Co., to allow customers to automatically capture and send records via a wireless network.
How does it work? A module from Cinterion in the JobClock Hornet hardware from ExakTime sends data wirelessly from the field to the software in the backoffice. This means payroll is able to process data faster and project managers can reallocate workers based on realtime information.
The technology is designed primarily for any business with hourly employees such as construction, and sends time stamps every hour for up to 30 days before the battery needs to be recharged.
Is this the next big trend for time and attendance tracking in construction? Possibly. But there are a few other high-tech alternatives that some contractors are considering.
Tim Wies, president, TJ Wies Contracting, www.tjwies.com , St. Louis, Mo., and president of AWCI (Assn. of Wall and Ceiling Industry), www.awci.org , Falls Church, Va., says, “Everybody is trying to figure out the next best way to get data back from the field, whether timecard data with your timecards, tracking your labor hours, and sign-in cost codes.”
Another option for tracking time and attendance: digital fingerprinting devices. Technology providers—such as FingerTec, www.fingertecusa.com , Brooklyn, N.Y.—offer biometric time clocks to log hours through a digital fingerprint scanner.
Workers simply punch in using their finger, a card, or a password, and the data gathered is sent wirelessly to software in the office. Construction companies can also choose to use a combination of fingerprint, password, and RFID (radio-frequency identification) technology for check in at the jobsite.
“Some people are using handheld devices to input all their timecards and send them electronically back into the office for verification, and going through payroll. Others are going to fingerprint scanning,” continues Wies. “There are a lot of new systems out there trying to eliminate the paperwork on the timecards and job costing and tracking.”