Knowledge Corner

Managing your company’s cash flow is extremely important. Unforeseen problems will arise, but if you have a proper cash flow management system in place, your company will be better equipped to handle any issues that may arise. Here are some cash flow solutions that your construction company can implement:

Restructure Contracts with Premium Finance Companies

Restructure your contract with your insurance carriers or the premium financing companies. This option tends to be utilized more in New York and its surrounding states and not the West Coast as the West Coast does not use the E&S market.  

An E&S market (Excess & Surplus Market) is a specialty insurance market that provides coverage policies to companies that the standard insurance carrier market does not. The E&S markets provide policies to companies that have a hard time getting a specific coverage. In doing so, they don’t offer payments. That is why, if your company is located on the East Coast, your best option is to restructure your premium finance agreement.

Negotiate Mobilization Costs to include Insurance Premiums

Once you’ve won the bid and your contract is being defined, now is the time to negotiate. Whether it’s the General Contractor or Prime Contractor, you can negotiate to include your insurance premiums in your Mobilization Costs.

Instead of paying for insurance premiums for a project you haven’t started to work on, you can receive the money upfront to cover the insurance cost. Not only does this give you the proper insurance coverage, but it also provides flexibility to your cash flow.

Education

Many of these cash flow problems stem from the lack of knowledge on how to actually manage cash flow. Ensuring proper cash flow management in the first 6 months of any project is crucial. If you don’t have it in place now, the likelihood of your business sustaining 5-10 years from now is very slim.

Reporting- 12 Month Outlook

It’s important to look at your company’s sales/payroll projections for the next 12 months. Work with your Broker to determine what exposures to report. If you report less exposures (i.e. Sales/payroll) upfront to your insurance carrier, your insurance rate will be higher, but you won’t have to pay as much upfront. As a result, you have more flexibility with your cash flow to pay for good labor, material increases, supplies, etc.

Alternate Risk Financing Options

If your company is larger, now is the time to consider looking into alternate risk financing options. These options can provide your company with the proper insurance coverage, while also giving you the flexibility with your cash flow. These options can include: 

• Loss Sensitive Options such as: Self-Insured Retention (SIR) Plans or Large Deductible Plans.
• Captives

If you do not have a proper cash flow management system in place, now is the time to implement it. This will set your company up for long-term success. If you have additional questions on how your company can handle your cash flow management better or where to start, reach out to TSIB today and speak with one of our team members today!

TSIB’s Risk Consultants are currently servicing the following locations:

East Coast: New York City, NY; Bergen County, NJ; Fairfield County, CT; Philadelphia, PA

Texas: Austin, San Antonio, Houston, Dallas

California: Orange County, Los Angeles County, Riverside County, San Bernardino County, San Diego County

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