Are you tired of the challenges associated with managing construction claims and cash flow? Our blog will help you discover the importance of clear contracts, effective communication, and meticulous documentation. Doing so will help your business to streamline its processes, enhance project management, and boost profitability.
Particularly in the construction industry there is a claims process that orchestrates the booking of time, costs and effort on large projects, through to the main contractor. It normally involves the collation of what has been done and a small percentage of work still to be completed within the agreed billing period.
Some of the quirks around this process are that the claim relates to a period that hasn’t yet past in full, i.e. it may relate to billing for a calendar month but need to be filed (claimed) before that period ends.
It's usually that estimated element that causes grief and can even delay processing. The assumptions made by the claimee may not match what the lead contractor is expecting and that gap in understanding slows the process down.
Some simple ways to mitigate this headache is to:
Ensure your contract terms and conditions clearly spell out what can be claimed, and when.
While project plans in detail are often part and parcel of this type of work, make sure you include in them the invoicing process, general assumptions and timing.
Communication is often key – where applicable, having the ability to discuss and go over claims is useful in getting agreement ahead of any submission.
Why submit something that you know is going to be rejected or delayed, when that will hold up the processing of the rest of the claim and add cost to the process.
It's not about being conservative, it's about being accurate and informative. It may require a bit more effort in preparing a claim, but it will pay off in the long run.
Management of variations is key. Without being pedantic about documenting changes, they still need to be clearly defined (the clearer the better) and signed off in advance of the work starting. I appreciate that’s not always possible in complex projects, but dotting the i's and crossing the t’s is critical in preventing exhaustive discussions dragging on unnecessarily where changes are vague and misleading.
Letting disputes go on unresolved brings in the risk that the longer it continues, the less clear the situation looks to both parties. Deal with it while it's fresh in everyone’s mind.
Before and after photos of what work you have done also helps provide clarity. It goes without saying that the quality of the photos also becomes important if it's to be relied on.
A positive cashflow position comes from managing big projects well. It's not just about doing the work, it's also about abiding by a system you can’t always control, except for the quality of the information you provide it with, and the supporting communications that help make this process work for you.
Get it wrong and you spend a lot of time chasing your tail, adding an inordinate amount of cost that can be better served elsewhere.