How to account for financial setbacks

CCS Influencer Will Lorenz says companies like ours would prefer to have people pay on time but we understand challenges.

Editor's note: The following is the transcript of a live interview with CCS Influencer Will Lorenz. You can read the interview below, listen to the podcast or watch the recording.

Intro: Hello everyone. My name's Karen Edwards from Coatings Coffee Shop, and I'm here with one of our influencers, Will Lorenz. Will, welcome.

Will Lorenz: Hello, Karen. Welcome. Thank you. I'm glad to be here.

Karen Edwards: Yeah. So this month we're going to be talking about a topic that a lot of people don't want to talk about. And that is how can you prepare for unexpected financial setbacks? We don't want to see things go bad, but sometimes they do. And what are some tips that you might have for contractors, how they could prepare for this?

Will Lorenz: Well, I think it's several fold here. No one solution is the right way to go about it. But first of all, I would say this, you should always have a good relationship with your bank and it's a smart idea to have some cash reserve. It's also a good idea to have a credit line that you can tap into. And then it's always, as you look at your year, early in the year, you have a lot of requirements for materials getting things going. Towards the end of the year, it's more about collections and finishing work. And financial challenges can be really related about just getting jobs done. So you can do things with regard to your contract that you established with your client to try and protect yourselves.

Encouraging earlier payment. I think I saw something recently from a roofer out of Los Angeles that was talking about 50% payment and they were trying to get their materials up front and then working on financing things. So cash flow is usually always about what you have to pay, vendors, employees and taxes and then what you collect from your customers on finished work. So prepayment discounts to people, if you need to get cash right away. Talk to your people. Hey, we'll give you a little discount if we can get paid up front or get a segment paid earlier. Many times I find that roofers can be challenged by getting their paperwork in on time to people and meeting the cycle of billing. So it's very important if that company is a property management company, is to make sure you're in on the cycle. It can be another 30 days before you get paid. So working internally in your company to get that as a top priority will help you keep your cash flow going.

Karen Edwards: Yeah. I think more so now than ever, you see companies paying 30, 45, 60 some even 90 days and they don't care. They don't care about your cash flow. So I think understanding that upfront is going to be one of the keys to making sure that that money comes in when you need it.

Will Lorenz: Yeah. And if you sign yourself up with a large project, you have to have that conversation with your customers upfront. Spell it out on your contract when you're expected to get payments, what are the milestones you have to achieve to do that and what are the billing cycles? So that pre-planning helps you avoiding emergency circumstances that can get worse because you didn't plan for it.

But if you have unexpected things like a car breaks down, a truck breaks down or your rig's down, you have to be able to look whether or not you can get some financing on that, extend the payments out or whether or not you have something on your credit card. I mean, there's always a lot of debt that's put on credit card, unfortunately, but there are mechanisms with credit cards that allow you to extend things out for, sign up a new credit card and they give you-

Karen Edwards: A balance transfer.

Will Lorenz: Yeah. And then obviously equity in your business or equity in your home. If you're a smaller enterprise, you have to rely on that what you can do from your white nights, meaning your own family or friends if you need to. If you're really a bigger corporation, I think it's really about negotiating things back with your vendors. Companies like ours would prefer to have people pay on time, but we understand challenges and we'd rather have a conversation with people about what they can pay rather than someone saying, "I can't do it." And holding off from any discussion about it. A good dialogue with your vendor or your distributor can work well. I think a lot of distributors offer good terms, and they should consider having that discussion with their credit departments if you see something that you need to address.

Karen Edwards: It sounds like it really comes down to relationships with your distributors, with your manufacturers, with your lenders, with your family and business associates. It is funny how it all comes back to that.

Will Lorenz: It does. And I think most of us are all invested in our customers, and so we recognize that things happen and we're looking for solutions that get us all to the end points that we want, but how we get there, there's flexibility and there's creativity. That's always an option to getting all of us happy and continuing a long-term relationship.

Karen Edwards: Yeah. Well, thank you so much for sharing your insights and your thoughts. Always profound and helpful, and appreciate you being here today.

Will Lorenz: Thank you very much. Good luck.

Outro: We'll see you next time.