Construction Disruptions Settle After Initial Impacts

The ever-changing atmosphere of 2020 is nearing an end; however, only the calendar will be what is changing. As 2021 approaches, it is important to review the last several months as the economy plummeted and sharply rebounded to prepare for what the new year might bring. The construction industry, like many other sectors, saw its ups and downs with project delays, shut downs, nonpayment and late deliveries among the impacts.

One of the biggest disruptions for many, not just in construction, was the transition to remote work. Dwight McCombs, credit manager with Highland Tank, said his credit department began working remotely in March. With older computer systems and being very paper-driven, the office had to determine how to operate. "Processes that were set up to operate from home were an improvement," he said. The department didn't go back to paper files once it was safe to return to the office.

Duane Schwartz, CCE, credit manager with The Tile Shop, LLC, is working remotely until June. He is still going into the office roughly three times per month for a half a day to handle paperwork. He said it's easier to do lien waivers and similar items in the office than at home without essential devices like a printer and scanner.

When the pandemic first hit, "We took a hard look at our slow-paying customers," McCombs said. They made calls to customers, finding the owners to have conversations about getting paid on future shipments as well as current open accounts. By being proactive with customer outreach, the credit department was able to let customers know their options for late invoices. "For the most part, customers saw the logic and offered payment quickly."

It was a different story for Schwartz. Jobs were taking longer—mainly in the remodeling sector—as more time was needed to work, clean and sanitize the job sites. This was also impacting how many subcontractors could be on the job at one time. This, in turn, resulted in slower payments depending on the overall size of the job. Yet, Schwartz said many customers have improved communications about the additional time delays.

No major changes were made in the credit decision process, but these processes were tweaked, noted McCombs. Faxing paper documents became virtual faxes. "From a credit perspective, things never really slowed down. We continued to see credit applications regularly, and we continued to approve credit as products were released to the plant to be manufactured."

It was business as usual for McCombs as far as the documents that were needed when looking to become more secure on a project. "We are very careful to gather documents to file notices in case we need to file a lien on the project." These notices allow everyone to know their company is on the job, and by filing preliminary notices, it often gets payment in more promptly.

Shipments have been fairly steady and order releases have been steady as well even with a majority of the products being customized. "Plants were not impacted as far as production is concerned, but some shipments and deliveries were impacted," said McCombs. "Our plants were open, so we were very fortunate."

At the start of the pandemic, there was plenty of inventory for Schwartz and The Tile Shop. However, as restrictions tightened, production stopped in some countries and some factories shut down or scaled back production. Schwartz says they are now close to pre-pandemic production numbers.

Another credit professional in the metal supply sector is fearful of a rise in COVID-19 cases in the new year after the holidays. This could potentially lead to more shutdowns and impact material supply.

—Michael Miller, NACM managing editor

For a more in-depth look at the construction industry, pick up the January 2021 issue of Business Credit magazine. 

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Tuesday, 13 April 2021

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