Why Do Contractors Fail

Document Sample
Why Do Contractors Fail Powered By Docstoc
					    Why Do
Contractors Fail?
EVENTS THAT CAN
    LEAD TO
  CONTRACTOR
   FAILURE ...
    Accounting & Financial
    Management Problems

 Inadequate cost tracking systems
 Estimating or procurement problems
 Under insured
 CPA does not follow guidelines
  contained in American Institute of CPAs
  Audit Guide for Construction
  Contractors
        Changes in Ownership
          and/or Personnel
   Leadership of                  Key staff leave
    company                         company
    changes                            Inadequate time to
       owner dies, retires,            train new staff
        sells company                  Need time to teach
       no continuity plan in           company policy &
        place when key                  operations
        person dies or
        becomes disabled
        Changes in Line
     or Scope of Business

 Change in type of work
 Changes in the location of work
  performed
             Over Expansion
   Significant
    increases in the
    size of individual
    projects
   Expands too
    rapidly
      Factors Beyond a
     Contractor’s Control
 Unexpected   economic down-turn
 Weather delays
 Labor difficulties
 Material & equipment shortages
 High inflation
 Owner’s inability to pay
  Warning Signs that a
Contractor is in TROUBLE
     Ineffective Financial
     Management System
 Cash   Flow is
  tight
 Receivables
  turning over
  too slowly
      Ineffective Financial
      Management System
 Vendors   are
  demanding
  Cash on
  Delivery for
  supplies and
  materials
 Bills are past
  due
   Bank Lines of Credit
constantly borrowed to limit
               Allcredit fully
                secured
  X            Lines not being
                renewed
Poor Estimating and
Job Cost Reporting
   Bidding  jobs too low
  Profit Margins are thin
      or not realized
        Profit fade
    Poor Project Management
 Inadequate
  Supervision
 Inability to get
  reasonable prices
  on change orders
 Project not being
  completed on
  time
  Poor Project Management

 One   or more
  contracts has
  a claim
 Company is
  constantly
  involved in
  litigation
No Comprehensive
  Business Plan
         Contingency
          plans are not
          developed
         No “road map”
         No goals
         No objectives
    Continual Downward Spiral
 Revenue &
  Margins
  Decrease Over
  Time
 Continuing
  Operating Losses
 Loss or reduction
  of bonding
  capacity
    Communication Problems
 Disputes between
  contractor and
  owner
 Poor
  communication
  from field to
  management
Loss of Loyal Customers
             Decreasing
             reputation for
             Company’s
             ability to
             perform
             contracts on
             time & within
             budget
        For More Information
Surety
Information
Office
5225 Wisconsin Avenue NW
Suite 600
Washington, DC 20015
(202) 686-7463
Fax (202) 686-3656
sio@sio.org
http://www.sio.org

				
DOCUMENT INFO