The Financial Impacts on Construction Companies Caused By COVID-19
Concerns for construction companies during the early days of the COVID-19 pandemic were two-fold:
1) The health and safety of employees and
2) The project delays stemming from an inability to obtain needed materials and labor
Fear. Panic. So many unknowns. The early days of the COVID-19 pandemic are unforgettable. As the age of the Coronavirus crisis carries on, however, the concerns for the construction industry shifts toward the long-lasting financial impacts of the current situation.
Financial Impacts of COVID-19 on Construction Companies
Unlike jobs in the tech industry, most construction jobs require hands-on and in-person work. Working from home isn’t an option for contractors and other employees in the industry. In order to reduce the spread of the virus, these companies face limited travel, reduced the number of workers on-site, and have taken other health and safety measures. This has significantly reduced efficiency on the worksite.
A whopping 60% of firms report that future construction projects have been cancelled or postponed. 52% of these firms are struggling to contract craft workers amid widespread fear of contracting the virus [The Construction Association].
Much like the 2008 recession, today’s economic climate will leave massive building projects unfinished. While companies keep their employees working from home, they don’t have a need for large office buildings. Investors building apartments might run out of funds and be unable to pay. This can cause the project to fail and leave contractors to fight the lenders to recoup the money they spent on the build.
Since many Americans are out of jobs, collecting payments from upper-tiered parties is becoming more and more difficult. This leads lien claims to become an ever-increasing headache for contractors and causes disputes among invested parties. And the amount of contractors filing a lien claim is drastically increasing, up by 63% from February to April this year [Levelset]. It’s clear that payment disputes will only increase as the virus continues to spread.
How to Minimize the Financial Impacts of COVID-19 on Construction Companies
- Become familiar with government programs that offer financial assistance. The Small Business Administration (SBA) now offers several temporary programs to help small businesses during COVID-19, including the Paycheck Protection Program and SBA Debt Relief.
- Carefully review your current contracts for compliance from all parties. When making new contracts, be sure to protect yourself and your company from any unforeseen events in regard to the coronavirus crisis.
- Document the impacts of COVID-19 thoroughly. Documentation is an important part of construction work all the time, but during a crisis, it’s paramount. Clearly document timelines, any delays, financial dealings, and mitigation efforts.
- Act quickly on receivable accounts. Once the work is completed and you’re awaiting payment, don’t delay. Take it upon yourself to make sure those payments come through. Having comprehensive payment software will make this process much easier.
CoFi Can Help
The financial impact of COVID-19 on construction companies is significant. CoFi is a reliable construction payment software that can ease much of the financial burden. We’ve taken into account the needs of construction companies and lenders and combined them into one streamlined software that simplifies and automates construction payments. Our technology is changing the industry, allowing you the time to focus on construction work instead of paperwork. Schedule your free demo today!
