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Days Working Capital
What is Days Working Capital?
Days Working Capital (DWC) in the construction industry is a financial metric used to measure the effectiveness of a company's short term liquidity and operational efficiency. It's calculated by dividing working capital by daily operating expenses. The result represents the number of days a company can continue its operations with the current level of working capital. A lower DWC indicates a company is managing its cash flow efficiently, and a higher DWC may suggest a company is not using its short-term assets efficiently. The construction industry often has a high DWC because of the long project durations and upfront material and labor costs that are required before payment is received. In other words, they have money tied up in work-in-progress. So, for a construction company, it's crucial to manage DWC effectively to maintain a healthy cash flow and remain competitive.
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Other construction terms
What is a Final Lien Waiver?
A final lien waiver is a legal document that serves as a formal release of a contractor’s or subcontractor’s rights to file a lien against a property owner or project after they’ve received full payment for their work. Its primary purpose is to provide assurance to the property owner, developer, and/or GC that no future claims or liens will be filed once the final payment has been made.
In the construction industry, subcontractors and material suppliers have the legal right to file a lien against a property if they have not been paid for their services or materials supplied. This lien acts as a security interest in the property, preventing the owner from selling or refinancing until the debt is settled. By signing a final lien waiver, the subcontractor or supplier acknowledges that they have received full payment and relinquishes the right to file a lien in the future.
For subcontracting businesses, obtaining final lien waivers from their lower-tier subcontractors and suppliers is crucial for these same reasons. It protects them from potential claims or liens that could arise after they’ve paid their lower-tier subcontractors in full. Failure to secure these lien waivers can expose subcontractors to legal and financial risks, as they may be held responsible for any unpaid debts owed to their lower-tier subcontractors or suppliers.
Overall, final lien waivers provide essential protection and peace of mind for all parties involved in a construction project, ensuring that all work has been satisfactorily compensated and preventing future disputes over payment.
Solutions like Siteline streamline the lien waiver process for subcontractors by:
- Automating collection from lower-tier subcontractors and suppliers;
- Providing a centralized view of lien waiver statuses across all projects; and
- Generating lien waivers (conditional or unconditional, progress or final) to submit to general contractors.
As such, Siteline helps enhance efficiency, mitigate risks, and enables subcontractors to focus on core operations while ensuring compliance and protecting against potential legal or financial complications that could arise from incomplete or missing lien waivers.
Request a demo of Siteline today to experience these benefits firsthand!
What is Retainage?
Retainage is a common practice in the construction industry where a portion of a subcontractor's payment is withheld until the project reaches substantial completion or a specific milestone. This withheld amount, typically 5-10% of each progress payment, serves as a safeguard for the project owner, ensuring that the work is completed to their satisfaction. However, retainage can significantly impact subcontractors' cash flow, as it ties up a portion of their earnings and limits their access to working capital.
This restriction on cash flow can create challenges for subcontractors, especially smaller businesses with limited financial resources. They may need to secure additional financing or lines of credit to cover ongoing expenses like labor, materials, and overhead. This can lead to increased borrowing costs and potentially reduce their profit margins. In some cases, subcontractors may even delay starting or completing work until retainage from previous projects is released, causing potential disputes.
To mitigate these challenges, subcontractors should carefully review and negotiate retainage contract terms, ensuring they fully understand the percentage withheld, release conditions, and payment schedule. Proactive financial planning, including budgeting for delayed payments and potential additional financing, is crucial for navigating the pitfalls associated with retainage.
Siteline can be a valuable tool in this process. It allows subcontractors to track retainage meticulously—ensuring they always collect retention payments—and provides a centralized repository for all closeout documentation. Additionally, Siteline streamlines the billing process, generating accurate and timely pay applications and submitting the correct lien waivers, further simplifying the complexities of retainage management.
If you're looking to gain control over your retainage tracking and improve your overall billing efficiency, book a demo with Siteline today.
What is a Submittal?
A submittal in the construction industry refers to the documents or materials that contractors present to architects and engineers for approval during the course of a project. The submittal process ensures all products and materials meet the quality and specifications outlined in the contract, helping to maintain standards and avoid costly revisions or errors. These documentations can include shop drawings, material data, samples, and product data. The submittal process is essential to avoid any potential discrepancies or misunderstandings, and it has to be accurately managed to guarantee the project's success.
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