Small-Firm CFOs Discuss Top Challenges at CFMA’s 2020 Virtual Annual Conference - Articles

The Small-Firm Contractor Roundtable Session on June 26, 2020 drew more than 76 construction financial professionals who were engaged in discussing topics of interest to contractors in the $1-25 million revenue range. The session included a presentation by Robert Heuer, Vice President & Partner
Guy Hurley Insurance & Surety Services, on risk management during the economic downturn.

More specifically, Bob presented on COVID-19 insurance issues and their impact on the market which included the following sub topics:

Workers’ Compensation
Business Interruption
Employment Practices Liability
COVID market “hangover”

The breakout groups were asked to focus on the following questions:

What can I do to fight the huge increases in Umbrella/Excess pricing?
What’s the best strategy to control potential large increases by the premium auditor (for workers comp, general liability and other insurance policies)?
Am I better off communicating straight to my surety underwriter, or going through the agent/broker?
I had to cut the safety director position to save money. How do I fill the void without incurring more cost?

Seven breakout groups were formed and below is a summary of their key discussions.

Outside of one participant that stated their premium increase was about 40%, not too many of the other subcontractors had experienced drastic premium increases around umbrella policies, but many renewals had not happened yet and they will be prepared to address any major increases.
The surety relationships are most important at the agent broker level as the agent is the one that can write and tell the company story.
Checking the auditor worksheets is important to ensure a clean and accurate GL and WC audits and to clarify classifications.
Most groups were anticipating much closer scrutiny of quarterly financial statements from banks and sureties moving forward.
Some agreed that contractors are being a bit more hesitant to make any large capital outlays at present. Although financing rates are low and many may be flush with cash right now, everyone was very aware that cash may soon become a problem.
The members of one session that relied on a supply chain for material purchases had experienced some slowdowns, but this seemed to be levelling off.
No one was investing less in safety. It was actually the opposite in the current environment. Safety directors are being asked to do more right now. Some participants had full safety committees to assist with safety and that were developed unofficially.
Current backlog and market strategy will play a large part in if a company will succeed through this time.
Ensure that any numbers provided to your insurance broker do not include OCIP numbers. Otherwise, you may be double counting, which increases your premium.
Be proactive with insurance premiums and manage it throughout the year. Coordinate with the broker if significant changes occur (decrease/increase in payroll or revenues) for a potential modification to premiums.
Be sure to consider all effects of reducing your internal safety staff. If you think you are saving an $80,000 salary by letting go of the safety director and letting a PM take on this responsibility, did you consider the effect of having a good PM at 80% capacity?
In support of the uncertainty component of requesting PPP loans, some sureties have been willing to write letters that are general in nature and speak to the uncertain aspects of construction life and the value of maintaining strong liquidity and available bank lines. This is good documentation to have in your PPP file.
For those looking for a current template tracking PPP forgiveness, the spreadsheet found in the toolkit at https://www.blumshapiro.com/coronavirus/ was highly recommended.

A special thanks to the Small Contractor Roundtable Task force who helped to develop this outstanding session: Tamara L. Kilty, Karl Kortman, Caryl Coronis, Lori Swisher, and Patsy Dunn.

If you missed this year’s roundtable peer group, mark your calendar NOW for CFMA’s 2021 Annual Conference, May 15-19, 2021 in Denver, CO. This is an opportunity you won’t want to miss that will afford you a connection with your Small Contractor peers to talk about the issues most important to you!