Contractors are often too caught up in keeping the wheel of business churning to recognize deficiencies in how their records are managed. Working hard and working often tend to leave little time for consideration of your documents. But all too often I see the unthinkable, a contractor gets into trouble and has to call on its surety for help. At that point, you might finally get your first dose of reality about your records – and it can cost you.
All contractors need to have a indemnifying relationship with a surety. The guaranty provided by a bonding company is probably required for most of your jobs – and if not it sure is a boost. Sureties provide bonds under a number of conditions. On top of collateral and premium requirements, you will be obligated to make your books and records available to the surety on demand. This protects the surety, who is in the not-so-envious position of cleaning up a contractor’s financial mess.
So what does this mean? A contractor’s books and records can take the form of anything from a room full of unorganized boxes to a cleanly organized set of electronic folders on a server. The latter virtually never happens. But I am here to tell you that it must.
Electronic filing cabinets are simply a better way to do business. Files are cleanly organized, easily searchable, readily accesible (any device, anywhere), cost-effective and sustainable. But why all of those reasons are no brainers, the benefit in a surety inspection might be more enticing. A surety may decide to evaluate your books and records, either because of a risk assessment, a claim on your project, or your financial distress. In one of those cases, you will be required to turn it all over. Turning over your electronic cabinet can take as little as 1 hour to export to a drive and mail it out. Turning over your paper files – could cost you $100s of thousands of dollars in scanning, organizing, document processing, and delivery. That’s right, your choice to print it all and stuff it in the back room might come with a major cost down the road.
My suggestion is to find a way to stop printing now and develop an electronic file system. Even if you can simply stop the bleeding now, it will help. If you have the time to go back, scan and digitize your past records – do it. It’s good for business operation, great for surety and insurer inspections and potentially most advantageous if a lawsuit pops up.
A number of companies specialize in creating electronic files all around the country, including my venture, ClaimKit. Call one and get started today.