More Than a Credit Report: Cutting edge ways to manage risk

We all know that effective credit management is critical to running a profitable construction business. It’s also critical to growth. 

Like everything else, credit management is evolving. Credit teams at leading contractors and suppliers are starting to layer powerful new data and groundbreaking artificial intelligence on top of traditional credit reports to make more informed decisions about customers and risk.

Learn about cutting edge tools that are making it easier for credit managers to answer the question “will that customer pay?”

Register to learn about: 

• Cutting edge credit and risk reports
• How credit leaders are using new data to make informed decisions
• How your team can bolster your credit arsenal
  

Transcript

John Weirich (00:06):
Good afternoon, everybody. We’re just going to wait a few minutes to let a couple other people sign in here. In the meantime, if you want to go to your chat box, go ahead. I said, we’ll just wait another minute for people to login

Laurie J. Drake, CBA (00:27):
Laurie. I’m going to do a quick audio check while we’re doing that because I had a little bit of a breakup there. Can you hear me okay?

John Weirich (00:33):
I can hear you. Perfect.

Laurie J. Drake, CBA (00:35):
Awesome. Alrighty, let me, it’s going here. What do we ask people? Throw in the chat. Where are you from? I like that. Get some hometowns going or at least where you’re from today. Okay. Alrighty. And then Laurie, give me a thumbs up when you see my screen comes up. You’re very literal. I liked that an actual phone in the air. Perfect. quick introduction and we’ll cover this in just a minute. My name is John Weirich. I have been with the Levelset team now for about six years, and I specifically work with our sales team, helping them find a new partners in the industry to bring in a Levelset family. So excited to talk a little bit more today about credit reporting and how we help companies manage and mitigate the risk in this crazy world that is construction payments. Laurie, I figure we’ll give every two, like one or two, one or three, and then we’ll we’ll get running here. I certainly know I’ve been more than a minute, late to plenty of meetings today. So I can’t hold that against anybody else

John Weirich (01:52):
Prior to joining Levelset. I was a credit manager in the construction industry for about the last 20 years now with a Levelset, I run a community of credit professionals who get together virtually and a person to do educational webinars classes. We write articles, industry news, as well as in-person events that are coming as well. If you want more information about that, just go to Levelset dot com slash CMC it’s credit manager community.

Laurie J. Drake, CBA (02:18):
We’ll make sure that gets out. I’m sure what the email afterwards, I’m a, I’m amazed. I don’t know Jill. And if if Ryan and Ryan are here together, but this has gotta be a record for the most folks from Idaho that I’ve ever had on a webinar. So thank you guys for being here. I see that we have got 25 folks in the in the webinars. Do we want to go ahead and kick things off here are

Laurie J. Drake, CBA (02:45):
Ready when you are. Alrighty, let’s do it again. If you’ve got any coworkers or colleagues who weren’t able to make it today, we will. We’ll see, we will be sending out a recording of this webinar. So if there are any questions that come up, if you’ve got to step away for a moment, don’t worry. We won’t we won’t leave you out in the dark. So to introduce Lori and I here, once again, we were really excited to be with you guys. My name is John Weirich originally I’m from Memphis. I work out of our new Orleans office though, here with Levelset. And I am responsible for helping our mid-market team find Spire subcontractors and rental companies out in the industry that are looking for help. Laurie he’ll certainly do a better job introducing yourself. And I will also go ahead

John Weirich (03:25):
Again. I’m Lori Drake and I’m the payment professionals community manager here at Levelset prior to working with Levelset. I was a credit manager in the construction industry for the last 20 years. Now I get to hang out with credit professionals together, virtually and in person, as we do educational webinars classes, we write blogs to industry news and we’re starting our in-person events, which will be full day education and networking events. If you want more information on that, just go to Levelset dot com slash CMC, which is credit management community.

Laurie J. Drake, CBA (03:56):
I was going to say, Sophia is dialing in from Houston and we’re coming your way in January. So we’ll have to make sure that you are you’re in the loop. If this is your first time ever, ever joining a Levelset webinar or stumbling into the Levelset world. I want to give you just a quick preview of who we are. Our goal as a business is to eliminate the complexity around construction payment. One of the ways we do that is with resources and surveys, blog posts, and CLS, even to help educate and share knowledge about best practices and some of these crazy compliance requirements, like the ones that we have to deal with in Texas for monthly notices. And addition to that, we’ve got a, a lien rights management software. We help them materials, financing and payment profiles. So today, if you have if you’ve ever been on the site, you may have seen a payment profile on Levelset.

Laurie J. Drake, CBA (04:44):
I like to describe it as Yelp for general contractors. The idea of our payment profiles has always been an area where suppliers and vendors don’t a job can leave both Doug, you know, five-star reviews and more personalized reviews about what it’s like to work with a specific company in the industry. These are free to the world and a great way to just get an initial preview on what it might be like to take a job with a general contractor, or to maybe compare your experience with the general contractor, to the experience of some of their other vendors. Now for today’s focus, we are going to be talking first about why it’s important to be looking into things like credit history or some of these risk reports. We’ll introduce you guys all to the construction payment risk reports, that Levelset. I wouldn’t say invented, but brought to the market for the first time, about 90 days ago. So very new tool that we’re excited to to be able to partner with our customers for we’ll look at how similar credit managers and accounting professionals are using these risk reports in their day-to-day work. Some other ways that Levelset helps to manage risk. And then of course, we’ll give you guys an idea of how you can get access to some of this information, any topics on top of your mind here, Laura, that I’m not covering with our agenda

John Weirich (05:58):
Now, I think the agenda’s full.

Laurie J. Drake, CBA (06:00):
Awesome. Alrighty. Well, let’s get going then. I know we got 25 more minutes before we all jump into what will surely be another meeting. So Lori, I know you have had a lot of experience running credit checks. I would love it if you you wanna speak a little bit, so it’d be important to you found out in the industry, but using reports like this and knowing your customer’s credit history.

John Weirich (06:21):
Absolutely. So I don’t know if you’re like me, but when I was a credit manager, as soon as I got a credit application, first thing I thought is who are they? Who is this company? Who are the people that own this company? Why are they spending this credit app? So obviously getting information upfront, make sure your credit application is full. Get it while they’re willing to communicate with you is very important because once an account goes past due or they stopped communicating with you, you’re not going to be able to get as full and detailed information as you would, if you did it at front, why pull these reports so that you can make informed decisions, they have great information on how they’re paying their, your competition. See if their account is past due, how they’re paying other people, a lot of information in regards to UCC filings, any judgments, IRS tax liens, a lot of information that will help you assess the risk level of how much you want to take when you open an account and sell the material on these jobs for it back to you, John.

Laurie J. Drake, CBA (07:18):
Awesome. you mentioned some of those classic pieces of information about a company that we’re going to be able to find and systems like dun and Bradstreet or experience. And the thing that I always like to highlight about the credit and risk reports is that they are reports that specifically give us information about a contractor’s ability, not just to pay some of their vendors and let their credit score look good, but how they’re actually going to perform and manage money on a project, right? A company can be very financially stable in this industry and still be a real pain in the, you know, what, when it comes to working with their project coordinators dealing with change orders and some of the different things that can really impact cash flow. So we’re going to look at some of the specific elements here in just a moment that go into these credit and risk reports.

Laurie J. Drake, CBA (08:04):
But the idea here is that it gives us construction industry and construction payments, specific information about how this company manages their cashflow and what it does to their vendors and the cashflow that they’re looking to manage as a business. Lori, I know when we were going to talk here briefly about using the risk report, so I’m going to talk real quick about the, the general score and what goes into it. And then I’d love to hear the things that you usually evaluate when you’re looking at one of these reports. So the very top of this report is going to look similar to a credit credit report that we may pull from another database. We are going to give a payment risk score, and it’s on a similar consumer credit spectrum of 300 to 800 and then a letter grade, just because everybody tends to understand a letter grade.

Laurie J. Drake, CBA (08:50):
Now, the factors or the piece of information that are going that payment and risk score, those are what are very unique. I think the Levelset, the first one is job growth, job growth is going to let us know how many unique projects a contractor has been on in the past six months. Payments feed pretty straightforward. It gives us the average time. It takes for a contractors, suppliers, subcontractors, and other vendors to be paid on their jobs. And then finally dispute index. The dispute index is going to let us know what percentage of projects a general contractor or developer has, where their vendors are having to take steps like sending invoice reminders or notices of intent to lien, maybe even escalating their collections efforts to that worst case scenario of final lien or filing a bond claim. That’s definitely my perspective though, from the outside, looking in Lori, when you’re taking a peek at one of these reports, what usually jumps out to you as some of the most important Intel?

John Weirich (09:47):
Well, definitely the payment risk score would be the top. I know ours is graded kind of like a consumer credit report, you know, from like 300 to 800, 800 is good. So obviously four 60 is really low things that I would look at in the dispute index. 40% is pretty high. I would take a look to see if they have disputes with multiple jobs, multiple different contractors, if they are having disputes all over the place. And it’s not just one contractor or just one job, it kind of makes you wonder if they can handle their finances. If they’re not doing billing correctly, if they don’t manage the job correctly. I think that’s one of the biggest things that I would look at just to get an idea of what they’re doing. The other thing that I like is that top, right, where it says 21 ratings, three out of five positive. You can actually go look at those ratings and see more than just somebody saying five stars, no information. They’ll actually say how the person does, what they’re billing. They’ll talk about how they are in communication and managing the jobs. They’ll tell you how their labor workers were that were on the jobs. So it gives you a lot more information than you would be able to find anywhere else.

Laurie J. Drake, CBA (10:58):
So if I’m understanding you correctly, Lori, it’s something that would really be a maybe a red flag or concern is that this isn’t a couple million dollars in claims from one or two contractors. We’ve got like three dozen people that are dealing with payment issues.

John Weirich (11:12):
Absolutely. Yeah. That, and, and if you can look and see if it’s more contract, if different contractors and not just the same one, because a lot of people say, well, that contractor is not paying me. Well, they can’t say that about every contractor.

Laurie J. Drake, CBA (11:26):
Yeah, no, that 36 specific companies that are dealing with, with payment issues here seems like it’s it’s not one or two bad apples. It may be a trend to look out for. I like the growth rate as well. You know, it’s one thing to have an increase, I think in disputes when you have a lot more projects, but if we’re seeing a company work fewer projects with more disputes, that may be a sign that things are going bad and in more than one way. So speaking of of how a company’s financial performance affects their vendors, one of the big areas that other credit managers that we speak to have really enjoyed as well is this network connections graph. And you can see here, we’ve redacted everything just to keep this anonymous. But what our network connections graph is going to do is it’ll let you know the financial safety and the payment risk score here of a general contractors, five most common vendors.

Laurie J. Drake, CBA (12:18):
In this example, we have three suppliers. One of whom really seems to be getting the short end of the stick. The other two, who may be getting a few delayed invoices is a couple of headaches, but it doesn’t seem to be causing major problems. And then if we, if we look we’ve got two subcontractors that one subcontractor on the 22 jobs must be an easy one to work with. They’ve got the highest score out of these five. But I think it’s really nice to know that, you know, even if a company has you know, a lower score, if you see that the five people they’re working with most often are getting paid fairly, then I think it shows us that there’s an opportunity to lean into communication and relationships on the job site. And we may get through this project without any real scares or issues. Lori, is there anything you wanted to add here that, that jumps out when you’re looking at a network connections graph or common vendors?

John Weirich (13:11):
Absolutely. So when I look at this, you can tell that one of their suppliers 3 95 is really low. So what I would do is reach out to any trade references that they put on there, or even check to see who these suppliers are, and you can directly message them and ask for more information, see if there’s a reason that they’re not getting paid, or if anything’s going on on the job that would, you know, make it okay that they have that score because the other three, right at the top, those aren’t bad. I mean, those are probably pretty standard across the industry, but I would check extra information for those two low ones just to make sure you know, what’s going on.

Laurie J. Drake, CBA (13:46):
Yeah. I was going to say slow payment happens. You know, it takes the average subcontractor, 83, 85 days. I think, according to our survey last year to get the, it was paid so we can understand and delayed payment. But if it’s if it’s a trend of nonpayment or it’s just something we can’t deal with, yeah. That would be a good example of maybe lower than that credit limit. We’re seeing other folks who’ve had to put a what’d you call it a trade freeze on the account. If they’re really having issues with a specific supplier

Laurie J. Drake, CBA (14:12):
Trade reference, pulling different reference. Awesome. this was a very quick crash course, of course, on what is included in these risk reports with the next couple of minutes. And I want to encourage any questions we can get here in the Q and a let’s let’s talk for a minute, Lori, about how some of your peers in the industry are starting to use these credit and risk reports. As we said, we’d been able to partner with our customers now for about 90 days, allowing their accounting teams to pull this information and get a new perspective on their client base. And I think we’ve gotten some, some really good feedback. So I’ll, I’ll send it over to you. Our,

John Weirich (14:46):
Absolutely. So this is always fun. I will tell you, I started with Levelset back in February, and that is when I first heard that we were creating these risk reports and I was so excited and I bugged them over and over and over to see if they’re ready yet. I’m so excited that they finally are. If I had this information back when I was still doing credits, I would know exactly what this person was going to, not Lisa that’s showing them what a contractor was going to be doing on the job. I mean, it gives you so much information. It just tells you how they perform, how they deal with things and what they have going on. So, you know, if they can handle more, Lisa is one of our community members and she has been part of our beta program. And she says, other than the risk stuff, it’s the only report that shows how they perform on the job. You get to see if they lose any jobs, all the disputes, the payment history of Alina information. She knows she’s checked every other report out there, like you said, dun, Bradstreet, Experian, credit, safe, all of those. And this is the only one that would actually show how somebody performs on a job. You want to go to the next one?

Laurie J. Drake, CBA (15:49):
Absolutely.

John Weirich (15:52):
Shelly is also a member of the community. And when she was checking out these reports, she said, she loved the fact that it was real time data. If liens were filed, it showed right away, disputes, job downturn. It’s not something from 30 days ago or six months ago. These are all red flags that you can see as the job is going on. And I know we have another slide. That’s going to talk a little bit more about that. But those are two just reviews of two community members that, I mean, they can’t live without these reports and I would not have wanted to live without them either.

Laurie J. Drake, CBA (16:24):
Yeah. Well, and Ferguson, you can imagine, you know, they have such a wide array of customers that they’re having to look at credit for. Right. They’re selling the Turner and they’re selling to the family business. That’s just really getting started maybe as a general contractor and a builder. From a Levelset perspective, we have over 700,000 general contractors, property owners and developers around the country that Shelly and her team can immediately plug into to figure out if it’s a new face, how they want to treat it. Or maybe if it’s a repeat customer, what what’s been going on since the last project to make sure exactly the things haven’t been looking bad elsewhere, while it didn’t pop up on their radar. Joe here though. I think had a really, really great perspective on these credit risk reports as well. So Joe is a an investor in a handful of construction companies around the country, certainly much smarter with finance and numbers than I am.

Laurie J. Drake, CBA (17:16):
I was, I was a failed English major. So I don’t do well with all the numbers, but Joe here, as he said didn’t really have a place to turn, right. He was new to the industry. He didn’t know some of the best practices that Lori has, has been able to build up. And so he turned a Levelset as kind of a source of information and a source of perspective when he was evaluating not only construction companies to invest in, but the companies that he wanted, his, his his portfolio companies to work with on a project, right, good people want to work with good people who are going to perform and pay well. And that’s what Joe was for. You know, as he says, here, it’s the perspective of a lot of different people. It’s crowdsourced wisdom here to make sure that when Joe’s about to enter into a contract or bring in some additional risks to the business, that he’s doing it with the, you know, the best picture possible of what he is he’s about to get into now Levelset, as we mentioned, does a lot more than just these credit and risk reports and it would be it would be silly of me not to mention how we help companies monitor and manage risks.

Laurie J. Drake, CBA (18:17):
Once an account is opened or once a job has started the most common way that companies are continuing to keep an eye on a project. As I like to call it is through our job radar. So with the network of contractors, suppliers, and rental companies in the country that Levelset works with, we have a really, really unique perspective on where cashflow is freezing up when a project may be experiencing slow payment or payment issues. And we’re going to share that information without customers to make sure that they can make the most informed decisions possible about a job or about an account. I like to call it our smoke alarm or fire alarm solution, right? Sometimes there’s not going to be anything to worry about. We just burned something in the oven. Other times, things are about to get really serious. And we may see examples of lien claims or bond claims that could affect funding and cashflow on the project. So always write down those credit and risk reports and his payment profiles on the front end of a job. But once they get underway, we want to make sure we’re staying in tune as well to to how money is moving around on the project. Anything from your from your side, Laura, that you wanted to add on job radar, how you hear some of our community members, you using it.

John Weirich (19:30):
Yeah. So even back when I was credit manager, I was a customer of Levelset and you have this dashboard and you have all your job information everything’s in there, but occasionally these red alerts would pop up. You’d know if somebody filed bankruptcy right then and there something you don’t have to wait for the mail or go look for. If somebody had a lien filed on a job, it’s going to radar alert you because you’re also on that job. So it gives you real time information to know if you need to maybe pull back on the material material that you’re sending to that job or contact them and just kind of tighten things up and see what’s going on. The amount of alerts can get pretty high if you’ve got a lot of jobs going on. But the information that is provided is definitely something you can’t get anywhere else. And I know what the community members, they like getting these alerts because they have say 700 to 1500 customers, you know, just monitoring that they have to look at every month. There’s no way he can keep an eye on all those jobs, all those customers. So when you get the alerts, it kind of lets you pinpoint where you need to look next.

Laurie J. Drake, CBA (20:30):
Exactly love that. Judy, you are reading ahead in the agenda. I love it. If you are currently a Levelset customer or even if you are not a level site customer, but you’re looking to get started with the risk report or maybe pulling a few risk reports to highlight some of your customers feel free to send an email to risk@levelset.com. As I mentioned, we have 700,000 of these and about $138 billion worth of construction spending and construction economy ready to go. We would love to take a look at one of your customers and get you a sample of this as a thank you for attending. If you want to learn a little bit more though, about how Levelsets toolbox of solutions around main rights management, risk mitigation and construction payment might be able to help your personal circumstances or your team’s specific business. I recommend you reach out Levelset dot com request a demo.

Laurie J. Drake, CBA (21:19):
We’ll get a construction payment expert in touch with you in a matter of typically a few hours. And we can take a deep dive into the challenges you’re dealing with and how other customers are facing them with Levelset in their corner. We’ve got a couple of minutes left now to review some questions. So I’m going to flip over here. I highly encourage. If you’d like to raise your hand, we can unmute and ask a question. Otherwise, a welcome to use the chat or the Q and a function that is built into our the little zoom room here together. So Olivia or Laura, Laurie, I know y’all had a chance to monitor some of this, any questions that we missed the first time through that I can get caught up on.

John Weirich (21:59):
I would just point out on one of the zoomed in slides, the one, I think it’s the first zoom. It didn’t slide. Somebody asked if it was 64 disputes out of 75 jobs with the two numbers down there. And I just want to make it clear on that slide. Can we go back to that slide? I think it’s the first one. Yeah,

Laurie J. Drake, CBA (22:16):
We can go wherever you want. Hold on. We’re going to flip back here. I bet you miss this slide.

John Weirich (22:22):
So on the bottom it says jobs started non disputed jobs. She was asking if it was 64 out of 76. Now below that it says that it’s 183 jobs across the board for the last six months. So it’s 64 out of 183. So it’s not as bad as it would have looked otherwise.

Laurie J. Drake, CBA (22:38):
Yeah, that I don’t, again, not a mathlete by any means, but I’m pretty sure that 64 over 180 3 is where we’re getting our 40% of the speed index here. And then in addition to that, you can see how many jobs they’ve started. So if they’re not starting jobs and their jobs are having payment issues, it’s probably a sign that things are a little bit worse for the wear for this contractor. Great question. What was Sofia was looking for the email address, which we will make sure you guys have included, but it is just going to be risk reports@levelset.com. Sophia, if you want to jot that down, we’ll be sharing the slides and the recording with everyone here as well. And anybody, like I said, who maybe on your team or in your office, but didn’t have a chance to attend in person here today.

John Weirich (23:25):
And Heather says that, you know, job well done. These are going to be very useful credit risk reports. Just one thing to keep in mind is these are still new. So we would love any feedback that you have on these. If you have any suggestions on how to play something or word it different, we would really appreciate that as well.

Laurie J. Drake, CBA (23:41):
Absolutely. Well if we don’t have any final questions coming through here, I will do us all a favor and give us five minutes or so back of the the afternoon I know coming up at the beginning of the month, there’s probably folks still closing out the books and getting ready for, for this weekend. So thank you again for attending, whether this is your hundredth webinar with Levelset or your first really excited to be here. Speaking with you guys about a new tool that we’ve got to offer this great construction and construction payment market. If you have questions, I’ll go back here. Feel free to jump on Levelset.com and request a call or email risk reports@levelset.com. And we can get you a sample to get yourself started again, John wire. Thanks for being here. Laurie couldn’t have done it without you and same to you, Olivia, and hope to hear from you guys soon. Thank you. Have a great day.