Getting paid in the construction industry is an art, especially for subcontractors and suppliers who must rely on payment to trickle down from the property owner, through the general contractor, and sometimes through even more parties.
Offsetting these complexities are state laws that provide subcontractors and suppliers with “mechanics lien” rights. These rights have existed in the United States since Thomas Jefferson introduced the first lien legislation more than 220 years ago. Today, the rights are as strong as they ever were.
One huge problem, however, is that companies must comply with the mechanics lien law’s notice and timetable requirements to preserve these mechanics lien rights. This is a minor headache if you do business in a single state, but as soon as you start expanding into other jurisdictions, balancing the paperwork load and differing laws in each jurisdiction becomes absolutely impossible.
What can you do?
1) Dedicate Your Company To Mechanics Lien Compliance
You may be tempted to avoid lien compliance simply because it’s so complicated. It’s easy to pretend that ‘it isn’t worth it’ or that ‘liens don’t work’ to avoid the daunting task of staying compliant with each state’s rules. The rules really do vary from state-to-state and circumstance-to-circumstance, and they are very complicated.
Nevertheless, savvy companies understand that the juice is worth the squeeze with mechanics lien compliance.
Adopting a Lien Policy and sticking to it could realistically drop your non-collectable debt percentage to near 0%; a key performance indicator (KPI) that could literally make your company millions of dollars.
Your company can be dedicated to mechanics lien compliance until their ears bleed, but without a way to actually comply, it won’t matter. For too long, companies have had to compromise their lien rights because compliance was impossible. As the next section explains, however, that’s no longer the case.
2) Use Technology To Manage The Mechanics Lien Laws
If you’re using Microsoft Excel or Outlook to manage your mechanics lien deadlines, you’re making a mistake. If you’re using a service provider and paying them per project to manually (yes, they are doing it manually) track and notify you of your mechanics lien deadlines, than you’re making a mistake.
It is a rare day when a company would rely on a manual process or a spreadsheet to track all of their invoices, expenses, or other accounting items; wouldn’t you agree? Why in the world then would a company use these same error prone and laborious methods to track something so complicated as lien rights?
Historically, the answer to this was simply that there wasn’t any other choice. The times has changed, however, and there is a great technology available to help companies manage these lien and notice requirements. Take, for instance, the zlien platform which completely automates the preliminary notice process and manages all mechanics lien and bond claim rights.
It is essential that your company rely on a technology to manage the lien compliance process, enabling the company to dedicate themselves to a lien policy, and resulting in a much better bottom line.