Construction professionals at work

Full disclosure: I’m very much in favor of preliminary notice outsourcing. But really, why wouldn’t I be?

Typically, when I speak to potential clients, controllers, CFOs and the like, they fully understand the benefits of partnering with a company to deliver and manage their preliminary notices. Every now and again, however, we run into someone comparing using a service like Levelset to sending all preliminary notices in-house.

A recent such encounter inspired me to write this post, which highlights three primary reasons why sending your own preliminary notices will not save you money.

Improper or Incomplete Preliminary Notices Can Cost You Thousands

When sending notices yourself, you may do it exactly right a lot of the time.  A mistake, however, is almost inevitable.

In addition to common mistakes made on preliminary notices because of a misunderstanding of the forms, business must also account for the mistakes attributed to the unavoidable rushing through the forms. Employees likely have 100 other things to do aside from sending these preliminary notices, and as a result, days pass without the notices getting sent, the proper amount of time and attention isn’t provided, and mistakes occur.

An improper, incomplete, tardy or returned (by mail) preliminary notice can be a big problem for your company. It can cost you thousands because of a loss of a mechanics lien rights.  And that’s a lot more than the expense you would have spent on outsourcing your notices.

Postage Is Expensive

At first blush, sending your own preliminary notices instead of outsourcing the work may seem attractive. However, you must consider the potential postage costs, and these costs are high.

Currently, the cost to send a Certified Mail Return Receipt parcel is $5.75!  That means you’re going to spend this much in postage for each and every notice delivered.  On a California project, where notice must go to the property owner, the prime contractor and the lender, that’s a total of $17.25 in postage alone.  Don’t forget the cost for envelopes, ink, paper, labels and other incidentals, and of course, licking and labeling all of those envelopes and the endless trips to the post office.

Your Employees Time Is Even More Expensive

If you think postage is expensive, consider the cost of your employee’s time.

Let’s say your employee makes a $55,000 per year salary, and works a 40 hour work week.  After researching the parties, filling out the paperwork and arranging the mailings, each notice is going to take at least 15 minutes to complete.  If you send 40 total notices each month (which is probably between 10-20 projects), you’re employee would have spent 600 minutes of time on these notices.  That’s 10 hours each month, or 6.3% of the total monthly time working.  That’s $288.75 of real money it costs to you in labor to send the notices, or $7.22 per notice.

This doesn’t even contemplate the negative costs of this practice to your business.  In other words, what could your employee be doing aside from sending notices to potentially make money for your company?

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