Construction professionals at work

“Speak softly, and carry a big stick.”

~Teddy Roosevelt
26th President of the United States

If you’re in charge of collecting on delinquent accounts for a construction office, you might find that it’s hard to track down late payments. There are a range of actions to take when faced this thankless task. Typically, the collections process doesn’t stop, trying to get the delinquent customer’s attention with countless phone calls and emails. If the unresponsiveness goes on long enough, it’s not unheard of for a company to walk off the job site or cut off all business ties with the delinquent party.

But is there a better way of doing business where contractors, subs, suppliers, and equipment rental companies don’t have to worry about delinquent customers? What if there are powerful tools available for construction companies – especially for the small businesses – that will take away the worry over not getting paid?

The Construction Business is Tough

In construction one bad loss can break the bank and hurt your overall bottom line for the year. This is especially true if the project has a large contract or might be ongoing for months at a time. With an interruption in cash flow, contractors might risk the well-being of their entire company when they can’t process payroll, bid on future jobs, or buy needed materials from suppliers or manufacturers.

Below are some options to consider when trying to collect on delinquent accounts.

Consider Sending a Notice of Intent to Lien

There’s really no better way to say it: construction participants are terrified of mechanics liens. Faced with the prospect of having a lien filed on a project, many companies will do everything in their power to get the underlying payment issue resolved before a lien is filed.

If you’re getting stonewalled on a project from a delinquent customer, the mere threat of a lien may be (and often is) enough to prompt payment. And the best way to do this, the best way to explicitly and professionally give this warning to your customer is by sending a Notice of Intent to Lien.

There’s a good reason why we call a Notice of Intent to Lien the “demand letter that works – it’s incredibly effective. If you’re waiting for payment from a delinquent customer, you may want to give good ‘ole Notice of Intent a try.  See more about demand letters in construction.

File a Lien or Bond Claim

Mechanics liens (generally used on private construction projects) and bond claims (typically used on public projects) are powerful tools to help construction companies get paid the money they’ve earned. These tools aren’t just suggestions or good ideas – they are full legal rights, rooted in the laws of all 50 states and the federal government, that give construction industry participants special protection to make sure they get paid. But these powerful tools come with some very complex and complicated requirements, so be sure to do your homework before venturing too far down this path.

Initiate a Lawsuit

As we discussed above, often just the threat of a potential lien filing is enough to get a delinquent customer to pay up. Sometimes, the more hard-headed customers have to see the lien actually get filed before they’ll finally do the right thing and pay the money they owe. But what happens when even this – filing a lien – isn’t enough to prompt payment?

If filing a lien or bond claim still doesn’t get you paid, the next step is to file a lawsuit to enforce the claim. Since mechanics liens attach to the property, liens filed on private work (meaning commercial and residential jobs) can be foreclosed upon to pay for the debt (by forcing a sale of the underlying property). Successfully foreclosing on a bond claim means that the surety will be on the hook to pay you through the payment bond in place on the project.


2 Essential Articles by Levelset CEO Scott Wolfe

What To Do After You File a Mechanics Lien

What to Do After You File a Bond Claim

Never Let This Happen to You Again

As a best practice, sending notices on all of your jobs, even when it’s not required, can help you get paid faster. A preliminary notice sent at the beginning of the job communicates to the other parties that they need to prioritize your invoices. Not only that, but in many states it’s also requirement in order to have a valid lien or bond claim.

Additionally, having a process in place for sending notices works to your advantage as a tool to helping avoid non-paying accounts. Simply put, the more notices and communication that a customer receives, the fewer liens you be filing. Having a process in place will allow you to take on new, and perhaps, riskier customers to get more cash in for the business.

Let Levelset Be Thy Stick

No one enjoys confrontations, and chasing a delinquent customer to try to get the money you’ve already earned is no picnic either. Thankfully, there are tools to help you. Want to find out more? Start by talking to us – we’re here to help you get paid.

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How to Avoid Delinquent Accounts in Construction
How to avoid delinquent accounts | Tips and actions to take for construction companies to avoid delinquent customer accounts and get paid what they're owed
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