A Fix that Works for Everyone, from Owners & GCs, to Subs & Suppliers
Managing payments in the construction industry shouldn’t be as difficult as it is. Frankly speaking, the industry is tough enough already. When you add the burden of managing payments – both for those making payments as well as for those receiving them – it’s like pouring salt into the proverbial wound. Getting paid in construction is messy, complicated, and it takes way too long.
Even as work in the field moves to a technology-enabled, collaboration-first mindset, when it comes to payments, many companies are still stuck with paper forms and documents and a protection-first mindset.
However, we believe that there are two things – 2 documents, actually – that have the power to fix this mess if used properly. We’re talking about preliminary notices and lien waivers. Please read on for a brief explanation.
2 Documents to Fix an
Entire Industry’s System of Payments
1. Preliminary Notices | 2. Lien Waivers |
How It Should Work:Notices (preliminary notice, notice to owner, etc) are sent up-the-chain to the property owner and the GC by every party, on every project, and even when it’s not required. | How It Should Work:Conditional waivers proactively sent with every invoice/pay-app/draw. The conditional waiver automatically converts to unconditional when payment is received. |
Benefit for Upper Tier Parties:Get visibility of everyone working on the project which will put an end to “hidden liens” from unknown parties. | Benefit for Upper Tier Parties:Protects against risk of a lien filing and double payment since the waiver effectively acts as a “receipt” of payment received. |
Benefit for Lower Tier Parties:Secures their project payments while alerting others that they’re working on the project. Sending preliminary notice has also been proven to reduce the time it takes to get paid. | Benefit for Lower Tier Parties:Protects against giving up lien rights before actually getting paid. Also significantly speeds up payments by cutting out time spent waiting on others during waiver exchange. |
Preliminary Notice Resources | Lien Waiver Resources |
Thanks to Technology, Exchanging Documents Has Never Been Easier
Technology can do a lot of things. But one of the biggest benefits of technology has been the ability to digitize paper and then facilitate the sharing of the information contained in those digital files.
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Think about it – as digital technology has taken over the business world during the last three or four decades, the following things all happened:
- Paper correspondence became email. [Be sure to read our article about this very topic, “When Your Project Partners Prefer Paper Over Email.”
- Hand-written accounting ledgers became spreadsheets.
- Plan and drawing rooms went from being actual rooms in the building to virtual rooms in the cloud.
And that’s the same sort of feeling we get when we look at the system of payments in the construction industry – that sense of possibility, excitement, and an earnest belief that, surely, there must be a better way to do things.
We think the better way comes when all of the parties on a project come together and agree to use and share these 2 documents, aided by a technological tool that makes it possible. We believe that the time has come to fix the system of payments in the construction industry because we know that there’s a better way. We’ve briefly laid out the how and the why in the table above. But we’re here if you have any questions or what just like to discuss this further, please get in touch.
