In a 10-year plan to fix the ailing US Postal Service, US Postmaster General Louis DeJoy calls for shorter hours, longer delivery times, and other moves to improve measurable reliability — moves that will undoubtedly impact construction businesses, which still rely heavily on paper documents. Keep reading to learn what construction companies can do to reduce and manage the risks caused by mail delays.
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What is the Delivering for America Plan?
Postmaster General DeJoy dubbed his plan “Delivering for America” — a 58-page document describing his plans for the future of the postal service.
Among the plan’s goals is shifting the Priority Mail delivery deadline from three days to five, which DeJoy feels is a far more realistic and achievable goal. In fact, he believes the move will lead to 70 percent of parcels being delivered in the first three days, while still having a two-day buffer for the rest.
DeJoy also wants to shift USPS resources by reducing the hours at some post offices and consolidating retail spaces in areas where it makes sense. DeJoy expects that a “small percentage” of post offices will be affected.
Among other points, DeJoy’s plan also includes moving to a more environmentally-friendly fleet, mobile devices for carriers, and a more modern approach that can compete with other leaders in the industry. There is also likely to be a price increase, though the first increase of 2021 already occurred in January.
How Post Office changes will affect construction companies
The Delivering for American Plan is going to affect almost every industry on some level. But with construction as reliant as it is on old-school technology, the effects could be tremendous. For contractors and suppliers, the changes will inevitably two important areas: payments and lien rights.
Construction payment speed
The construction industry is heavily reliant on old-school methods and technology. Most invoices are still mailed and paid by paper check. (The phrase “the check’s in the mail” probably originated in a general contractor’s trailer somewhere.) And that process is already slow.
If the Delivering for America plan goes into effect, payments will likely get even slower.
Some might suggest that waiting 62 instead of 60 days isn’t a big deal, but a few extra days could mean an extra interest payment or filling out loan paperwork just to make payroll.
And, for contractors submitting pay apps, bids, or other documents via USPS, there’s an increased risk of missing a critical deadline.
There are plenty of essential documents that contractors need to send to property owners, customers, subs, and other parties on a project. In many states, if you aren’t hand-delivering your documents, you need to send them via certified mail —and certified mail is about to get slower and more expensive.
In states that require contractors to send a preliminary notice to retain their lien rights, this more relaxed approach to letter delivery could be a big problem. The states that require preliminary notices have strict deadlines contractors must meet. While some of those states will allow the notice to cover payments moving forward, others say you’ll lose your lien rights altogether.
Liens are also deadline-driven, and the stakes are even higher. If you’re filing a lien via USPS and that paperwork arrives one day late, you can kiss your chance at a lien goodbye.
3 key things construction companies can do to reduce risk
Like it or not, changes are coming to the United States Postal Service. It’s an important service, and it cannot keep operating as it has been. Construction companies need to assess the situation and make strategic moves to lessen the impact and risk involved in those changes.
1. Accept electronic payments
To say that electronic payments are the way of the future would be a gross understatement. Electronic payments are the way of right now, and the construction industry has been slow to wake up to it. By having a customer or subcontractor move to ACH (Automated Clearing House) transfers, payments will go much faster and smoother, and the check never has to be “in the mail.”
According to Jon Flora, President and CEO of NACM Business Credit Services, electronic payments have been a long time coming, but it’s still a challenge despite the lag time. “We’ve seen a huge slow down in processing time,” he says. “We’ve always had a push to move people to ACH, but that’s kind of our biggest push right now is to try to convert as many customers as possible to electronic transfer.”
Imagine sending and receiving invoices, checks, and other money-related transactions online. No more paper checks — and fewer payment deadlines missed.
Author and veteran credit manager Thea Dudley also points out that there is less to lose, quite literally, by moving to electronic payments than sticking with the status quo. “Worst-case scenario is your salesman or one of your delivery guys picked up a check and it’s floating around God’s little green acre because somebody couldn’t figure out how to get it to you in time,” she says. With electronic payments, you can avoid many of the human-caused errors that lead to delays.
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2. Manage payment rights online
One thing most contractors need to check into is switching from a paper filing system to a software program that can manage the document process for payments. Many larger general contractors already have a program in place. Jumping on board with their payment portal or document management system will help.
There will probably still be some documents that need to be hand-delivered or sent certified mail, but switching to a construction software program opens up a world of possibilities.
“Many of [our customers] are doing their books at night at home, so we need to give them the tools to make that easy,” says Jen Martin, the Senior Director of Credit and Accounts Receivable at Kodiak Building Partners. “So we are pushing online delivery of invoices and statements. And I think that’s at least where we’re all headed, if we’re not already there.”
Jumping on board with a general contractor’s construction software program allows the sub to send important documents electronically instead of through USPS — removing the issue altogether.
3. Send documents earlier
Transitioning to new software or transitioning to electronic payments can take time. And even if your company does makes the move, it might not solve all your company’s issues with the Postal Service slowdown. Many companies will find that sending documents sooner could be a good way to hedge their bets against these changes.
Luckily, it shouldn’t cost anything to transition to sending pay apps and notices several days earlier. But it will have to become a policy with everyone is familiar, so training may be in order.
As an important note: Some states consider notices sent on the day they’re postmarked, while other states don’t consider them sent until they’re actually received. For companies in states where the postmark rules, the impact might not be as severe.
For everyone else, timing is everything, so get used to sending notices and pay apps sooner to leave more time for delivery. And if you’re mailing a mechanics lien claim, take the extra delivery time into account to ensure it’s received by the recording office before the deadline.
Doing what it takes to protect your payments
There’s no way a construction company can insulate itself entirely from the effects of the Delivering for America plan. And, since so many of the changes will impact construction, companies need to do what it takes, whether it be moving to a new software system or adopting electronic payments, to shelter themselves from this pending storm.
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