Getting Paid in Construction: Everything businesses need to do to get paid on time, every time
In the construction industry, it’s almost a given that at some point you won’t get paid on time or in full whether for a section of work, a whole project, or retainage. But what if you could take control of payments and change that consistently?
Join construction payment expert Zach Timmons for a live webinar with a complete guide on how to get paid on time, every time.
Save your spot to hear:
- Why getting paid is such a struggle and what needs to change
- 5 effective tools and strategies for getting paid faster and in full
- How to use Levelset to establish a consistent process without adding more to your plate
Speaker 1: I’ll go ahead and, and get started here. Um, just, uh, with a little bit of a brief introduction, so hello to everyone again, thank you for attending today’s webinar. Uh, we are excited to talk about why getting paid is such a struggle in construction and what needs to change to get paid on time every time. Uh, I’m guessing if you have joined this webinar today, it’s because you have, or are having Bakersfield, California love to hear it, um, or are expecting to have slow or incomplete payment on one or more of your jobs. Uh, if that’s the case, you guys are not alone. Um, and we’re gonna be talking about some solutions available, uh, to make sure that that doesn’t happen for you, no matter the scale of your jobs or the size of your company. The one thing that I can guarantee Maryville, Washington, there we go.
Speaker 1: Uh, the one thing that I can guarantee is that you will leave today’s session, knowing exactly how you can take steps to get paid on time, every time, including some processes that will not only add to your plate, but actually save you time. Um, but before moving forward, I just want to quickly say that we are recording this live session. You will receive a link to the recording tomorrow. If you’d like to watch it again or share with your team. I understand this is a Workday and people are busy. Um, so if this is something that, uh, you guys see as useful, we can make sure that we send you over that recording and share with anyone in your team that wants to learn more as well. If you have any questions during the presentation, go ahead and enter them in the chat box or LinkedIn comments, and we will get to those questions at the end.
Speaker 1: Um, so my name is Zach Timmins. Uh, that is an old photograph. I don’t know if you can tell, uh, I am a construction payment expert here at level set, and I work to help businesses like yours, get paid fast and without payment problems. I love what I do here because I’m able to focus on helping businesses of all sizes, maintain the continuity to help people get paid for what they’ve earned. We have a lot of very hard working people in this industry, and I’ve had some great experiences working with businesses, addressing payment issues that can literally make the difference between staying in business and feeding their family and having to shut down shop. Um, it is a good feeling here at level set to know that I can make a difference in a way that’s so fundamental to people’s bottom line. Um, so it’s a fun place to work.
Speaker 1: Uh, first to get started, I’d like to give a quick overview for newbies of level set, um, so that those of you who are attending one of our webinars for the first time can understand who we are and what we do. Uh, so we all know that the construction industry presents all sorts of challenges when it comes to getting paid level set is here to help you get paid. That’s our main focus, our lean rights management software helps you track mechanics lean and notice deadlines helps you verify job site information, and basically just makes it easy to manage your lean rights paperwork. We also provide access to construction attorneys and other legal services. Plus we have all kinds of free resources on our website from profiles, outlining contractors, payment histories, to educational guides, to, uh, questions about changes to the law state by state guides on lean rights in all 50 states.
Speaker 1: Um, we try to provide as much information as possible to make sure that you guys are educated on what your rights are and how you can receive prompt payment. Um, and you can, uh, hear what Barry has to say about level set. We have some fans, uh, our agenda today. Uh, we’re gonna start by talking about why getting paid is such a struggle. Then we’re gonna talk a little bit about tools and strategies for getting paid faster and getting paid in full. And then we’re gonna talk about how software can create a streamline process and get you paid. And then finally, we’re gonna have some, uh, audience question and answer sessions so that we can address some of the burning questions you guys have about some of the content here. Um, so we’ll go ahead and, and jump into the presentation. Uh, we had a annual P w C report.
Speaker 1: It found recently that it took contractors an average of 83 days to get paid. And that was before the pandemic. Now, the question is, why does it take so long? Why is it so hard to get that money you earned on time or even get all of it? Sometimes there are a few key reasons and today we’re gonna share what they are and how many other contractors we’ve talked to, uh, how they’ve changed their strategies and routines to successfully tackle this nearly universal challenge. Um, and really the first challenge, uh, is that payment can get caught up in a convoluted payment chain. Uh, this payment chain starts where money gets passed from an owner, goes down to a general contractor to subcontractors and two suppliers and cash gets held up at various points either due to a genuine lack of visibility and awareness as to who is owed, what, and when, or it could be, uh, more nefariously due to power struggles in which parties with more power and parties with more influence hold on to their cash, as long as they can with whatever methods smaller parties will tolerate.
Speaker 1: Uh, the second reason that it can be a struggle to get paid in construction is that the laws and compliance regulations surrounding payments are incredibly complex to the point where in certain states making a mistake in the color of ink used on a document or using the wrong method to calculate a deadline. Um, and sometimes those methods change, uh, could leave you with no right to payment, like none at all. Um, so that is the challenge for people. Uh, and then the third reason why it’s such a struggle is that it takes an exceptional amount of time, as well as expertise to manage this process of collecting payments correctly, which many companies either don’t have the resources for, or they would benefit greatly from, to have relief from some of this time consuming work. Um, and so what we’re gonna be doing today is talking a little bit about some of the tools and strategies that you can use to get paid faster and in full on all of your jobs and address some of these challenges head on.
Speaker 1: Now, uh, the most important thing to remember when it comes to getting paid is that an ounce of prevention is worth a pound of cure. Um, that’s an old face, but in other words, it means that by being proactive and taking certain precautions as part of a regular routine payments will simply happen without any additional effort. And more often it’ll take less time, effort and conflict to resolve the situation when it doesn’t. So here are five tools and strategies contractors we hear from find to work. 90% of these are proactive approaches. Um, so it’s very important to go ahead and, and get your ducks in a row before you start to see problems on a job.
Speaker 1: The first thing is to document everything. Now there’s many reasons to do this. Uh, one is that what gets documented is what gets proven. If a payment dispute arises on a project, the best supporting documentation will win the case. There are also many points in this process where a documentation is required and an easy way to ensure that you will always have everything you need is to make a habit of documenting everything and keeping it organized. Another benefit is that documenting things while they’re right in front of you saves you time if, and when something is needed. So you don’t have to put in the extra effort of tracking it down in hindsight, which, um, can be a lot more difficult if you’re trying to do that after the fact. Um, so very important to make sure that you’re documenting everything. Uh, another important step is to make sure that you’re writing a credit policy.
Speaker 1: Now, a credit policy would contain your company’s process for providing credit to your customer. Unless you get paid before you perform the work or provide materials, you are always providing your customer with credit, which really can be the source of the issues of nonpayment. If you ever given a special exception to your policy, to a long time customer or even a new customer, um, sometimes people do that because they just don’t want to make waves. We talk to contractors every day who thought they could trust someone to pay on time, but they were wrong. Now, sometimes it’s just due to the convoluted payment chain that I mentioned earlier. And all you need to do is exercise some basic protocols in your credit policy, but the trick is to set these expectations up front for everybody, regardless of your relationship or their history, it should never be up for debate or discussion, making sure that you have a strong credit policy.
Speaker 1: Now, what does this mean in practice? Let’s say your credit manager wants to send a notice of intent to lean on a payment that is 15 days overdue as a warning, and also file a mechanics lie on any past due account before the deadline for doing so passes the solution to any customer who receives one of these documents is to pay as soon as they can. If you have a policy it’s not a personal conflict, it simply is your policy to ensure that you don’t have days outstanding that are allowed to be exceeded. So it’s very important to, uh, establish a credit policy, to make sure that you, uh, have a consistent process for, uh, sending out the right documents at the right time. Now, the third step is to pre-qualify potential customers. Uh, pre-qualifying customers is value for valuable for a couple reasons. Uh, the first one is that if you research their payment practices and financial history, or even current financing for the proposed job, you can determine one.
Speaker 1: If there is a string of red flags that might make it worth walking away from the project or two, that you can work together, but might need to take some extra precautions such as the ones we’re discussing in this webinar today to ensure a smooth payment exchange experience. Um, we have payment profiles, our payment profiles are there to help, uh, gather a better understanding of the history of contractors with payment. Um, we have a, a job radar system, which is there to make sure that when you’re working live on a job, you were kept up to date with challenges with payment. A lot of great information can be found with us, uh, including risk reports you can order, um, so that you can help pre-qualify potential customers. And if you’re looking to learn more about that, obviously, um, you can speak with us later and then we’d love to kind of talk about what that might mean to help you pre-qualify those potential customers.
Speaker 1: Now, the next step is to get an attorney involved. Um, it’s important to have your lawyers review contracts, and there are a number of ways that lawyers can help from proactively setting up your business interactions for success, to aiding in the execution of routine legal processes, to just having your back. Should you need to enforce legal rights in a dispute. We’re gonna focus on the proactive part for now, which is really all about contracts now while verbal contracts and verbal agreements, I should say, um, still technically constitute a construction contract and, uh, they are very common, although not recommended. Uh, the details can be impossible to prove if you’re on a verbal contract. Can you work on a job with a written agreement? Um, yeah, without sorry, without a written agreement? Uh, yes, of course. Uh, but it’s not generally a good idea. And there are some common types of standard construction contracts, uh, but it’s important to understand what are you agreeing to?
Speaker 1: Are you working on a lump sum contract? Will you be receiving progress payments at regular intervals? Are the people in the contract going to be withholding retainage? And when are you going to receive final payment? In addition, it should also be clear about the consequences of late payment. Will there be an interest charge for late payments? When does that interest charge apply? If your customer’s providing a contract for you to sign, which, uh, happens quite frequently, uh, up the payment chain, it’s important to have construction lawyer read the terms carefully because in construction, some common contract clauses can significantly damage the rights of contractors and suppliers. So you wanna watch out for them. It’s also worth asking a lawyer what prompt payment laws apply to your projects and know what you need to do to enforce them or your contract. So a lot that attorneys can do, um, the most proactive part is to have them review your contracts.
Speaker 1: And we can talk about if you’re looking in more detail to talk about some of those provisions and what that might mean, uh, for your business. Um, now this is in my view, the most important one, um, our last tip, really the most powerful tool for getting paid available to you. Uh, and this one is a mixture of a proactive and a reactive approach. Um, it is to protect and enforce your lean rights. Now lean rights are, uh, really a, not so fancy legal way of saying rights to get paid for labor or materials that are permanently installed to a job site. Now with that power comes great responsibility when executed properly, the odds that you’re going to get paid by exercising, your lean rights are very high, but there is a lot of legal and technical complexity to the process that if being done manually or if you’re doing it for the first time, um, or if you are, uh, you know, just having some challenges in new states can trip you up and leaving you without any ability to collect. There are various professionals and software services that can aid with this, but for now, we’re gonna share what needs to be done and how you can do it.
Speaker 1: Now, fundamental to the lean rights process is the preliminary notice. This is simply a notice to the parties above you in the payment chain that says, Hey, I’m here. This is my company. This is the project. This is how much I’m owed. And here are the rights I’m given by law to get paid. Every state has different laws and requirements. Uh, most of them actually require notice to be set by a certain deadline in order to protect the right to file a mechanics, lie and get paid. And even in the states that don’t, this act of transparency gets 80% of our customers who send them on all jobs paid without any further escalation. At the end of the day, you still might not get paid for a variety of reasons. And at this point you have a choice between sending a notice of intent to lean, which is a stern, but professional sign that you mean business or going ahead and filing that mechanics lean to push your invoice to the top of their desk priorities.
Speaker 1: This is the first reactive strategy that we’ve talked about today. While we strongly believe here at level set in having a proactive strategy. First, there is no doubt that this will get the job done provided that you have protected your rights to obtain payment by utilizing the lean process the right way. And as such, it’s essential that you both follow the local rules for filing a mechanics lean correctly, as well as you also need to get the details of your project and the involved parties, correct. We see this happen all the time. A mistake can just a simple mistake can cause your lean to be rejected and potentially not have time to correct it before the deadline, which could lose you thousands, tens of thousands, hundreds of thousands, hopefully not millions. Um, and this is where having extensive and accessible documentation can come in handy as well as a construction lawyer who can either review your documents or even handle the filing process for you. Another option is to use a software service like level set, which that will not only automate the process and take it off your plate and ensure that it’s being done the right way and ensure that it’s being done the right way, no matter what state you live in, but also offer many additional benefits related to payments and financial health for your company.
Speaker 1: So before I get into that, let’s take a look at these five strategies and recap that you can walk away from this webinar and start doing to get paid faster and in full on every job, document everything, write a credit policy. Pre-qualify potential customers have a lawyer review contracts and also protect and enforce your lean rights. Most importantly, now the next question is how can you use software, um, we’re level set to establish a consistent process without matting more to your plate level set can be your partner in payments. And I’m gonna share a few ways that we can help implement the strategies we talked about today easily, and with little to no time added to your existing workflows. In fact, many of the customers that work with us report that they save an entire work week of hours by using our services. It allows their staff to focus on doing the work that matters in construction, revenue, generating activities.
Speaker 1: Um, and, and that’s really, uh, one of the major important factors is to make sure that you’re doing this the right way and doing it in a way that doesn’t, um, waste everyone’s time that you’re working on, which is where we’re really here to help. Um, now our bread and butter is the lean rights management process. It’s what level set was founded on. So you could say that we’re experts on it. A couple of the main benefits include automating those preliminary notices. We talked about earlier, our software will put all of the info into the right format and our dedicated team of document specialists will get it sent out for you on as many jobs as you want. Again, we strongly recommend that you take a look at other companies who have had amazing results for sending these on all jobs, even when not required.
Speaker 1: It’s also important to track deadlines, according to state codes, including ones that change as various things happen throughout a project like change orders delays. We have a dedicated team of job researchers here who will track down the info. They’ll even do things like call nearby coffee shops, next door, to verify info about their neighbor. Um, this really has happened. Um, and this is where so many people get the details wrong and lose their right to payment. Our team. They focus on making sure that all these documents are sent out the right way, and they gather the information that can be very difficult to find otherwise. And then of course, um, if it gets to that point, we can file mechanics leans if needed. Uh, and, and that’s obviously something that we do very well. We can send, uh, documents, we can send demand letters. The best policy is to make sure that you have, um, a system in place to escalate those demand letters over time, to make sure that it meets your credit policy and you guys do what needs to be done to ensure that credit policy is matched with what we can provide here at level set.
Speaker 1: And that’s something that we focus on. So that’s our lean rights management service. Uh, another thing we talked about a few times earlier was hiring a construction lawyer. Uh, we offer a service called legal guard. It provides a vetted construction attorney in your area, lawyers who know your business, um, that provide a flat rate fee, uh, for having, uh, legal services provided. Uh, we can have them directly connect to you, um, and you can also get additional discounts on services, uh, that go above and beyond our traditional scope of services. Uh, if you need to go to court, which ultimately we hope you don’t do, um, we can help them review your contracts, review documents, strategize with you to make sure that when problems arise, you have somebody that’s in your corner to help protect you. And they can also work with you to be very proactive in this process, uh, to ensure that, um, you never have to get to that point.
Speaker 1: Um, so without further ado, um, I want to open up, uh, to a couple audience questions. It looks like we have, uh, one question that pops up here. Um, we have, uh, an anonymous attendee asking a little bit about retainage. How does retainage affect the lean process? Um, looks like they’re a subcontractor. Um, they have to wait for the general contractor to get paid retainage before they get their retainage to the GC. Do they still have to file the lean for unpaid retainage 90 days after their work is done? Um, so there are different, uh, documentations for, uh, retainage and various states. Um, you know, we have, uh, lots of, uh, resources that are available depending on the state in which you live in. Um, I, if we can, uh, get, um, a little bit more information, I know you’re, uh, anonymous here. Uh, we can, uh, if you wanna scan on the QR code, we can give you a call and we can kind of talk about how the retainage might work in your situation and how that retainage would work to help you ensure getting paid.
Speaker 1: Um, but the short answer is yes, you absolutely a right to file a mechanics lie if you haven’t received your payment. And, uh, you can file a claim at any point up to the, the state’s lean deadline. Um, there are a couple catches there. Um, so, you know, that’s something that’s definitely, uh, worth discussing Tennessee. Okay. Um, yes. Uh, so, so we’ll be able to kind of talk about how that retainage works in Tennessee. If you wanna scan the QR code and I’ll give you a call and, and we can talk about how this, uh, affects your situation. We also have, uh, blogs that are available in Tennessee, uh, to address specifically issues of retainage.
Speaker 1: Do we have resources for collection letters for smaller service jobs? Um, one thing that you want to make sure that you’re focusing on when you’re working in, uh, construction, is that they, uh, the lean rights focus on permanent improvement of a property. So there can be some challenges sometimes with service jobs. Uh, we have demand letters that are really focused around helping to establish a consistent credit policy. Uh, that is something that we, uh, can actually automate through our service. Um, so Donna, I can learn a little bit more about the jobs there and see if it might make sense, uh, to have level set, uh, implement a policy with you, uh, to see if those collection letters might make sense. I’d have to learn a little bit more about those service jobs and how they operate.
Speaker 1: Uh, anyone else sounds good, Donna, I will give you a call. I’ll leave a couple minutes, um, for people to ask questions. Uh, if you’re shy, if, um, you’re not really sure what questions to ask, but are just looking for some general resources. Uh, we are available to, uh, provide, uh, the answers that you’re looking for. If you scan that QR code, uh, I’ll reach out to you and we will make sure that we can get all of your questions addressed. We can help you focus on implementing a process in place to protect your work so that cashflow is no longer a concern for your business. That’s something that we think is very important. Um, we hope you guys found some usefulness here in terms of these steps that we take to protect your work. Thank you guys all for attending. Um, any other questions here that, uh, anyone else wants to pose before we hop off?
Speaker 1: What is the cost to use our services? Um, it depends on the scope of work that you were doing Troy, as well as a number of other factors, um, including your tier in the project. I’m more than happy to go over pricing and how pricing can, uh, work for your business. Um, it’s, uh, it’s designed to be obviously very cost effective and significantly less than the cost of even one problem project going wrong. So if you’d like to scan the QR code, um, we could chat, uh, we can talk about what it is that you think is most useful, and we can go over pricing as well as, uh, show you how it works in real time.
Speaker 1: How do you handle building a credit policy as a subcontractor who primarily works with general contractors on pay when paid contracts? Um, that, that is a very good question. Um, when you’re talking about dealing with, um, pay when paid contracts and really just, uh, dealing with a credit policy in general, building out a credit policy, it’s very important that you’re consistent with, um, the, the, the work that you’re doing. Um, we have, uh, you know, obviously that’s important if you need to speak with an attorney as well to help figure out what would make the most sense there. Um, we do have, uh, lots of, uh, resources available, but generally it would involve having a lean policy. Um, it would involve having a policy of, uh, if you need to do a personal guarantees or other tools to mitigate, uh, risk, um, having a collections policy, um, as well as litigation, policy and procedures. Um, it can be an additional challenge when you’re operating with general contractors, uh, with a pay when paid. Um, it really does emphasize the importance of sending out the required legal documentation when you’re in that situation, because pay when paid contracts can give rise to additional risk, which might not traditionally be risk that you would, uh, see as much, um, when you’re operating like a net 30 payment term. So that’s something that, uh, is really even more focused on ensuring that you’re protecting your lean rights.
Speaker 1: And again, Elliot, if you’d like to scan the QR code, we could talk about that in more detail, uh, off the webinar. Okay. A anyone else? Well, sounds good. I, I appreciate everyone’s time today. Thank you guys so much for joining us. Um, and, uh, again, we’re, we’re looking forward to speaking with you soon about how we can make sure that we solve these problems, which are so pervasive in construction. So, uh, appreciate everyone’s time and, uh, I will give you back the rest of your day. Thanks again.