Why Contracts Aren’t Enough to Get You Paid
Let’s be real. Sometimes even the best customer relationships and strongest contracts aren’t enough to get you paid on time and in full.
In fact, if you don’t have an easy way to protect your lien rights, you might be left chasing down slow payment and even writing off money you should’ve been paid.
Register for this webinar on Thursday, October 20 at 1pm CST to see why lien rights management software is essential to the success and growth of your construction business.
In this live session, you’ll learn how you can:
- Get paid faster and in full (stop chasing overdue invoices!)
- Save time on pesky payment paperwork
- Improve your valued customer relationships
Speaker 1 (00:02):
So hello and welcome to today’s webinar. I’m excited to present this session for you all to, uh, help contractors and suppliers just like you, uh, make getting paid the easiest part of your job. Uh, we all know that cash flow in the construction industry can be painfully slow. Uh, there are some sure fire steps that you can take, though to help speed things up. Uh, and that’s certainly something that we’ll get into today. If you’ve joined this webinar, then I’m guessing you’ve dealt with some of these issues like slow payment or even non-payment. Um, you know, this industry definitely is known for that. Uh, but that’s where Level Site comes in and you’re certainly in the right place. Couple of housekeeping items before we do jump in, though, Uh, we are recording this session, so you’ll receive a link at the end, uh, excuse me, tomorrow. And if you’d like to watch it again or share it with your colleagues, please do. And then second, if you have any questions during the presentation, go ahead and enter them into the q and a box on the right of your screen. We’ll save time at the end to get those questions answered.
My name is Michael Agne. I am a construction payment expert here at Level Set. I worked to help businesses like yours get paid more quickly and without payment problems. Uh, I love what I do because I empower businesses to get paid what they’re earning, um, and that allows you to focus on growing your business, uh, supporting your, your employees, your livelihoods, uh, without having to worry about this precious thing called receivables. And I know in looking at the attendee list that we do have a, a, a good mix of current level set customers and, um, maybe some new individuals who are learning about Level Set for the first time. So, if it is your first interaction with us here at Level Set, I’ll give you a brief overview. Um, we exist to help contractors and suppliers protect their payment rights, um, also known as Lean Rights, um, which allows you to collect payment more reliably. We all know that the construction industry presents all sorts of challenges when it comes to getting paid. Um, and so to solve those challenges, we have all sorts of resources, whether it’s, you know, profiles from outlining a contractor’s payment histories, um, educational guides, uh, our, our cloud based software, which I’ll show you today, or things like this, like webinar, so you can get good industry knowledge.
Specific to today though, here’s our agenda. We’re gonna debunk why rely on contracts and, and your good relationships might actually be hurting you. Then we’ll talk about why even your strongest contracts are still not as strong as protecting your lie rights. And then lastly, we’ll take a look at how Lean Rights can help you get paid every single time, especially in today’s economy. And, and of course, the very squeeze that our software can help you with that. But I do want to keep that last point, Um, this current economic ecosystem, I want you to keep that in the back of your minds. You know, as GCs tighten their spending, how are you gonna make sure that your invoices are not ignored, that your invoices are paid on time? You know, what happens if a company goes bankrupt that you’re working with or a project you’re on is abandoned? You know, these are all real concerns for you as you go forward in the next, you know, six to 12 months. And I wanna make sure that you have the resources to help mitigate those risks.
Okay? Construction contracts, real hot button issue here at Level Set. Um, and when it comes to signing contracts at the start of your jobs, uh, more often than not, we see the contractors and subs are doing one of two things. One, they’ll, they’ll just sign whatever their, their customer sends them, or two, they rely on handshake deals, verbal agreements, and not get anything in writing at all. And so before we kinda go in further into that, if you’re not getting paid fairly on your jobs currently, if you’re dealing with anything like that, it’s probably not a bad idea to start your fair payment journey by taking the necessary steps to make sure you understand and fully agree to all the terms outlined in the contracts that you’re receiving. Sometimes you can have an attorney review that for you, but if you don’t have access to one, uh, we do have plenty of free resources that can help you, like webinars, uh, blogs, even contract templates that you can refer to you and use to help you understand your contracts better.
And if you are kind of in a second boat, you’re working on verbal contracts or handshakes, I’d highly recommend downloading one of our free contracts. It, it’s a great reference point, uh, very easy to use. Um, then in general, if you are relying on your relationships, as we talked about as a main point here, um, that can sometimes be a double edged sword. You know, what I’ve personally seen, and I talked about 50 contractors a day, is that they can sometimes be over confident. If, if you’re working with a GC or a property owner that you’ve worked with in the past, things have gone well, you’re less likely to, you know, take the necessary steps to protect yourself on a new job. You may think, Great, it went well in the past, I’ve got nothing to worry about. And that’s where you’re vulnerable, That’s where factors outside of your control or factors outside of your relationship with the person can impact your payment.
And, uh, it’s always important that you’re keeping your best interests in mind by, by protecting yourself, whether it’s with a good contract or of course, as we always encourage with your rights, we’ll get more into that in a minute though, okay? Even with the most bulletproof contracts, you’re still not guaranteed, you know, fast or full payment. And that’s what this webinar solve up, right? Why aren’t handshake deals with your good customers enough? What will guarantee your payments are sufficiently protected? And, and, you know, how can you make sure that you’re taking those steps to protect and collect on all your payments on time? And if full, okay, so if we kinda take a step back, what should a good contract look like if you, you can certainly use this, um, as litmus test for yourself. Um, a good contract should define how you want your business, um, to, to be treated by your customer, right?
You wanted to have clear expectations for payment, like a schedule, and you want to have consequences for any sort of, of failures to reform or, or, you know, a break in your payment schedule. You know, those are are great ways to make sure that you’re not entering into contracts without checking off those very simple boxes. But as you mentioned, you know, even if you do have all these things checked off, which is great, if you do, you need to go a step further, especially as, as we kind of enter some uncertainty in our larger economy. Um, and income’s lean rights, the construction payment process is complex. How to protect yourself is complex because each state has, you know, different laws when it comes to what to do in one. For example, some states require you to send notices to protect your lie rights like Texas, California, Florida, Arizona, to name some of the big ones.
Um, and in those states, you also need to have certain language in your contract to secure your rights. Another good example, the state of California has many nuances written into law regarding the construction payment process, like sending out a preliminary notice, generally speaking. And if those laws aren’t followed to a t you may be completely outta luck if someone decides to not pay you regardless if you have a contract or not. And, and that’s kind of something that, that I preach to when I’m talking to, you know, potential users of level set is you can have the best contract in the world that defines how you’re gonna be treated by your contract, by by your customer, includes really clear language of a payment, still has consequences like, Hey, we’re gonna start charging interest, or, you know, I’ll commence a lawsuit if you, if you break our contract.
The reality though is that how do you actually hold someone accountable to that contract? The short answer is typically you get a lawyer involved. Now, not a sustainable, not a winning approach. Lawyers are, are going to certainly be costly. The time is going to be longer. You know, it’s gonna be a lot longer of a process for you to actually get paid once you do engage a lawyer. Um, and, and really at the end of the day, you may be going through this entire process strapped for cash cuz you’re not getting paid, having to show out more cash to get it paid and then still wind up, you know, six months down the road in a position there you’re barely breaking even. Um, and so again, not a winning strategy, which is why, you know, we always preach for lean rights. It’s much more clear and concise process. Um, and, and that’s what is going to again, ensure that you have real consequences and, and real results to get paid.
Okay? Kind of hint to that. Some states have really complex laws regarding lean rights and, and I think that in general, that’s why some companies shy away from, from leveraging these rights. I mean, the, these are some of the oldest laws in the country, lie rights. Um, and, and they’re not written very clearly in a lot of ways. So in Texas, I mentioned there, there’s this thing called a monthly notice. Um, in Florida you got specific documents like a notice to owner or in California prelims or prelims. Um, and, and, and I’ve been helping construction companies for a while to do this stuff. Um, but what I’ve learned as a general rule of thumb is that regardless of whether or not the state you work in requires you to send these notices, uh, you always wanna do it at the beginning of the job to set expectations.
Now, I, I’m not talking about sending some crazy, you know, pre-and notice that that’s gonna read like a threat to your customer before you even start working with them. What I’m talking about is a friendly but official notice telling them that you’re on the job, you’re a professional, and you outline exactly how you expect to be paid, what your company’s policies are in the event that a customer fails to submit payment timely. So the overall goal is that you’re communicating that you have rights, that, that just by the fact of existing as a construction business and the work that you’re doing, you have rights and you know how to leverage those rights. So it’s a very clear way to set those expectations that sometimes a contract can do, but it has a much more clear consequence for what, what happens in the event of a nonpayment.
You know? And, and again, sometimes I think that people think, Oh, well, that, that might be threatening to my customers. I don’t wanna do that. So let me ask you this. I’m sure everyone here has, has probably rented a car at some point in their life. Um, before you take that car out of the lot, you sign an agreement, that agreement has things such as like how you’re gonna pay and what happens if the car is damaged, or, you know, you’re by the beach and you have saying in the car right now as a customer, I doubt that you’re, you’re looking at that and saying, Oh my God, this is such a threat. Like, I’m never gonna rent with this company again. No, it makes sense. You know, the, the rental car company is looking out for their asset and you know, you as someone who’s using that car are agreeing, Hey, I’ll treat it with respect. I’ll bring it back to you on time. I’ll bring it back to you without a, you know, a de you know, it seems very fair. And that’s really similar to the approach of, of preliminary notices, setting the expectations that you are a respectable business. You’re providing a service or you know, materials and, and you want to be respected. And if you’re not gonna get respected, then there are consequences. You know, you could have it lean filed.
So we’ve established that the combination of strong contracts and protecting your lie rights, that’s gonna be the best bet. You always want to, again, do that litmus test with your contract. Does it set expectations? Is it clear about payment? Are there consequences? But when you combine it with your lean rights, again, which we’ve been saying are, are sometimes even more powerful, you’re gonna have the best outcome. All right, Now we gotta adjust the big elephant in the room. Lean rights are really complicated. You know, I mentioned a few states specifically that have some pretty complex rules. Um, and, and if you’re a company that works in multiple states, you may be thinking, again, that’s pretty complicated. Let me again, just stick with contracts. But that’s why our software exists. You know, before you did have to have that really manual intensive process, Maybe you’d have to have multiple lawyers in different states that can help you navigate this stuff.
So there was really no easy or efficient way, um, enter level set about 15 years ago. Um, and we’ve just continued to grow. Of course. Now with the support of Procore, um, our lean rights management software is allowing thousands of, of, of our customers, contractors, suppliers, to manage this process fairly efficiently. And of course, protect their rights so that they can leverage those rights to get paid on time and in full. And when you tap into something like Level Set, you’re gonna have full access to our tools. Like sp you know, our Lean rights management software is one specifically, but then we have other tools that I’ll talk about, like Job Radar and payment profiles. There’s, they’re gonna give you the ability to easily protect your rights, make sure you’re working with trustworthy GCs and avoiding problem projects. All these things that, again, in the, the context of where we’re going, a as an economy are gonna be really important so that you’re mitigating risk.
All right? What exactly does Lean Rights management look like? I’d be happy to dive into this more deeply, uh, on an individual level. But what Lean Right’s automation looks like for us, I is you’re allowed to send notices with just a few clicks rather than, you know, filling out a paper document, jumping it in the mail, all that complicated stuff. You then can track your jobs, your payments, your documents, all in a centralized place. Job Radar, great feature. It’s one of our newest features in a nutshell. Imagine getting alerted whenever someone filed a lien or, or you know, an escalatory document about not payment on a job. You get that insight before it hits kind of the, the gossip of the job. Um, so it allows you to stay ahead of payment problems with these types of alerts that you can in real time react and avoid those risky situations.
Job research, something that, that on your land rights, everyone is getting, We’ve got a fantastic research team here that when you enter a job into our system, they’re gonna be looking at that address, making sure that we identify all the proper participants there, the gc, the legal property owner, maybe even a lender, really filling out that project there so that you don’t have to worry about, you know, getting everything down, compiling it, sending it to us. We’ll do it for you. Payment profiles are, are, you know, really popular right now. Before you start work, you can look up to GC or maybe even a developer that you’re working for, see what they do, see how they pay their people. You know, it’s almost like a, a credit report, but specific to how a subcontractor or supplier gets paid. Ok, I wanna talk about a specific story cause I know I’ve, I’ve been kind of talking in general about how this stuff is great, how cool it is,
Excuse me. But there are real results here. You know, there’s a company that that we recently were working with and, and in just six months they went from struggling to get by to thriving. Um, so Ace Insulation, they’re a full service, family owned construction company in California. In their own words, before level set, we were sinking, we were barely getting by. The owner had to use his own money to cover payroll cuz the company wasn’t getting paid and we were going down, you know, at first the owner was pinching Penne a bit hesitant to sign up with Level set, understandably, you know, tough times. But after using the software on just two jobs, they made more than what level set costs for the entire year. Fast forward now six to seven months later, they’ve used levels set on over 800 projects. You don’t need to be an Alberta Einstein to see how it paid off. They now have healthier cash flow than ever before. They can now take bigger jobs because they have that good cash flow and they’re making sure that they’re avoiding risky jobs. So each job is more successful, payments are coming in, more timely business is thriving. We’ll certainly send this out as a link two cause I wanna make sure you guys can actually see it’s real company real results.
All right, it’s time to jump into q and a. Um, if you have questions and you haven’t asked them yet, please start in the q and A box. Um, in the meantime, my colleague Caroline is gonna share some of the questions that you’ve been asking, but I’m here for it.
Speaker 2 (17:22):
Yeah. Awesome. Thank you so much. Um, this has been really helpful and there have been a few questions come in so far. Um, hope to see more, but, um, we’ll just get started. First question is about pricing. How do they find out the pricing?
Speaker 1 (17:38):
Yeah, so the way that we do pricing, we typically have three tiers that, that we’ll recommend for your business, depending on size, you know, where you work, what you do. Um, then based on that, again, we’re gonna kind of create a little package for you even within that, that overall bracket. So I, I’d say a range is tough to give without more context, but certainly get with me after, um, and, and I can see, you know, where you guys would fall and even if it makes more sense to continue further.
Speaker 2 (18:07):
Awesome. Thank you so much. Um, does Level Set have information on notice requirements in each state?
Speaker 1 (18:18):
Yes, we, uh, we’ve got a map of the us you click on each state and it’s gonna pull up exactly what to do to protect yourself, uh, another great resource that, you know, if you are a bit unsure, we’ll make sure to fill in the gaps.
Speaker 2 (18:31):
Ok, thank you. Um, okay, so this one’s about contracts. If I just sign the contract, my customer sends me and I protect my lean rights, is that enough to protect my jobs or do I need a contract of my own as well?
Speaker 1 (18:51):
Okay, so from understanding it correctly, this person is, is receiving a contract from who hired them, They’re signing it and they’re also protecting their lean rights, right? So their one, Okay, so great question. Um, you know, generally speaking, your lean rights, that’s, that’s gonna be your, your bread and butter, your way to protect yourself. It’s always a great recommendation though if you do have your own contract, that will help you to again, communicate more clearly. The overall goal of preliminary notices and contracts is to make sure that you’re on the same page with who you’re working with. Tons of issues, especially regarding payment and construction. We see that they stem from poor communication. And so the more you can communicate, whether it’s through a good contract that you’re sending, um, or your preliminary notices, the better you’re gonna be. So to that answer, I’d say yeah, not a bad idea to also have your own contract. Um, I don’t think it’s hurting you now, but it’s certainly, it, it’s certainly gonna help things go more smoothly in the future.
Speaker 2 (19:56):
Great, thank you so much. Um, and will a contractor know that I’ve looked them up on payment profiles?
Speaker 1 (20:09):
No, they do not. Um, so it’s not like LinkedIn will, they’ll get a mess, Uh, yeah. Notification that you’ve been looking at it. Um, free resource, open to all, uh, that you can obviously leverage to, um, see who you’re working with, see who you’re maybe bidding on or already working with on a current job.
Speaker 2 (20:25):
Speaker 1 (20:26):
Totally anonymous to reviews, um, or, or, you know, the stuff that we’re putting on there about how they, they get paid. Um, if anyone has a lie, that’s all anonymous.
Speaker 2 (20:36):
Awesome, Thank you. Um, and okay, since as an original contractor, you can file a lien at any time, so don’t necessarily need to show lie rights. Do you offer any strategy to help GCs in collection efforts from owner on municipal utility district product project? Sorry.
Speaker 1 (20:57):
Okay, I’m reading this again since as an original contractor, so just so I I understand this correctly. Um, is this asking if you’re a GC and you’re looking to avoid having a sub or supplier file?
Speaker 2 (21:19):
I perhaps maybe like g the GC is, um, having an issue with collecting money and from the owner Okay. On a municipal utility discharge product.
Speaker 1 (21:34):
Yeah. Regardless of of, of where you are in the payment chain, even if you are a gc, I know that a lot of the stuff we’ve been speaking regarding subs and suppliers, um, as a GC you have these rights too. Uh, and so if you’re getting slow paid, if it’s a public job especially, there are ways that you can make sure that, that you’re leveraging your rights. Generally speaking, if it’s, if it’s a municipal public job, it wouldn’t be a lean claim. It, it’s a bond claim. You can’t lean a public piece of property, but there are still steps you can take to make sure that, that the municipality understands that you have a right to get paid on time and that there would be consequences for not doing so. And so yeah, there, there are still ways that, that you can leverage those rights.
Um, for the first part, yes, you can file lean any time, but what we see is that if you go from, you know, hashing that on email or calls like, Hey, where’s payment to just filing a lien? It hurts relationships. And so what we always advise is take it as, as a sequence start at the beginning. If you see that payments slow, send a reminder, uh, through us. Send a notice of intent to lean or notice of intent to file a bond claim and then save that actual mean or bond claim for the last step.
Speaker 2 (22:55):
And this is the last one I’ve got, so if anybody has any more questions, please just keep sending them in. Um, these are really great questions. We appreciate it. Um, how do I introduce, introduce contracts and notices to customers that haven’t gotten these from me before?
Speaker 1 (23:13):
Hmm. Yeah, I, I think what you do is, is tell them that you’re following the law, you know, or if it’s not required, you, you’re trying to set better expectations, um, and communicate with them. You know, there, there can be some hesitancy like we talked about in that rental car example. Um, but the main thing that we see is, is people are understanding of it because especially how the, how the notices look from us, it’s very friendly. It essentially says, Hey, we look forward to working with you on this project. We want to give you info about our role, which is, hey, we’re, we’re supplying concrete or whatever it may be, and we’re protecting our rights through the state and exactly what the state requires. It’s, it’s a friendly notice and it’s something that again, you want to do to start a conversation. It’s certainly not threatening though.
Speaker 2 (24:07):
Right. I think a good point also too to make is that they’re not, they’re, yeah, they’re not threatening. And a lot of companies I’ve seen have a lot of success and just say like, Hey, this is like our new, you know, standard operating procedure and this is what we’re doing across the board just to make sure that, you know, it’s not you, it’s mostly other people kind of thing. So yeah. And it’s, you know, people respect that.
Speaker 1 (24:29):
They definitely do. And to add to that, if you see that there’s some pushback to you guys sending a notice saying, Hey, we’re happy to work with you and also we’re protecting our rights, sometimes that can be a red flag of would they have slow paid you? So something, keep in mind,
Speaker 2 (24:48):
Right. Well that is all the questions I see here. Love it. Um, thank you so much.
Speaker 1 (24:57):
Yeah. And I appreciate everyone’s time here. Um, also wanna call out, Let’s see here, come back here. You know, if you do wanna reach out to me for a bit more personalized conversation about your specific business, happy to chat with you further. Um, we’ve got my email and my direct line here at Level Set, uh, up on the screen. So write that down, share it with the colleagues, and I’d be happy to get with you, uh, after or even the next couple days, uh, regarding a, a more personalized experience about best practices and ways that you can implement as you go forward with your business.