Progress on Payments and Lien Waiver Management

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Progress on Payments and Lien Waiver Management

Currently, the payment process for most contractors consists of spreadsheets and emails — manual methods that often result in missing pieces that prevent payments from being completed as quickly as possible. Even more troublingly, any mistake that happens along this pathway, such as an incomplete or incorrect lien waivers, is painful and costly to resolve.

The big idea is that when it comes to payments, mistakes not only mean you can’t get paid, but they also can result in costly lawsuits. That’s why one of the biggest risks the construction industry faces when it comes to payments is failing to properly obtain and process lien waivers.

Today, the complications lie around making this process as streamlined as possible, as staying on top of the construction industry’s regular structure is essential in ensuring that dollars don’t get lost. However, keeping up is an extremely person-intensive process — and the problem with humans is that they are prone to error.

Here are 3 things to know – and why they matter:

1.      Caring about compliance: “If you don't comply, you don't get paid,” explains Bill Richmond, JD, Founding Partner, Platt, Cheema & Richmond (PLLC), a leading real estate legal firm. “Any contractor who wants to stay in business has to be on top of complying with statutory regulatory constitutional lien structures. If not, their competitors who are staying on top of it are going to be getting paid faster and paying less interest on floated dollars or lines of credit.”

2.      Moving from away from manual:  “We always advise our clients who we see are getting it wrong on the lien side that they need to establish best practices to make sure that trained, qualified people are there, or to reach out and find a system that from a technological standpoint will be able to ensure that they're complying,” says Richmond. “Rather than paying for a lawyer, what you really need is … a system in place that can answer all of these questions, dot the Is and cross the Ts, and make sure you get your lien protection.”

3.      Choosing payment tech to pay lawyers less: Richmond adds, “If I was an in-house lawyer, advising a contractor or a GC about the value of using a technological solution that ensures accuracy, completeness and timeliness, it would be, ‘We're going to pay lawyers less, we're going to get our dollars faster and we're going to get what we're owed with less hassle.’”

Plus, adopting technology in the long run makes good business sense, especially during a decade of what have been fairly uncertain times. Labor shortages, supply-chain disruption and the costs that come with these challenges ultimately have been passed down to owners. Interest rates also continue to rise, further squeezing the cost of assets and capital.

That means that anything we can do collectively to reduce risk, increase efficiency, and ensure accuracy is now critical. We need to continue to be able to adapt because sticking to the status quo will come at a great cost. Choosing not to adapt is no longer an option. As more contractors move away from the way they’ve always done it, a modern approach to payments and lien waiver management is emerging. Early adopters will pave the way for an industry ready to change and move forward more efficiently and effectively. Will you be part of the change or be left behind?