Preliminary Notices: The Secret Sauce For Your Credit Department
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Preliminary Notices Secret Sauce To Credit Departments
description
Establishing a policy to send a single document – the preliminary notice document – may change your company’s fortunes with DSOs, aging receivables, and bad debt. So, why aren’t you doing it? Getting paid in the construction industry is an art form, and the preliminary notice document has been used by contractors and suppliers for nearly 200 years to position themselves in line for payment. As this Webinar will explain: if you’re not sending it, you’re not in line. Watch a recording of this webinar here: http://hub.zlien.com/preliminary-notices-secret-credit-success
Transcript of Preliminary Notices: The Secret Sauce For Your Credit Department
Preliminary Notices Secret Sauce To Credit Departments
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Construction Credit Knowledge
1. History and Purpose Of Notices!
2. What GCs and Owners Do With Notices!
3. What this means to you!
4. The Results
WHY?
WHY?
Thomas Jefferson introduced the first mechanics lien legislation.
?
No one was willing to build out Washington D.C. because they were afraid of not getting paid
?
If You Build It
And We Don’t Pay For It
You Can Have It
?
This would have never worked pre-America, because land ownership was reserved for aristocrats. America, however, was land-rich.
?America believes that trade contractors and suppliers
should get paid.
?America believes that
GCs and Owners should shoulder the burden of a
project’s financial risk.
Facing Serious Difficulty Getting Paid!
Have Some Delays But Cash Coming Through!
Paid Fairly & On Time
77.8%
22.2%0%
http://zlien.us/17Fx31Y
PAY WHEN PAIDPAY IF PAID
JOINT CHECK AGREEMENTSBANKRUPTCIES
DELAY DISPUTES & DAMAGESWORKMANSHIP DISPUTES
CHANGE ORDERSSCOPE OF WORK ISSUES
CODE INSPECTION VIOLATIONSPREVAILING WAGES
An epic battle between contract and policy
Mechanics lien laws provide contractors remedy in event of non-payment
Contracts start to include “no lien clauses.” Courts void these provisions as anti-public policy
Contracts start to include “pay when paid” clauses. Courts say this is only a “timing” clause
“Pay when paid” turns into “pay if paid.” Many courts declaring this void as against public policy.
Notice Claim Provisions now appearing in contracts with strict claim periods.
1791 40’s 60’s 80’s 2000
Mechanics Lien Rights !Payment bond requirements !Contractor license bonds (i.e. WA) !Misappropriation of funds laws and criminal statutes !Contractor payment timing laws
Laws Protecting Subcontractors & Suppliers
Mechanics Lien Rights !Payment bond requirements !Contractor license bonds (i.e. WA) !Misappropriation of funds laws and criminal statutes !Contractor payment timing laws
Laws Protecting Subcontractors & Suppliers
No Lien Clauses !Pay When Paid Clause !Pay If Paid Clause !Notice Claim Provisions !Retainage Requirements
Owners / GCs Attempt To Shift Risk With Contract
Mechanics Lien Rights !Payment bond requirements !Contractor license bonds (i.e. WA) !Misappropriation of funds laws and criminal statutes !Contractor payment timing laws
Laws Protecting Subcontractors & Suppliers
No Lien Clauses !Pay When Paid Clause !Pay If Paid Clause !Notice Claim Provisions !Retainage Requirements
Owners / GCs Attempt To Shift Risk With Contract
Judges (usually) tip the scales back to subs & suppliers
Liens were created to protect subcontractors
and suppliers.
Notices were created to protect owners and general contractors.
Liens were created to protect subcontractors
and suppliers.
Notices were created to protect owners and general contractors.
You can be fined or charged with a crime for not sending some notices.TN, CA, AZ, NV, WA, OR...
1. History and Purpose Of Notices
2. What GCs and Owners Do With Notices!
3. What this means to you!
4. The Results
1. History and Purpose Of Notices
2. What GCs and Owners Do With Notices!
3. What this means to you!
4. The Results
Use Software to manage “financial risk” - which is the risk of lien
GCs and Owners Track Who Does And Does Not Send Notices
Track Preliminary Notices
If not Textura, they are using something to distinguish between those who do and
do not send preliminary notices.!
1. History and Purpose Of Notices
2. What GCs and Owners Do With Notices!
3. What this means to you!
4. The Results
PRIORITIES
Smart CompaniesAlways SendPreliminary NoticesBecause they prioritize your invoices above others.
Smart CompaniesAlways SendPreliminary Notices
1. History and Purpose Of Notices
2. What GCs and Owners Do With Notices!
3. What this means to you!
4. The Results
0%
2%
4%
6%
2011 2012 2013
% of Projects Liened
As preliminary notice policy implemented at Graybar, percentage of projects that need a lien to get paid falls from almost 6% to <1%
0%
13%
25%
38%
50%
2010 2011 2012 2013
% Projects Noticed % Projects Liened
Again, more preliminary notices means less payment problems, and therefore, less liens.
Secure your debt.
Secure your lien rights with a Preliminary Notice. This is sent right when you begin furnishing.
START OF YOUR WORK
END OF YOUR WORK
30 DAYS PAST DUE
90 DAYS PAST DUE
Send a notice of intent to lien after work is completed and you are unpaid.
START OF YOUR WORK
END OF YOUR WORK
30 DAYS PAST DUE
90 DAYS PAST DUE
File your lien or bond claim.
START OF YOUR WORK
END OF YOUR WORK
30 DAYS PAST DUE
90 DAYS PAST DUE
Recap1) Preliminary Notices Benefit The Owner, Not You!
2) GCs / Owners Expect Them, and Manage Them!
3) You will not scare away customers
!
4) It will prioritize your invoice!
5) It will protect you in the event you are unpaid
Secure your debt.Always get paid.
it’s really that simple
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