Client Interrogation?

A new customer just came on board! Just imagine how much potential business this customer will bring you and the company! However, what happens if this new and exciting customer turns into a bad customer? Thinking about not getting paid is something you do not want to consider at this time. These are happy and exciting times – you are making money $$$

The customer wants you to start right away and provide them with your goods and services ASAP. Great! Why should you bother your customers with the extra paperwork that the credit department gave you? What cares about the project details?!  It is all about the customer right now. They want to buy!

Why does the credit department need ask so many questions about the project? 

Have you ever considered - what if something happens on the project that is out of your control and all of a sudden your amazing new customer cannot pay you? What if project financing falls through or there is an issue with another contractor on the project that is going to jeopardize your involvement on the job?

What are you doing to protect yourself before a project potentially goes bad? No one is going to help answer your questions about the project when the job is going south. Everyone will be too concerned with protecting themselves to stop and help you find the information you need to collect your account and potentially file a lien.

Think about this - do you know everything you need to about a project to make your lien effective?

Real Life Example:

A client came to us and wanted to file a lien on a project. As a supplier to the project, the client only knew where to send their products based on the shipping address on the invoice. We filed the lien for the client based on the limited information they had on the customer and the project.

Initially, you may think, to effectively file a lien all you need to know is where the project is located. Liens are easy! If you think lien filing is as simple as knowing where the project is located, you are wrong!

After a few short months, the lien was removed because it was considered invalid.

Here is why the lien was invalid – the lien was filed against the property where the materials were shipped and registered against the owner of the property. The client did not know that their customer (now debtor) was leasing the property. Unknowing to the client, they were providing their product to a leaseholder and because the owner did not request the work the lien was disputed. The client now no longer has the protection of the lien for the $50,000 worth of work they have provided all because of who was responsible for the project. Under each Builders’ Lien/Construction Lien Act you can dispute a lien claim if you believe the lien is invalid. In this case, the owner did not authorize the project and the work ongoing on the property and did not accept responsibility for the project. The owner formally disputed the lien and said either remove the lien or prove the lien is their responsibility. This client is a world-wide supplier with teams of lawyers and highly trained credit staff; however, they did not know the basic project information for their lien to be effective and stay on the property.

How do you avoid this situation? Do your homework!

Ask your customer questions from the beginning. Whether you are working with a new customer or an existing customer on a new project, gather information on the job while the relationship with your customer is friendly and their account is still in good standing. Asking basic questions when there are no problems on the project. Once your customer begins to delay or stop paying their account altogether, they will be less likely to answer your questions.

By info gathering and asking the important questions you are simply conducting good business. You want to be able to paint a better picture of whom you are working for and understand the overall project. It is not uncommon that your customers may be hesitant or put off guard by your questions; however, it is all about your approach and how you go about asking the questions. You are not trying to be confrontational. You do not need to sit your customer down, and rapid-fire ask them all about the project. Do not turn your inquiry into an interrogation. It is all about how you ask the questions.

As a company, you are trying to protect your bottom line and avoid any non-payment situations. Non-paying customers and delinquent accounts is simply a part of the business. Be smart and protect yourself. It is important to have the business systems in place so the sales and credit teams can work together.

Start asking the right questions and request a copy of our  "10-Point Project Profile" now to use it as a part of your onboarding and accounts receivables processes.

Request the entire Project Information - Due Diligence Package with our "10-Point Project Profile" now

If you would require further information or would like to discuss your situation, give us a call. Remember: It’s Time To Get Paid™

Notice of Furnishing

How does it benefit me?

A notice of furnishing is a letter sent on your behalf letting your customer, general contractor and owner know that you are working/providing goods and services on site and that you expect payment in accordance with the terms of your contract. Notice of Furnishing is also known as a Pre-Lien.

Sending a Notice of Furnishing establishes communication that benefits everyone. There are no surprises to the owner of the property – they know which contractors are involved in their project and can manage their cash-flow properly and better manage their relationship with the general contractor.  The general contractor is made aware of your involvement (you could be a sub of a sub-contractor and may not know who you are or that you part of the project). Your customer (if different than the GC) will know you are managing your accounts correctly and you are demonstrating attention to detail and you are providing your goods/services as agreed and you expect them to do the same.

What does Notice of Furnishing (Pre-Lien) do?

Who – Send the notice to your customer! Depending on the type of Notice of Furnishing you wish to send, notice can be sent to the property owner(s) of the project and the General Contractor.

What – The notice will outline the work provided, state the amount owing (if any), request bonding and project financing information, and remind of your rights (lien, collections, legal, etc.) in the event of non-payment. The notice is a reminder to your customer and those involved in the project that you expect your account to be managed properly and paid on time.

When – Send the Notice of Furnishing at any time during the lifecycle of the project.  Send before a project starting, during your supply of work and materials to a project, or send the notice after your work has finished as a way to finalize your account.

Where – It is recommended to send the Notice of Furnishing on a per project basis. By sending notice to each of your projects you can gather all important information (project financing, bond info, etc.) about your specific job. You are also able to ensure notice is sent to the appropriate parties involved on a specific project.

Why – Using the Notice of Furnishing will help promote prompt payment of current and future invoices. Let your customer know that work is occurring, you expect payment, & reserve your right to take action if payment is not received. You are simply conducting good business.

The notice is a non-threatening way to let your customer and those involved know that you are a professional and manage your receivables effectively and you expect the same in return.   If your account is already past-due, a Demand Letter (Notice of Intent to Lien) may be a better alternative as it is a more serious letter outlining your intent to lien if payment is not received on your account.

The benefit to using a lien filing agent to send all of your notices is that all communications are going out on the lien agent’s letterhead. This is a subtle way of letting everyone know that you have the systems in place to manage and protect your cash flow.

2 Questions You Should Ask Before Filing a Construction Lien

via Pexels.com

Construction liens (also known as Builders’ Liens or Mechanic’s Liens) have the greatest influence over two things – land and money. Ideally once a construction lien is filed the land will not be sold and the money/financing for project is going to stop flowing. After the lien is filed, the people managing the project are going to want to address your resolve your construction lien and non-payment issue right away because the project’s funds are held up and/or the sale of the property is delayed. 

If you are thinking about filing a construction lien, consider the following two questions:

1.       Does the project have ongoing financing?

2.       Is the property going to be sold in the near future?

Your answers to these questions will help determine if you are a good candidate to file a construction lien.  If you have answered YES to either of these questions, you are in a potentially powerful position if you file a construction lien. After you file, your construction lien will have influence over the project by either tying up the financing or delaying the sale/transfer of the property.  This will result in a higher probability that your non-payment issue will be dealt with. Liens help get you to the negotiating table.

If you have answered NO to both questions, your construction lien may not have the desired effect and power over the situation that you are hoping for. If you file a construction lien it could potentially just sit there – there is no urgency to resolve your lien. The project stakeholders are not being directly impacted by your construction lien because the financing and/or the sale of the property is not directly affected.

Registering a construction lien is not for everyone, therefore; there are alternative collection tools you can consider. Third party collections or initiating legal action through either small claims or superior court (depending on your situation) may be a better option for you. Both collections and commencing legal action can be beneficial resources to utilize to aid in the recovery of your money.

If you are still uncertain about filing a construction lien, we are always available to consult with you.  Simply give us a call to discuss your situation. We can help provide clarity and assist you with finding the most suitable option for you. 

Let’s get you paid!