This post was originally published on July 20, 2011. It was updated on 10/15/15.
Preliminary notices are not only the backbone of a thorough lien policy, they can be an important part of the solution to making construction payment fair. While preliminary notices exist as part of the mechanics lien landscape and do maintain parties’ ability to file mechanics liens, perhaps their most important job is providing visibility. A preliminary notices, whether called a notice of furnishing, a notice to owner, or a pre-lien notice, is the document that makes a total project overview possible. And that leads to fairness in payment and, after all, being fair is the secret to avoiding risk.
Given that backdrop, it’s crucial to send preliminary notices, not only for protecting the right to file a lien if needed, but to build relationships and provide information. In fact, it’s been demonstrated that sending more construction notices means filing fewer mechanic lien claims. The ability to provide this information to the proper parties, throughout the country, and according to different and particular requirements is both necessary, and extremely difficult. Attempting to do this work in house, or by managing a conglomeration of disparate service companies, is a fool’s errand. Further, even though sending notices is important, there may be times where it may be believed to be in a business’s best interest to refrain from doing so. Complete control over workflows and notice requirements may not seem to be served by outsourcing, but it is. Here are four reasons why its smart for your company to outsource preliminary notices through use of a cloud-based software platform.
Software is Better at Tasks Requiring Management of Large Amounts of Data
Large companies, or companies with multiple projects and/or projects in multiple states, can greatly benefit from using software platforms to manage and optimize their notice policies. With lots of differing deadlines, and many other rules and requirements, keeping preliminary notices on track as part of a business’s credit policy is difficult. Many companies employ people in the credit department for the sole purpose of checking deadlines, and sending preliminary notices. The truth of the matter is that that type of approach wastes both time and money.
People, while great at many things, are not as equipped to deal with the enormous amounts of specific, technical, discrete information required to manage a large number of preliminary notices. This, however, is exactly what computers and software platforms are created to do. A giant matrix of deadlines and rules can be queried instantly by software, without the need to “remember” or investigate the appropriate rules every single time. It’s just built-in. Likewise, other features like automated mailing, the ability to pull mail pieces if needed, and the ability to customize the exact workflows desired to meet a company’s notice policy needs are all additional benefits of outsourced software that in-house credit departments just can’t match.
Learn more: The Smart Technology Advantage (from Construction Business Owner),
Software is More Efficient – It’s a Waste of Time & Money to Send Notices In-House
Even if the inside department, whether the credit department or otherwise, could handle the enormous amount of specific technical data and correctly process every preliminary notice based on specific and differing workflows – why should they? It is much more economical in terms of time and money to have this process outsourced and processed by a software platform.
Your employees already have a lot to do, and the things they do make your company money. Whether they are doing project management work or accounting work…it’s highly unlikely that you have an employee 100% dedicated to sending preliminary notices.
Most of the time, if a company sends its preliminary notices at all, they will pick someone on their staff to prepare and send these notices. Whenever a notice is required, this employee has to interrupt his or her workday to figure out which notice to send, how to send it, and then to put together the notice and mailing. If the employee does it 100% correct, checking and re-checking the appropriate deadlines, mailing requirements, required recipients, and how the notice fits into the company’s overall policy, they will spend at least 15-25 minutes for each notice.
Is it worth that amount of time? Is it worth taking that employee away from things that make your company money to work on these technical and time-consuming preliminary notices?
The answer is most certainly “no”, especially in light of how much real money you can save by outsourcing. Software platforms are less expensive and more efficient at handling the information and processes that overload human employees in credit departments. Such platforms can handle 1000s of notices and all the associated data, rules, and requirements, every day. The amount of manpower needed to accomplish the same task is large, and expensive. By licensing a software platform to do the heavy lifting, a company can decrease the reliance on expensive human capital in this area.
Software is Customizable and Can Be Tailored to A Company’s Specific Policies
As noted at the beginning of this piece, companies have different philosophies and internal practices related to the sending of preliminary notices. While it is likely a good idea to send preliminary notices on every project, the practical realties of the market may push companies to decide differently. While implementing a complex and nuanced notice scheme can be difficult (if not impossible) when dealing with the multiple individuals associated with the department that handles your preliminary notices, with a software platform it’s simply set-it-and-forget-it, until you want to modify the scheme.
Since software is so adept at dealing with the large amounts of data associated with the noticing process, it is simple for it to handle that data according to set workflow preferences. If a company wants to send preliminary notices only for projects with a certain contract value, or only send within a certain number of days from a certain deadline, or wishes to avoid sending preliminary notices to certain customers, this can all be accomplished simply and easily. Completely automating the notice process through individualized workflow settings gives your company total control over the notice process.
Software Can Provide Reporting and Insight Into Notice Performance
A useful offshoot of having complete and manageable control over preliminary notice workflows is that the relative performance of A/R associated with different workflows can be examined. While this can be nearly impossible to accomplish in-house, software allows for simple digestible A/R performance reports associated with certain notice settings. By comparing the performance of A/R in each separate workflow bucket, your company can make intelligent decisions related to its overall notice policy, and understand the impact of notice on A/R performance.
When your company’s specific performance related to preliminary notices can be determined, a notice policy can be set to maximize the return. Which, in turn, leads to better cash flow, fewer late or unpaid accounts, and a stronger bottom line.
Sending preliminary notices is important. Sending them correctly, efficiently, and intelligently requires an outsourced software platform.