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By Josh Molina
December 31, 2018
No one in the construction industry wants a lien to become the outcome of a long and expensive job. As everyone in the construction world knows, profit margins are thin and it takes a long time to get paid.
According to zlien, it takes about 73 days to get paid after submitting a payment application or invoice. For retainage, general contractors wait an average of 99 days to get paid, and for subcontractors it’s even longer—a wait of 167 days.
The experts at zlien will tell you that there are three killers to getting paid for construction work: fears, fires and friction.
The key to any good relationship is communication and trust. However, when the relationship is of a financial nature, some of the time-tested interpersonal skills and strategies can often become compromised. That’s why it’s crucial to establish active workarounds to some of the obstacles that arrive.
One of the most common challenges to getting paid is a mentality of fear. It can lead to a protectionist mindset and unhealthy use of leverage.Frictions breed frustration, which erodes trust and relationships and puts people into a bad and unhelpful state of mind.
Fires, or blowups, entrench the parties into combative positions and offer few way outs.
However, all of these potential mishaps can be avoided. zlien offers a number of solutions and pieces of advice for how to breed construction payment collaboration to avoid the dreaded lien from taking place.
Most of the techniques involve throwing out the old way of doing business in favor of a new, more collaborative style.
When acting out of fear, companies enter a situation where they plan to fail. In other words, they lawyer up, set up protections, assert leverage, try to stay ahead of the process and then “hope” that everything works out.
To reduce the fears surrounding construction jobs, zlien suggests to see everyone and prioritize visibility. To reduce friction, make paperwork easy. When fires arrive, create channels to talk it out.
Zlien calls it the “Set Framework”—See everyone, Easy Paperwork, Talk it Out.
These three principles can shift the paradigm of risk and fear on your next job and dramatically improve the results for everyone.
When it comes to the concept of seeing everyone, Zlien suggests the following four steps to create the culture of early collaboration:
Be a good steward and send notice to others on the job.
Encourage others to send notice. Elect to work with lien zero contractors and suppliers who send notice.
Send requests to everyone you know to provide the information they have. Make it easy.
Leverage tools, services, databases to fill in the job tree.
When it comes to paperwork, zlien urges companies to be good stewards of easy paperwork, use proper tools, and avoid frustration by staying positive when encountering non-lien zero paperwork.
And when the fires break out, zlien warns to remember some unfortunate facts. One, it’s impossible to avoid them. Unfortunately, getting lawyers involved usually makes problems worse. Although a lien may seem like the best approach during a time of adversity, it likely will just lead to more problems.
So to avoid these pitfalls, zlien suggests the following:
Build channels for communication.
Talk, with your voice, not through paperwork or threatening written correspondence.
Widen your options.
There is hope for those in the construction industry, particularly because construction work isn’t going anywhere. Everyone agrees that the culture of fear and pessimism when it comes to payments in the construction industry isn’t working as well as it could.
The industry, according to zlien, can’t keep chasing down a “solution” through complexity and protectionism. It’s time for a revolutionary, dramatic change in this approach.
“And, since this industry is full of good people who already want the best for their business, their families, themselves, and the people with whom they do business, the dramatic shift really only requires a tiny tilt toward that goodness,” zlien CEO Scott Wolfe wrote in the booklet LienZero. “A tiny tilt away from those bad actors, who are wooed to exercise all the leverage they possibly can by the prospect of having zero risk, and a tiny tilt toward the good actors who want good results.”
Zlien and Procore's integration allows you to minimize your lien risk with an easy and effective waiver process while enhancing the experience of your project stakeholders. The integration links projects between zlien and Procore. Any notices or completed waivers you receive in zlien will be instantly sent to the project’s document library in Procore. To learn more click here.
The High Price of Slow Payments
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December 31, 2018