Credit managers aren't lawyers, but they do need to know the law...at least as it relates to keeping their receivables secure and preserving the company's legal right to collect. When securing a receivable is not done, or isn't done correctly, collecting the money owed can become more difficult.
Construction projects in general provide a special legal right to collect money: the mechanics lien or construction lien claim. Depending on what State the project is located in, different rules can apply to filing a mechanics lien. If you are not using a construction lien filing service like LienItnow.com, then you should make sure you know the rules to filing a property lien in that State.
To secure your collections you don't need to play hardball with your customers. Friendly phone calls can work just as well as threatening letters, and when payment is still not received, going the legal route by filing a mechanics lien has a big effect. Having a solid compliance system can mean the difference between receiving prompt payment and wasting valuable time and effort and not getting paid.
Questions that often arise in any given situation are:
- How many times should I call before I move this into a more aggressive mode?
- How many days should I allow a receivable to age before I file a mechancis lien?
- When is the last date of completion?
- What work is lienable?
- Can I lien for late charges, extras and the like?
- I have a "no lien" contract. Is it valid or enforceable?
- Do I have a lien if all project funds have already been disbursed?