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The Definitive Lien Waiver Workflow

Imagine spending a week and a half of consecutive workdays doing nothing but digging through email archives and fixing mistakes on documents. Saving 15 minutes each workday saves seven and a half eight-hour workdays over the course of a year.

That’s a lot of time. That’s why getting smart about processes and workflows is so important. Every job has implicit workflows, from opening a restaurant each day, to doing warm-ups for NFL team practices, to preparing weekly expense reports.

Construction Industry Workflows

Construction industry jobs are no exception; sending invoices, receiving and matching invoices and approving change orders all have repeatable steps. Defining and honing those steps can transform each process into a more pleasant, faster workflow.

One process that is messy and confusing for many in construction is the exchange of lien waivers. Exchanging lien waivers is a pain for those making payment and for those receiving. Both want to protect their businesses (and themselves) financially, both want to exchange the proper waiver, and both want to spend as little time as possible achieving this.

Unfortunately, a lack of understanding and preparation often hold up this process. This delays the payment transfer and adds more work for the accounts payable and receivable professionals responsible for the waiver exchange. Following is a definitive workflow for exchanging lien waivers.

Plan for the Project

Contracts set out billing schedules, so it should be no surprise when invoices are being sent. This is important because common practice is to exchange a waiver with every payment (best practice is to send a waiver with every invoice). Answering the following questions before the first payment becomes due on a project will facilitate smoother waiver exchanges and payments.

  • Decide who will draft and provide the waiver document: the payer or the payee.
  • Parties who are providing the waiver should have a plan for creating the document. Some companies use in-house templates to create waivers, others leave this job to in-house or third-party lawyers, while others create and share waivers using free online tools. (Note that 12 states require the use of statutory forms.)
  • Agree to a process for exchanging waivers: Will they be sent via mail, email, fax, etc.? Where and to whom should the waivers be sent?
  • Agree to a process for approving waivers: Who must review the waiver? How long is the review process?

Answering these questions requires communicating and collaborating with other involved parties, usually a counterpart in accounts receivable or accounts payable. Getting on the same page about the process for transferring payments and lien waivers will make both parties happier throughout the projects and make everyone’s jobs easier.

Prepare For Each Lien Waiver Exchange

Each lien waiver will be unique. Parties that provide waivers will have to gather some information before writing the document. Parties receiving the waiver will probably want this information as well to verify the accuracy of the lien waiver. Knowing which information to gather will grease the wheels for getting waiver signed and approved. Here is what’s important to know for each lien waiver:

  • who is making payment and who is receiving payment;
  • the amount of the payment (the amount of lien rights being waived);
  • whether it’s a progress payment or the final expected payment for the project; and
  • the through date (the last date labor or materials were provided in exchange for this payment).

Knowing which information is required to create or approve a waiver is half the race. The other half is implementing a system for getting that information where it needs to be. This data might live in job sheets, ERP systems, lien and notice software or perhaps a Microsoft Excel file. Create an efficient, repeatable process for getting this information in one place.

Exchange the Lien Waiver and Maintain Records

With proper planning, the actual exchange of the waiver should be easy. Follow the guidelines set forth at the beginning of the project, and keep accessible records of everything. Accessible is the key word here. This might mean creating an electronic folder with each revision of the waiver. It also might mean labeling emails related to a single waiver so they’re easy to find in one’s inbox.

Recordkeeping makes communication easier, especially with something like a lien waiver exchange, which might involve rapid back-and-forth emails and phone calls. Having a log of communications to reference keeps everybody on the same page. It eliminates time that would be spent searching for information and skips to the point: getting both parties speaking to each other about valuable information and ultimately exchanging the lien waiver.

It’s the little things that count, because the little things add up. Highlighting certain cells on a spreadsheet, tagging emails, or creating a folder devoted to a given project or lien waiver might only save minutes at a time, but they have the power to turn a headache-inducing job into a seamless task.

Setting rules at the outset of a project and creating a lien waiver workflow will do more than anything else to make lien waiver exchanges easy. Questions are bound to arise at some point. Addressing these preemptively and getting on the same page with customers or contractors is essential. Communication can be the beast that holds up payment or delays a job, but it also can be the angel that shepherds everybody to success.

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