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The construction industry is loaded with risk, both physical and financial. Safety procedures and insurance policies are often put in place to protect workers and businesses in the event of an accident, while mechanics lien rights exist to protect construction companies from financial exposure and unpaid or overdue contracts.

However, securing payment by asserting lien rights isn’t always enough to eliminate risk. Just because a contractor follows the appropriate steps to protect lien rights doesn’t mean it’s a good idea to sign any contract that comes his or her way.

Fortunately, technology has the ability to collect, analyze and apply data that can make the difference between liability and security for construction companies. Think about how data can be used to qualify customers and set credit terms. Banks already use this type of information to determine loan rates and limits. Shouldn’t construction companies be able to do the same before extending credit? Technology simplifies the process of evaluating creditworthiness. Data on a potential client’s payment history can prevent pitfalls later on.

A huge component of risk in construction is the potential for nonpayment. Mechanics liens exist to mediate this risk, but mechanics lien compliance can be confusing and arduous. Following are the basic steps to establish lien rights:
  1. sending preliminary notice;
  2. sending notice of intent; or
  3. filing a mechanics lien.
These are not always enough to secure payment. It is essential to make sure that each document is completed and submitted properly because one little mistake can have huge repercussions. For example, formatting a form incorrectly or missing a deadline can invalidate the right to claim a lien. Luckily, technology can significantly benefit construction companies by automating this process and eliminating small errors with considerable consequences.

Software platforms use data to learn requirements and deadlines to ensure that the correct document is sent properly and on time. Keeping track of lien law is a nightmare (rules vary by state and even by county), and managing deadlines is an even greater challenge, one that grows in size as a company takes on more accounts. When these requirements are managed manually, it is easy to make mistakes. Using technology to automate these processes is a shortcut; it saves time and increases accuracy by eliminating human error.

But that’s not all. Data also can provide shortcuts when it comes to researching and filling out the information necessary to protect lien rights. For example, this includes the legal property description (what constitutes a "legal property description" varies by state and even by county) or the general contractor’s information (this can be especially tough for sub-subcontractors, materials suppliers or other parties that have no contact with the general contractor). But imagine a database that contains all this information because it can pull data from projects, properties and people all across the country. Then, rather than wasting time struggling to find this information and entering a name with uncertainty, lien claimants can rely on the suggestions of an intelligent matrix of data.

The technology discussed above already exists. Dozens of software platforms and service providers take the stress and confusion out of lien compliance and construction risk management. Their databases are chock full of information ranging from legal property descriptions to statistics on the effectiveness and average reduction of outstanding invoices when optional preliminary notice is sent. If knowledge is power, harnessing technology and data to optimize lien compliance will powerfully reduce risk.

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