A Construction Notice has many names depending on the state where you are working. Some common names are preliminary notice, notice to file a lien claim, notice to owner, notice to contractor, and some slang names are preliens and prelims. They all reference a notice that is mailed or served to parties up the payment chain at the beginning of the job to notify all parties of a contractors, suppliers, equipment lessors or engineers role on the job, creating transparency and to secure any lien rights that they may have.. This straightforward step helps clarify the scope of work, the resources being supplied, and the payment responsibilities, ultimately leading to faster payments and fewer financial roadblocks.

In this article, we’ll explore the various ways that sending prelims can benefit your construction business, as well as some of the detrimental effects of slow payment they can help you fight.

How Notices Strengthen Supplier Relationships and Improve Cash Flow

Every subcontractor understands that their operational efficiency relies heavily on the quality of their relationships with suppliers. Suppliers are pivotal to the success of any project, and maintaining strong relationships with suppliers is important to your overall business operations. One key aspect of nurturing these relationships is ensuring that suppliers are paid on time.

Sending notices establishes a clear record of the materials or services provided for the project. By sending a prelim, you effectively alert the project owner to the payment obligations related to the work you contribute on the project. The notice makes it a priority for them to address and process payments, which may lead to a faster cash flow back into your business, allowing you to pay your suppliers more quickly. Prompt payments help in maintaining a positive relationship with your suppliers, enhancing their trust and willingness to work with you in the future.

Additionally, when payments are processed promptly, it reduces the risk of project delays or work stoppages due to financial constraints. With cash flow coming in more reliably thanks to preliminary notices, you can manage your payments efficiently, ensuring that the project progresses smoothly and stays on schedule.

The final benefit a preliminary notice can offer is that it can help you establish a positive reputation. When suppliers know they will be paid promptly, they are more likely to view you as a reliable business partner. This reputation can lead to better terms, priority service, and stronger long-term relationships with your suppliers.

The Problem with Slow Payments

Slow payments have long been seen as standard practice within the construction industry, which is why savvy subcontractors try to get cash back into their business quickly, using resources like preliminary notices to help. While subcontractors work hard to navigate the challenges posed by slow payments, these delays come with several significant drawbacks:

Higher Overhead Costs

Delayed payments to suppliers can significantly increase costs for subcontractors. When payments are slow, suppliers may charge higher fees or interest for delayed payments, impacting your overall project budget.

Delayed Production 

Slow payments can result in delayed production schedules or even halted work on projects. If suppliers are not paid on time, they may stop delivering materials, causing delays in project timelines and affecting overall productivity.

Deprioritization with Suppliers

If payments are consistently delayed, suppliers may deprioritize your projects in favor of clients who pay promptly. This shift can limit your access to essential materials and services, compromising the success of your operations.

By sending notices, you can potentially speed up payments, allowing you to pay suppliers promptly and maintain healthy relationships.

Conclusion

Sending notices is one way you can work to receive payments faster and keep your cash flow steady. By sending notices, you can proactively address the issues associated with slow pay, demonstrating to suppliers that you respect their work. This helps to strengthen your partnerships.

Ultimately, sending notices is not just about ensuring timely payments. It creates a healthier working environment. By making this practice routine, you enhance relationships and contribute to the smooth progress of your projects, which can ultimately lead to greater success in your business.