Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she's here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at [email protected]
Dear Thea,
Mechanics lien rights are
a great tool in our industry that I would like to use more. Every time I
suggest it, my sales people freak out, saying it will insult and upset their
customer. Eventually our discussion goes nowhere. How can I get them to see
what a benefit this is to everyone?
Irritated in
Arizona
Dear Irritated, That situation reminds me of the quote "People fear what they don't understand and hate what they can't conquer." The mere words mechanic's lien, preliminary lien notice, or job sheet are enough to strike fear into the hearts of many a sales person.
"I don't understand why you want to do this" mutters the sales person, followed by the inevitable scornful look of disgust as I hand them the job information sheet. Snatching it from my hands, the rep demands, "How am I supposed to explain this to my customer?” "Well," says I, "It is OUR customer, and why don't you stand back and let your credit manager do what she does?"
Why all the negativity and unnecessary hating on the use of liens? It’s fear: Fear of ticking off the customer, fear of losing the sale, and fear of not being able to explain what, exactly, a lien is.
While the rep is still looking at me working on formulating a response, I sit the rep down, hand him a paper bag (I suggest you keep a stash of these in your desk) and have him breathe in and out of it as I explain the process and the mutual benefits, again.
Benefit #1. Securing lien rights allows you to extend credit to a customer who wouldn't be able to get credit terms otherwise.
Benefit #2. For customers with a limited credit line, securing lien rights on a job allows you to extend additional credit to your customer.
Benefit #3. For customers with large lines of credit, securing your rights allows you to keep jobs separate and extend terms to "fit" the type of job being done.
Benefit #4. If for whatever reason the money hits a bottleneck and your customer isn't getting paid, having secured those lien rights allows you the opportunity to call the owner and inquire about the holdup.
Benefit #5. If the answer isn't to your liking (i.e., you don’t get paid) you can let the owner know you intend to "perfect" said lien. You become the bad guy, pushing for payment while your customer can retain their customer. (Note: Depending on the circumstances this may be a plus or a minus.)
Benefit #6. Securing lien rights offers protection for the project owner as well. It allows them to know who is on their project and verify payment through lien waivers.
Benefit #7. Liens give you the opportunity to educate your customer on the benefits of using lien rights and encourage them to use that protection themselves.
By building a conversation around the benefits to your customer and teaching reps how to build that same conversation with their customers, you can educate, increase your sales, and keep your sales rep from passing out.
Our industry is unique in having this tool. It gives an added, sometimes only, layer of security to a job/customer. To not take advantage of laws afforded to you when most of the credit you extend is unsecured is just crazy, and not in a good way.
The fear of using lien rights comes from lack of education and understanding of what exactly they are and what they can and can't do. Sending a Preliminary Lien Notice, also known as a Notice of Commencement, or Notice of Intent, isn't recorded anywhere. It is exactly what the snappy name implies: notification to all parties involved that you are hereby securing your right to file a lien if something goes wrong and you aren't getting paid. Nothing is recorded until a mechanics lien is actually filed.
Help your sales team and customers face the fear of the lien, conquer it and use that power for good (and to be clear, when I say good I am referring to the good of getting paid).
Now go forth and help others conquer!
