What is a Contract?

Long-term liabilities, also known as noncurrent liabilities, in the construction industry are obligations that are due more than a year from the current date. They are an important part of a company's financial structure and may include bonds payable, long-term loans, deferred tax liabilities, lease obligations, and pension obligations. For example, a construction company might have long-term liabilities in the form of a multi-year loan taken to acquire new heavy machinery or land for future projects. These liabilities have a significant impact on a company's liquidity and overall financial health, so it's critical that construction companies manage them effectively. Depending on how these are managed, they can influence a construction company's creditworthiness and its ability to secure future funding for expansion or for carrying out large projects. Hence, understanding long-term liabilities is vital for sustainability and growth in the construction industry.

Accounts Receivable (A/R) in the construction industry refers to the amount of money owed to a construction company for goods and services it has provided but has not yet been paid for. This is typically recorded as an asset on the company's balance sheet as it represents a legal obligation for the customer to remit payment to the company. The A/R system helps track these outstanding payments within a set time period, allowing construction companies to manage their cash flow effectively. It's essential for construction firms to monitor their A/R closely, as late or uncollected payments can significantly impact their financial health and ability to fund future projects.

A notice of intent to lien (NOI)—sometimes called an intent notice or notice of non-payment—is a legal document that serves as a final warning from a subcontractor or supplier to the property owner, developer, or general contractor (GC) indicating their intent to file a mechanic’s lien against the property in the event of non-payment.

The purpose of an NOI is two-fold: First, it protects the subcontractor’s or supplier's rights to establish a legal claim against the property, allowing them to file a lien—or pursue legal action—if the outstanding payment is not made within a specific time frame. Second, it motivates the responsible party (i.e., property owner, developer, or GC) to settle the outstanding payment(s). This is because once a mechanic’s lien is filed, the property owner can’t sell or refinance the property until the debt is settled.

Currently, NOIs are only legally required in nine states:

• Arkansas (10 days before filing lien)
• Colorado (10 days before filing lien)
• Connecticut (Within 90 day lien period)
• Louisiana (material suppliers on residential projects 10 days before filing lien)
• Missouri (10 days before filing lien)
• North Dakota (15 days before filing lien)
• Pennsylvania (30 days before filing lien)
• Wisconsin (30 days before filing lien)
• Wyoming (10 days before filing lien)

However, regardless of state requirements, sending NOIs can be a beneficial and inexpensive step that increases subcontractors’ chances of getting paid (ideally without actually having to file a lien). Note that subcontractors must first submit a pre-lien (or preliminary) notice before submitting an NOI. Making both of these a standard part of accounting processes for past-due payments can improve A/R collection processes—and get payments in the door faster.

Along this vein, Siteline empowers subcontractors by providing visibility into outstanding payments across all projects, alerting them when it's time to pursue overdue balances—or issue an NOI for the most persistent cases.

To experience how Siteline can help your subcontracting business proactively manage payment processes, leverage NOIs when necessary, and accelerate cash flow, book a personalized demo today.