How do I ensure lien waivers are collected before releasing vendor payments?

The Compliance Context

Construction projects involve complex legal relationships between the general contractor, subcontractors, and suppliers. Lien waivers protect the GC from liens being placed on the property by unpaid vendors. Auditors and regulators expect GCs to have a documented process for collecting these waivers before payments are released.

Risks of Non-Compliance

• Lien exposure: Unpaid vendors can file liens against the property, causing legal headaches and project delays.
• Inaccurate financial reporting: Missing lien waivers distort the true work-in-progress (WIP).
• Audit findings: Lack of lien waiver documentation is a common audit flag that can lead to penalties.
• Vendor disputes: Paying without a waiver can create conflicts if the vendor later claims non-payment.

Best Practices

1. Automate lien waiver collection: Require vendors to submit waivers before invoices can be approved for payment.
2. Integrate with your AP system: Tie payment releases to the presence of a valid lien waiver.
3. Standardize waiver forms: Use approved templates to streamline the process.
4. Maintain an audit trail: Document the lien waiver collection process for each payment.
5. Train staff on policy: Ensure AP, project managers, and others understand the importance of this control.
6. Leverage technology: Tools like Vergo's AP automation enforce lien waiver policies automatically.
7. Review policy regularly: Update procedures as laws or audit expectations change.

How Vergo Helps

Vergo is a card-agnostic expense management platform built for construction. Connect any corporate or project credit card and get full visibility and control over field spending.

• Job-cost coding at the point of capture — field teams assign job number, cost code, and cost type from their mobile device before the receipt leaves the job site.
• Per-job spend controls — set card limits by project, cost code, or cardholder so spending stays within approved budgets.
• Mobile receipt capture — superintendents and PMs photograph receipts on-site with automatic data extraction.
• Role-based approval workflows — route expenses through project managers, job-level approvers, and controllers based on your org structure.
• Vergo integrates natively with major construction ERPs, syncing coded expenses directly into job cost and general ledger without manual re-entry.

Related Questions

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