Business

How Construction Companies Can Streamline Payments and Strengthen Relationships in 2021

Relationships have always been important in the ecosystem that is construction, but they are more critical today than ever before. One of the best ways to build quality relationships is to pay well and pay on time.
By Jim Campbell
February 27, 2021
Topics
Business

Construction is an ecosystem in which every business is connected. Relationships have always been important in this framework, but they are more critical today than ever before. As the industry enters 2021 one of the best ways to build quality relationships is to pay well and pay on time.

Ask any contractor and they will say one of the biggest challenges they face today is a skilled labor shortage. Entering 2021 there is a backlog of work that is greater than the supply of skilled labor. Construction leaders anticipate this will only get worse as the economy shifts back to normal and once-stalled projects become active again. It is reasonable to think the skilled labor force will continue to lag behind the pent-up demand in construction for several years.

What does that have to do with streamlined, timely payments? Well, labor lives at the subcontractor level. During a labor shortage, subcontractors can be more selective as to what work they do and when they do it. Those businesses count on getting paid and having funds in the bank to cover payroll checks and material expenses. Slow payments can bring a subcontractor’s cashflow to its knees.

For a contractor to ensure their project leaps to the front of the line for a subcontractor, relationships are key. And timely payments make for a good relationship.

Consider these steps to streamline payments and build a strong reputation among the subcontractor community.

1. Understand current workflows and automated options

The first step in this process is to embrace change and ask internal accounts payable (AP) employees if there is a better way. Preserve what works (the people involved), eliminate what does not (piles of paper) and ultimately become more efficient. This usually leads to a discussion about automation.

Automating AP, at its core, gives you continuity and collaboration on the invoice process and helps you execute payments faster. However, it is critical to go through the educational process to truly learn about payment automation and trust the system. With knowledge comes comfort.

A business owner must realize they will have more control in cashflow management and the release of funds by using electronic payment methods. They will sleep soundly knowing their data and information is secure and their transactions are insured.

2. Eliminate paper and transition to electronic payment methods

Folks responsible for invoice routing and approval at far too many construction companies are drowning in paper. Some have tried to solve the problem with generic document management and workflows that often include scanning physical documents into a computer, but this has largely proven unsuccessful.

AP software is purpose-built for the invoice and payments approval process and solves those paper problems. By getting invoices and payments in a digital format, several initial steps associated with processing are eliminated.

Then by using customizable workflows and conditions, automation software sends invoices directly to a project manager or to the appropriate approver. Treasury rules can be applied to make sure invoices of a certain dollar amount are approved by the right person. Utility and other no-brainer bills can be paid automatically. Pay control features can hold payments for one final approval before funds leave the account. It is a tremendous amount of control.

3. Find a trusted partner that can provide the right tools

After understanding the importance of streamlined payments and automation, find a trusted partner who can help identify the right tools. Making electronic payments is not as simple as it sounds. Even well-established contractors and companies need a partner to walk through the move to automation.

Let partners worry about executing those payments, transitioning vendors away from paper checks to electronic payment methods and maintaining each supplier’s preferred payment type, along with follow-ups if that payment is not cleared in a certain amount of time.

There is no question contractors overcame unique challenges in 2020, and with hope for what’s ahead, they can expect new roadblocks in 2021. But failing to pay invoices quickly does not have to ruin a company’s reputation and force its projects to the bottom of a subcontractor’s priority list.

Streamline payments with automation. Build strong relationships with suppliers and subcontractors. And, most importantly, enjoy a profitable 2021.

by Jim Campbell
Jim Campbell is the VP of Construction at AvidXchange, the industry leader in automating invoice and payment processes for mid-market businesses. Jim joined the company in 2016 after decades in the construction software industry and is now responsible for driving buyer growth in AvidXchange’s construction vertical. Jim began his professional career in 1979 with Timberline Software Corporation, a pioneer in the development of application software for the construction and real estate industries before it was purchased by Sage Software in 2003.

Related stories

Business
ICYMI: Highlights From NIBS’ Building Innovation Conference 2024
By Jordan LeGras
CE reports from the National Institute of Building Sciences’ Building Innovation Conference 2024, where industry experts answered questions on sustainability, diversity and inclusion, technology and more.
Business
Nonresidential Construction Spending Slips 0.3% in April, Remains Near Record High
By ABC
ABC has released its nonresidential construction spending report for April, noting a marginal slip along with maintenance of a near-record high.
Business
Saying the Quiet Part Out Loud
By Tracy Winn
While silent leadership is easy to overlook, it can play a key role in forming deeper and more meaningful connections with work crews, subcontractors, clients, suppliers and stakeholders.

Follow us




Subscribe to Our Newsletter

Stay in the know with the latest industry news, technology and our weekly features. Get early access to any CE events and webinars.