Technology

Is Paper Standing in the Way of a Profitable Year?

How AI can help clean up your back office, streamline production and strengthen your business.
By Jim Campbell
May 30, 2023
Topics
Technology

The construction industry made a remarkable recovery last year, closing 2022 with remarkably more construction starts than the year prior, according to Dodge Data and Analytics, despite battling a deluge of challenges. With a positive outlook, demonstrated resilience and steady demand for building, the industry is poised to continue weathering economic volatility, but there’s a pesky problem standing in the way—a relentless paper chase.

Construction firms are managing a continuous flow of paper across jobsites, collecting and coding thousands of invoices from scores of contractors and suppliers and routing them through complex review and approval cycles for payments. There’s pressure to process and pay quickly as future work depends on it.

With building starts projected to hold strong and some of the country’s largest construction projects, including the Buffalo Bills Stadium, the JFK International Airport expansion and the BMW supplier Envision AESC plant, set to hit major development milestones this year, the industry’s notoriously complex paper chase is about to get even more complicated. It has the potential to drain time and budget when firms can’t afford to lose either.

Technology can alleviate the costly complexities of construction finance and set firms up for success by helping them do away with paper in the back office. Artificial intelligence and cloud computing solutions, for instance, simplify and streamline mission-critical financial processes so construction firms can operate smarter, more securely and with less expense.

Paper Makes for Risky Business

Managing the flurry of paper receipts, invoices and checks—and adjusting for the complexities inherent to the construction industry, from partial orders and backorders to complicated liens and billing structures—is challenging for most construction firms. Manual invoice and payment processes are prone to human error, susceptible to fraud and costly, requiring staff labor, overhead and supplies and postage to cut and mail paper checks. The work is a time burden, especially for firms that are short-staffed amid an unrelenting labor shortage or dealing with merging processes and systems due to industry consolidation.

In addition to taking time away from the business, the inefficiencies involved with paper-based invoices and payment processes can tie up cash flow and stall payments to contractors and suppliers, threatening firms’ abilities to purchase supplies and find committed workers to take on new work. With the construction workforce shortage topping half a million in 2023, risking supplier relationships due to delayed payments is not a gamble construction owners can afford to make.

Going Paperless to Strengthen the Business

Deloitte’s 2023 Outlook reports that investing in emerging technologies, like artificial intelligence, is one of the key strategies that will help construction firms weather current economic volatility and stay on course for continued growth. The report notes that growing global supply-chain disruptions, increased competition, worker shortages and skyrocketing materials prices have made digital transformation even more critical to staying in the game.

For many firms, the back office, riddled with paper, bottomless file cabinets and disparate, antiquated software and systems, would greatly benefit from modernized, AI-driven, automated solutions, including accounts payable (AP) software.

Automating AP takes the time and complexity out of invoice and payment processes by eliminating the need to collect scores of invoices from the mail, manually enter data, circle around jobsites for approvals and print paper checks to pay contractors and suppliers. Optical character recognition technology is used to enter data, reconcile and electronically send invoices to supervisors’ mobile devices for quick and easy review, whether they are in the field, on the road or in the office.

Once approved, payments flow directly into a firm’s accounting system for automated payment processing. Suppliers are offered their choice of payment method, including faster, more secure epayments. The assurance of fast, accurate payments can help owners win contractor loyalty, ensuring the owners have the staffing they need to complete projects and win new business.

Modernizing the Back Office for Better Visibility and Insights

Financial metrics and insights are especially valuable to the construction industry, as success hinges on managing bids and commitments against budget and time.

Cloud-based AP solutions store all invoice and payment data in a central location and provide real-time visibility, making it easy for firms to track important financial data and manage their cash flow. This accessibility also enables firms to check the status of a payment and rectify any holdups before they cause delays that threaten to stall projects or tarnish supplier relationships.

Executing a Paperless Back Office

Creating a paperless back office is an effective way to speed invoice approvals, save time and money and strengthen important contractor and supplier relationships, giving construction firms the competitive edge they need to sustain and grow their business despite trying economic times.

Leaning on a trusted technology partner that understands the unique needs of the construction industry and is committed to continuously evolving to meet them can ensure a seamless transition to modernization and pave the way for continued optimization. With major developments and recovery ahead for construction this year, paper should be the last thing standing in the way of a profitable year.

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.

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