Houses, buildings, towers, factories, and more are all things that are built by hand. Why? Because typically no two are the same, and if they are, then there are so few that finding a more streamlined approach is not worth the time or cost associated. Although the practice is changing for larger buildings, currently, only the most rudimentary structures can be built in an assembly line-like manner, being shipped to sites upon completion.
Essentially, what we are getting at here is that the construction industry does not lend well to the automation of the core business, the construction itself. But what if there were other ways to bring automation to the contractors and construction teams that would allow for more time to be spent on the tasks and projects that these people have expertise in?
One of the most important parts of a construction business, other than hiring and maintaining skilled workers, is cash flow management. Companies need to ensure they have cash on hand and available to keep job sites and projects moving forward, including payments to subcontractors, suppliers, and employees to keep operations afloat. Without proper cash flow management and knowing when money is coming in and when money needs to be paid out, you can run into some huge blockers. As such, cash flow is often one of the main hindrances to growth in construction.
Have you ever been stuck between a rock and a hard place? Or, worse, between maintaining vendor relationships and ensuring job progress? Enter a payment strategy with automation for accounts payable and accounts receivable.
An all-in-one payment automation platform can provide contractors with greater financial control and simplicity by unifying payments, approvals, reconciliation, and reporting. Some of the top reasons why contractors should adopt AP and AR automation tools are the following:
Early Detection of Risks
Much like in software production where a bug caught early on is much less expensive to deal with than a bug caught in production, the construction industry faces the same methodology; an issue with framing is less expensive to fix early on than it is once drywall and paint has been applied on top.
Much the same, issues with your AP or AR process can be caught early on if automation is in place, saving you time and money in your business operations. A good example here is if contractors take a look at their payment terms with a vendor. Do you know exactly which vendor offers which payment terms, and are you taking advantage of early payments? Or are payments falling through the cracks? With automated processes and workflows, there is clear visibility of the current flaws of your AP/AR and easy solutions to optimize the process and mitigate any issues in the future.
Increase in Productivity and Efficiency
How much time are you or your staff spending on operational processes dealing with paper invoices, data entry, writing checks, and reconciling financials? It’s time to transform your team and your daily operations to allow more time for what matters most – not just completing tasks but ensuring there is time to analyze these tasks to optimize employee output and eliminating issues before they arise. Gone are the days of reacting to issues and putting out fires. Now, you can enter a life of proactive decision making and strategy planning.
Accurate Financial Reports for Better Cash Management
Answer this: Do you have certainty over your business cash flow? Can you see every detail of your business payment statuses – when payment was made, where it is, when it will arrive in your account or your payees account? The answer is probably no.
Allowing contractors to take control of the financial operations of the business with the ability to approve invoices, pay vendors remotely, and receive electronic payments with access to a robust audit trail is a critical thing to enable business growth. Having full visibility into your financials means you can make better, more effective forecasting decisions.
No Chance of Duplicating an Invoice or Payment
Have you ever come across an invoice that was months old and never paid? Or, you’re not sure if it was paid, so you pay it again? Surely a paper invoice has been lost in a work truck or at a construction site before. With an automated system, you and your team will never have to worry about managing invoices. You will know when an invoice comes in, which balances are outstanding, when payments are due, and where the payment is sitting in the approval process workflow.
Better Relationships and Happier Vendors
Much of the success of a construction business these days not only relies on the craftsmanship of the work completed, but also on the relationships built. Word of mouth is an extremely valuable tool, but a harmful one if your relationships are poor. When it comes to accounts payable with your vendors, you’re always going to want to keep those relationships in good standing and the easiest way to do that is to ensure you make your outstanding payments on time.
You might be asking yourself, “My vendors prefer to be paid in a specific way — check, ACH, EFT, wires, etc. Won’t an online, automated platform limit the payment type options?”
This is a big part of managing vendor relations. There will never be a one-size-fits-all solution for every construction company, just like there is no one-size-fits-all solution for your vendors and how they accept payment. The good news is that many of these online payment solutions provide a multitude of payment options.
While most options are digital, some still do also offer payments made by check (cheque, for our Canadian friends), in which case the payment is still set up and made online, but the provider manages the hassle of printing and mailing the check on the construction companies behalf. This solves two things: one, you can still pay vendors in their preferred method be it checks or electronically, and two, open a new avenue for your vendors to choose to change their payment method as electronic payments are oftentimes faster and have more visibility into the process than paper checks do.
How to Get Started with Automated Payments
The first step will be to assess where your business is currently falling short. Is it in overall cash management? Or, only on the payables or receivables side of things? More on the invoicing side of things? There are many great software solutions available that cover any number of financial practices. Some even have two-way sync with accounting software platforms, so your books are automatically reconciled.
It’s time to start thinking more strategically about your business, your payments strategy, and leveraging available technologies to get the most out of your back-office initiatives. The good news is that there are many options available, even for the construction industry, which has typically been slower to adopt technology to move forward.
This is a guest post from Wajdi Ghoussoub, the Director of Finance & Operations at Plooto. His passion is to enable businesses to avoid challenges and change the way they manage their finances moving forward. Plooto’s vision is to provide SMBs with a complete cash flow management platform to automate complex workflows, by unifying payments, processes, control, reconciliation, and reporting.