Why Every Construction Company Should Be Using Payment Management Software

The construction business is a financially fluid industry and that can make it volatile when it comes a company’s finances. Fluctuating project costs, high employee turnover rates, recurring delays in payments, and unscheduled changes are often the norm and can create cash flow issues and devastating losses. In addition, each construction project can vary in scope, materials and labor costs, sometimes making it difficult to budget. Having a clear and accurate schedule of values (SOV) in place via construction payment management software can be invaluable in providing successful financial management.

There are many different payment management software programs on the market geared towards the construction industry, but most make it easier to send invoices to vendors; manage a building company’s finances, including revenue, profits and expenses; and make the billing process more efficient. Many software payment programs also help construction companies analyze and predict expenses, track cash flow, and sound the alert when projects are in danger of going over budget which could result in delays and project cancellations. In addition, many programs also offer suggestions on how to reduce expenses, leading to greater financial stability.

The reality is that the construction industry has greater payment challenges than other industries. It takes an average timeline of 83 days – and sometimes up to 180 days – for many construction companies to get paid. This timeline is the longest period of any industry in the world. Payment management software programs can not only speed up this process but can also improve vendor and contractor relationships and job progress.

Tearing Up the Checks

One way payment management software implements better payment strategies is by eliminating paper checks and replacing this form of payment with virtual card payments. The fact is, the construction industry is still a check-based industry because the process of bank card and ACH payments involves securely storing and maintaining vendors’ banking information in an industry that often involves different business entities, localized vendors, and a merry-go-‘round of changing subcontractors. In addition, the building industry’s low profit margins can result in scarce IT resources needed to implement upgrades to payment systems. A payment management software program, however, is not only a more convenient payment method for all parties involved, but is also a more secure way to get paid.

In addition, payment management software can help construction companies stay on top of missed payments. Many companies in the building industry run on tight budgets, where one missed payment owed can be financially crippling. Payment software programs help to remind clients that payments are due and send the message that late payments are noted and won’t be tolerated. By streamlining the process, payment software can enable construction companies to stay competitive and improve cash flow that can increase a company’s ability to take on new projects and grow the business.

Payment management software programs can also provide realistic insights into a construction company’s financial status. This helps to develop a strategy when hard economic situations, such as Covid, tax the financial well-being of a company. Software programs can also speed up the process of contract amendments should there be material changes or additional work needed. In the past this could take weeks or months to finalize, whereas a program management program makes contract amendments automatic and minimizes financial disputes down the road.

Choosing the Right Software

There’s no denying that there are many choices in construction payment software programs today. Finding the right one depends on an individual  company’s needs. Here are some of the popular ones on the market and what they offer:

• PaperTrl: offerings include project-based accounting, vendor management, online payments, cash flow management, improved visibility, and audit trail.
• Flexbase: provides project tracking, lien waivers, payment applications, legal reminders, and financial data integration.
• GCPay: simplifies payment process applications between general contractors and subcontractors through payment application automation, creates and exchanges lien waivers and organizes and collects compliance documents, monitors the progress of projects, allows for approval of expenses, and allows for overseeing of accounts payable and accounts receivable as well as payroll and cash flow management.
• Procore: this application emphasizes construction project management and informs construction companies what needs to be done to stay on schedule. It also helps identify issues before they impact a company’s budget or schedule, and provides easy integration with other financial solutions.
• Contractor Foreman: this software is tailored for small and medium sized construction companies and markets itself as an all-in-one solution offering over 35 features via various plans. It integrates easily with existing software programs and provides the ability for estimates, bid management, change orders and purchase orders.
• Buildertrend: toted as a software that works best for homebuilders, it provides cloud-based project management and includes tools for estimating, scheduling, change order features, and client communications and document management tools.
• Sage 100 Contractor: this software is tailored to small to midsize contractors, and offers accounting and tools for estimating, scheduling, project management, equipment management and payroll needs.
• Fieldwire: a field management solution that coordinates project teams, tracks job performances, and reduces risks. The software’s features include messaging, task lists, scheduling and reporting. There is a free “Basic” version for small teams that is limited to 100 sheets and three projects that allows companies to try out the software to see if it’s a good fit. It is also easily upgraded into a paid plan.
• Spectrum from Viewpoint: a construction ERP software that is entirely web-based and provides fully integrated tools including construction accounting, project management, equipment and materials management, service, HR and payroll, and reporting.
• STACK: this software is a leader in estimation and takeoff tools for pre-construction, and is geared to enable general contractors to win more bids, subcontractors to find the most profitable projects, and suppliers and manufacturers to connect with customers. It is also designed for teams to improve efficiency and increase company revenue. There is a limited free STACK version for companies who want to try the software on for size.

Embracing the Future

While the construction industry has been slower than other fields to embrace payment management software, it is imperative that building companies do so now. The past three years of Covid has pulled back the curtain on the weak links in construction, exposing methods such as paper checks, paper scheduling and paper invoicing as processes that slow down payments, increase risks, and invite disputes.

Those construction companies that integrate a payment management software system can save contractors money in materials, stamps and time; keep supply chains running smoothly; make it easier to budget and prepare for unexpected cost fluctuations; reduce errors and improve communications between all parties involved; and increase accuracy and efficiency in billing and expenses.

Picking the right payment management software is key, and it will require research on the part of individual companies. But the benefits of integrating a program into a company’s daily operations are invaluable and, in today’s workplace, necessary.