As technology takes off in the construction industry around project management, BIM, safety solutions, and progress claims, there’s one area where the process remains largely unchanged… payments.
Even as general contractors become more agile and innovative, the majority of accounting teams spend their days cutting paper checks. Talking to GCs and industry experts – I hear “that’s how it’s always been done.”
As a proponent of construction technology, I believe the time has come where we can no longer ignore the benefits of electronic payment.
The top 3 reasons automatic payments will impact your business for the better:
It was believed for a long time that paper checks were the only way to ensure the safe transmittal of funds. However, according to the Association of Financial Professionals, fraud risk for checks has actually gone up, rising from 60% in 2013 to 78% in 2017.
Electronic payment is much more secure than paper checks in terms of ensuring your money arrives when and where it is intended to. There is no need to worry about checks being intercepted, lost in the mail, or having your account number stolen along the way. Financial technology has evolved to provide enhanced security for the electronic transfer of funds in nearly every industry. Construction is no different, with companies like AvidXchange ensuring your financial data is kept safe and your funds are delivered with no hassle.
When accounting teams process payment with paper checks, they are forced to manually pull together data from the subcontractors’ application for payment, the contract, and compliance documents. They may have to pull change orders to confirm amounts and check the math on every line. Then, they cut the check separate from those other documents, making it difficult to follow the path of data.
A solution like GCPay with electronic payment increases the visibility for general contractors and their subcontractors. All the contract data, change orders and compliance information is pre-loaded in GCPay, so all of it can can be easily applied to the application for payment. If there are any disputes or discrepancies, the system will notify the subcontractor that changes need to be made. Rather than back and forth email chains that can slow things down for weeks, GCPay helps keep everyone up-to-date on outstanding tasks. Once the application for payment is approved, you have the option to release payment electronically. All your contract data stays in sync as the electronic payment is administered. No manual steps required.
Believe it or not, cutting paper checks can actually cost your team a significant amount of money. There is the cost of the materials and stamps of course, but mostly it costs your team valuable time. As outlined above, there are several key steps to approving an application for payment and deciding to release funds. When your team is engaging in manual, labor-intensive processes to verify contract and payment data, it creates a bottleneck.
The GCPay solution can help reduce the time your team spends handling pay apps by at least 50%. You can automate the application for payment management process so all that is left is for your accounting team to hit “approve.” Once approved, pay apps can be payed electronically through our integration with AvidXchange, which provides prompt and secure payment. And once payment has been received, GCPay kicks back the lien waiver for the GC’s records.
Last but not least, electronic payments help to keep your supply chain running smoothly. When everyone is both billed and paid in a timely fashion, you save valuable time and resources.
Bonus: Business Continuity
In the past when general contractors have thought about making a move to electronic payment, they haven’t had to consider the possibility that they may not physically be able to cut checks. As we consider our business continuity planning, both during the current crisis and our preparations for future situations, we must include payment processing as part of that conversation.
We’ve spoken to a few GCs over the last few weeks that have shut down their offices entirely amid the COVID-19 situation, with the exception of someone from AP who still goes into the office once a week to cut checks. We are now at a point where it’s not only more secure to send payment electronically, it’s also physically safer for the wellbeing of your staff.
We are excited by the strides being made across our industry in support of technology and innovation. We truly believe it is the future of the construction industry. But, we also believe we are only as agile as our slowest process. Now more than ever, it’s important to consider leaving manual, paper-based processes in the past.