Slow payments create significant challenges for all project stakeholders. According to the PwC, the construction industry has a median days sales outstanding (DSO) of 83 days, the longest of any industry. This means contractors commonly wait 83 days or more after incurring expenses for labor, materials and equipment before receiving a corresponding payment.
These delays can strain relationships, put finances at risk and potentially lead to costly litigation. The good thing is that you can fix construction payment problems by implementing a construction management platform and utilizing technology.
Implementing a construction management platform with payment processes and built-in documentation is the first step in speeding up payments and reducing problems. Using the same technology you use to plan, bid, manage and close out a project means that general contractors and specialty contractors can simplify and streamline construction’s highly complex payment process.
In addition to the reduced administrative burden to execute payments, utilizing technology to improve on-time payments is a boon for general contractors too. Given the slow payment standards and the expectation for specialty contractors to carry the capital expense for a project, some have begun offering discounts up to 5% on promptly paid invoices. In other situations, general contractors have extended similar terms to specialty contractors through formalized early payment programs. These mutually beneficial arrangements reduce costs for general contractors while bolstering cash flow for specialty contractors, enabling greater contributions to ongoing and future projects.
Faster, more efficient payments are a win-win for all project stakeholders. Procore Pay addresses these construction payment challenges head on.
“The whole invoice process is faster and more accurate with Procore Pay. It speeds up creation, submission, payment out, questions of how they’ve been paid. It’s absolutely everything.” said Bonnie Castle, CFO at Allen Harrison Construction.
We have found specialty contractors getting paid via Procore Pay receive payment an average of 46 days after invoice submission, which is a significant difference from the baseline for the construction industry.
A faster payment process benefits every project stakeholder in construction by reducing administrative burden, limiting carrying costs, and strengthening business relationships. Procore Pay equips construction professionals with the essential tools to reduce payment cycles and optimize project cash flow.
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