Cash Is King.
A Levelset 2020 National Construction Payment Report on the state of payments in the construction industry revealed some interesting data points. While slow and late payments are a function of the complexity of the construction process, construction firms can leverage technology to optimize processes to improve cash flow.
Companies live and die by cashflow. Steady cash flow supports the viability of firms by putting them in a position to take on new projects and fund growth. Worry around cash flow was cited by survey respondents as a top concern.
With RedTeam’s construction project management platform, firms can produce detailed AIA-style billing as progress billing or cost-plus billing. The platform provides budgeting and billing options that allow companies to include progress against a schedule of values and make updates for more accurate billing.
Some of the primary issues that negatively impact cash flow include inaccuracies in invoicing, poor job site coordination and project delays – and these issues often go hand in hand. Substandard coordination is a major reason why many projects are delayed. Nearly 70% of Levelset survey respondents said that poor jobsite coordination “sometimes” or “always” causes projects to run over budget or past deadlines. Survey respondents ranked planning and coordination as the top factor in getting paid on time.
Construction management technology can help accelerate payments by facilitating the collaboration and communication needed to keep projects moving. RedTeam’s cloud-based project management platform provides project stakeholders with real-time information that ensures everyone is on the same page. The platform connects distributed teams and breaks down data silos, reducing the miscommunication and misunderstandings that can delay projects and contribute to rework and cost overruns.
The impact of not completing jobs on time is significant. More than three-quarters of Levelset survey respondents (77%) indicated that not completing a job on time or on budget would have a financial impact on their business. The survey also found that “of the 77% financially impacted, more than half of the respondents stated the impacts as loss of payment for work (57.8%) or loss or reputation (54%), while effects like losing clients (34.9%) or damaging relationships (43%) was also quite common.”
The Levelset report also found that the majority of respondents spend a moderate or substantial amount of time on payment paperwork. The more manual the invoicing process the more likelihood of mistakes and inaccuracies that lead to delayed payment. Technology solutions that make data management easier and more organized can improve the accuracy of invoicing and positively impact company cash flow.
As firms look to technology solutions to help improve cash flow, they will want to carefully evaluate the ROI of any technology they integrate in their solution stack.
RedTeam’s new ROI calculator tool is aimed at helping companies estimate and measure the value of construction technologies. The tool helps companies understand which software is worth the investment and determine how these benefits will translate into their specific operations.
The calculator takes the benefit (financial value created by the technology being used) divided by investment (the total cost of buying, implementing and maintaining the software) to find the ROI, or total net value created, measuring benefits in labor savings, productivity gains, workplace benefits, and risk mitigation.
Cash flow is fundamental to business viability. Using construction project management technology to streamline processes, optimize workflows, and increase the accuracy of billing, allows firms to improve cash flow and focus on growing their business.