Technology has taken off in the construction industry around project management, BIM, finance, and safety solutions. But, there’s still an area where the process remains largely unchanged – payment.
Even though general contractors are more agile and innovative, the majority of accounting teams are still spending their days cutting paper checks. When we speak to GCs and industry experts about paying via check, we hear the same thing: it’s just how it’s always been done.
As proponents of construction technology and saving our customers valuable time and money, we believe the time has come where we can no longer ignore the benefits of electronic payment in our industry.
We’ve collected the top 3 reasons for how electronic payment can impact your business for the better.
1. It’s More Secure
For a long time, paper checks were the primary way to ensure the safe transmittal of funds. However, according to the Association of Financial Professionals, fraud risk for checks has increased – rising from 60% in 2013 to 78% in 2017.
Electronic payment is more secure than paper checks in terms of ensuring your money arrives when and where it is intended to. There’s 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.
2. It Provides Enhanced Visibility
When accounting teams process payment with paper checks, they’re forced to manually pull together data from the subcontractors’ application for payment, the contract, and compliance documents. They may even pull change orders to confirm amounts and check the math on every line. Then, they cut the check separate from those other documents, so it’s difficult to follow the path of data.
A payment application system with electronic payment options increases the visibility for general contractors and their subcontractors. All the contract data, change orders, and compliance information is pre-loaded, 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 email chains that can slow things down, the software 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.
3. It Saves You Time and Money
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 in 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 barrier.
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, general contractors who considered electronic payment didn’t have the possibility of removing physical checks. As we consider our business continuity planning, both during the pandemic and in preparation for future situations, we must include payment processing as part of that conversation.
We know GCs have had to shut down their offices during COVID-19 restrictions… with the exception of someone from accounts payable who still goes into the office to cut checks. 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. Technology is the future of the construction industry! But, we also know we’re only as agile as our slowest process. Now more than ever, it’s important to consider leaving manual, paper-based processes in the past.