General contractors need reliable cash flow to keep projects running smoothly. Yet many contractors still rely on outdated payment systems and simply put up with the hitches — like driving an old engine that eventually gets the job done, but consumes more time and resources than necessary. Navigating cash flow challenges is no easy task, particularly when they appear in various forms like delays, mistakes, and complications. Tackling each problem with a separate solution is both time-consuming and impractical.
What if there was a single solution to all of these problems? The common thread tying these challenges together is the need for streamlined organization, faster processes, and immediate diagnostics — and this is where payment automation comes in. Just as oil keeps an engine running without friction, payment automation connects every part of the payment process, solving all seven problems with one elegant solution. Learn more about how GCPay optimizes construction cash flow management.
Below, we explore seven common cash flow issues in construction and show how automation addresses each one, paving the way for efficient, predictable project management.
7 Obstacles to Cash Flow — and Why Payment Automation Is the Answer
Problem 1: Unpredictable Payments and Billing Cycles
Payments in construction often become unpredictable due to delayed submissions and approval processes.
Automating reminders for subcontractors to submit required documents on time ensures compliance and speeds up the approval process, enabling contractors to disburse payments faster and maintain steady outgoing cash flow.
Problem 2: Delays from Change Orders
Change orders are common in construction, altering the scope and impacting the budget. When these changes aren’t documented or approved promptly, it throws off cash flow forecasting and delays billing.
Automating the change order process allows for immediate integration into billing workflows. With real-time updates, contractors can reflect approved changes in the schedule of values right away, eliminating the bottlenecks that typically slow down payment applications.
Problem 3: Errors in Manual Data Entry
Manual data entry is prone to errors, whether it’s in invoices, compliance documents, or pay applications. Even minor mistakes can lead to time-consuming corrections, stalling cash flow as project teams scramble to fix inaccuracies.
Automated data entry minimizes the need for manual input, reducing errors across the board. Invoices and compliance documents are populated with accurate information, speeding up processing times and allowing cash flow to move without interruptions.
Problem 4: Inefficient Lien Waiver Tracking
Tracking lien waivers manually can clog the payment process like residue building up in an engine. The different lien waiver requirements between states add further resistance. When lien waivers are missing or delayed, payments get held up, frustrating contractors and subcontractors alike.
Automation eliminates this friction by managing lien waivers seamlessly within the system. Digital lien waiver requests are generated automatically, comply with state requirements, and include digital signatures, preventing paperwork backlogs and ensuring payments proceed without delay.
Problem 5: Complications with Retainage
Retainage, where a percentage of payment is withheld until project milestones are met, is designed to protect project owners but often leaves contractors operating on a reduced cash flow. Managing these holdbacks manually creates financial shortfalls, forcing contractors to stretch their available funds.
Automation simplifies retainage tracking, making it easier to monitor withheld funds and release them when milestones are achieved. This streamlined approach ensures that contractors have access to necessary resources throughout the project.
Problem 6: Limited Financial Visibility
Many general contractors lack real-time visibility into their payment obligations. Without live data, it’s challenging to make informed decisions about where resources are needed or when payments are expected. This lack of clarity can lead to unexpected cash flow issues and project delays.
Automation provides up-to-date reporting, giving contractors a clear view of outgoing payments and helping them anticipate cash flow needs more accurately.
Problem 7: Disputes and Documentation Issues
Payment disputes often arise due to incomplete documentation, disagreements over work completion, or confusion about compliance requirements. These disputes slow down the payment process, leading to cash flow disruptions and strained relationships with clients.
Automating all billing and compliance documents in one centralized system minimizes disputes. Digital tracking and automated signatures ensure that all necessary paperwork is completed on time, streamlining payment processing and reducing the potential for delays.
Keep Your Cash Flowing
In the construction industry, cash flow issues come in many forms, often stemming from inefficient payment systems. Instead of patching together separate fixes for each problem, payment automation provides a single, elegant solution. Acting as the oil that lubricates every part of your payment process, GCPay’s automation tools streamline billing and enhance compliance, and connect all aspects of cash flow management. With automation reducing friction at every step, GCPay streamlines the process of managing payments to subcontractors, allowing for a consistent flow of funds and smoother project delivery.
