Trends to watch in the construction industry.

Recent reports show good news in the construction industry — spending is up across most nonresidential categories, even in the face of recession fears.

“Manufacturing-related construction spending growth continues to lead the way, but even segments that had been weak (such as lodging) are picking up steam,” ABC’s chief economist, Anirban Basu, said in a recent announcement.

Navigating some common challenges facing the construction industry

But with this ongoing growth come challenges. Many construction firms continue to struggle to find all the staff they need to meet demand, and while there is substantial public funding lined up for future projects, tighter credit conditions and inflationary pressures are a concern. It also is an industry with complex operations.

Commerce Bank doesn’t just support the construction industry, it embraces it. In 2022, while the nation was still grappling with pandemic recovery, Commerce Bank tapped Craig Higginbotham to serve as vice president and national sales manager for its growing construction payments division. His team is focused on helping construction companies manage commercial payments in ways that boost profitability, reduce fraud and create efficiencies.

With 15 years of banking and commercial payments experience behind him, Higginbotham said Commerce Bank is well-positioned to help with many of the industry’s current challenges, starting with understanding the construction world and its people.

“I fell in love with the construction industry through being a part of the Construction Financial Management Association (CFMA). These are just great people to work with, and we are excited about being all in, understanding the pain points of the industry and including ourselves in industry organizations so we’re learning alongside contractors.”

He added, “Understanding the flow between all the many components of construction is a big job. We understand the ecosystem of the construction world rather than having a general approach.”

Nick Hadley, vice president for Commerce’s engineering and construction services group, agreed. “Having a financial institution that understands the complexity of the industry gives the opportunity for a great partnership, which from Commerce’s standpoint consists of a holistic view,” he said. “It is no longer the age of a simple working capital line of credit and a deposit account. The tide is changing to automation and creating efficiencies.”

Tackling the urgent labor shortage of construction workers

One of the more complicated areas of construction is payroll management, especially given the shortage of certified payroll specialists.

“It’s not uncommon for specialty contractors in the $100 million and higher revenue range to work with 10, 15, 20 different wage scales, based on union affiliations or prevailing wage jobs,” Hadley said. “This can be a major strain on the financial arm of any organization. Using a comprehensive review of an organization’s cash flow cycle, we can suggest ways to create efficiencies that allow organizations to shift resources in those high demand areas.”

It’s no secret the national labor shortage has heavily impacted the construction industry, but the shortage doesn’t just affect the field. Higginbotham said the in-office shortage on the professional services side of construction is also an issue where Commerce can be of assistance.

Tech-driven solutions in construction

As a company grows and needs more help in accounts receivable and accounts payable, for example, it needs solutions other than hiring more hard-to-find employees.

“By incorporating and embedding our solutions into the systems they’re already using, contractors can take advantage of our payments technology and service model as our platforms communicate with each other,” Higginbotham said. “This creates a more streamlined onboarding experience and limits the needs for internal technical resources.”

Hadley concurs. “We bring to the table the new way payments are flowing,” he said. “We are accentuating the abilities of existing positions within a company to either collect AR (accounts receivable) faster or make payments more efficiently.” Commerce Bank is uniquely positioned based on the investments we have made into technology that allows us to expedite the workflow from Accounts Payable (AP) automation to fully integrated accounts receivable (AR) collection.

Another complexity within the construction industry is the continued reliance on writing and receiving paper checks and other manual processes that have yet to cross over into tech-driven automation. When Covid-19 shut down workplaces, it became urgent for many companies that couldn’t follow their existing processes without being physically in the office.

“Our conversations shifted to how contractors could use technology to automate everything from invoice capture all the way through payment processing, and understanding the need to integrate into their existing financial systems,” Higginbotham said.

“Construction financial professionals are leaning into technology to enhance their payment processes, and that’s where we can help.”

At Commerce, we look at challenges as opportunities to innovate and see disruption as a chance to uncover new ways to add value. We value long-term relationships and strive to know your business well. We are ready to take on challenges and opportunities together, offering creative solutions to the challenges you face every day. Learn more about how we support the construction industry.

Also See:

• Safety in the Construction Office Avoid payments fraud with a virtual credit card
• Ohio based construction company finds solutions to growing pains

CommercePayments® solutions are provided by Commerce Bank.