Positively impact your profits with custom-made payments solutions.
Today’s construction industry is more competitive than ever.
In many metro areas, firms are struggling to hire enough qualified workers despite raising wages, according to a recent analysis of government data by the Associated General Contractors of America link opens in a new window. At the same time, uncertainties swirling around inflation and interest rates continue to add pressure. While the difference between most material prices and construction bids has eased since their pandemic-era highs, contractors must also keep a sharp eye on supply chains, pricing dynamics and the bottom line.
The result: Margins are slim. Budgets are tight. And the stakes are high. Finance teams are under pressure to help their companies do more with less. After all, every dollar you save is another dollar toward your bottom line.
But that’s only one piece of the equation. It’s also critical to improve cash flow, maintain great relationships with subcontractors, and provide strategic analysis to the rest of the business.
It’s a lot to balance, but here’s the good news. New technology is giving finance and accounting leaders a unique opportunity to impact company results positively. Innovations in payments solutions make it possible to do all of this as well as reduce human error in the back office, mitigate fraud and free up valuable accounting team time for strategic initiatives. These custom-made solutions are designed to help your teams to not just survive, but even thrive under mounting industry pressures.
If your organization hasn’t yet explored these technologies in detail, it’s time to take a closer look. Here are five areas where custom payments solutions can deliver significant results.
- Cash flow.
Finance teams today are often drowning in data. Data from transactions, payments, payroll and more pours in, often in varied formats and sourced from multiple systems. Technology now makes it possible for businesses to integrate that data into unified systems, making it easier to analyze and identify opportunities to improve cash flow.
If your team is still swimming upstream when it comes to data, check with your financial institution or payments solution provider to see how they can help. There are a range of payments and treasury management tools today that can help you streamline your processes. These tools should be able to connect your enterprise resource planning (ERP) system with the bank’s payment and other services. That connectivity means your team will be able to pay bills through multiple payment methods quickly, see the status of payments in real-time, streamline their reconciliation process and automate journal entries. You’ll also eliminate questions about your cash position — it’s all available at a glance, giving you greater control over maintaining liquidity, managing debt and sustaining your creditworthiness.
Here’s an added benefit: Embracing new technology in your payments system can establish a new source of revenue for your business. Chances are you have a long list of suppliers you pay on a regular basis. Check-based payments are costly and hit your bottom line, but they also hit the bottom line of the financial institution you use. Many forward-thinking banks now offer incentives in the form of profit sharing, simply for replacing paper checks with electronic payments associated with an accounts payable card. It’s a great way to save time while making money. - Reputation with subcontractors.
Keeping your clients, suppliers, employees and contractors happy is not always easy. Still, it is absolutely necessary for the health of your company’s reputation. After all, the more you show you value your subcontractors, the more likely they will say Yes to your next job. That’s critical in an environment where finding good subcontractors is getting harder and harder.
One way to keep your hard-earned reputation polished is to pay on time and in the way the payee wants to be paid. Modern payments solutions make this easy. Here’s how it works: Application programming interfaces, or APIs, and batch file transfers make it possible to enable smooth, real-time data transfers between your bank and your business systems. By automating some of the manual work involved with paying subcontractors in this way, your firm can issue payments more quickly.
The right solution will allow your accounts payable (AP) team to automate tasks from invoice reception to payments reconciliation. It also will offer a variety of electronic payment options, such as Automated Clearing House (ACH) payments, direct-to-debit cards and payments through Visa+ directly into Venmo, PayPal, Cash App or another digital wallet. Not every business is currently able to accept card or digital wallet payments, but their use in the construction industry is growing as more companies see the benefits these payment types offer. These two options give valuable suppliers money in hand within minutes — a big plus for your subcontractors — and you want your business to be ahead of the curve.
If you haven’t already, you also can take a similar approach with another critical stakeholder group — your employees. Look for a financial institution that offers a low-cost payroll solution in which you can eliminate paper checks by using direct deposit payments. Or, for those employees who don’t have bank accounts, you can provide a direct deposit to a reloadable Visa® card. Both are attractive options that are simple for your team to execute, enhance convenience and foster loyalty among your workforce. - Accuracy.
Mistakes in accounts payable aren’t just embarrassing; they’re expensive. Whether it’s a typo in an invoice, a misfiled payment or missing remittance data, mistakes can cause payment delays, strained relationships with subcontractors, and disruptions to cash flow.
One way to reduce human error is to implement automation in your accounts payable workflows. For example, many modern payments solutions use artificial intelligence to automatically validate invoices, match them with purchase orders, and ensure all data is accurately logged into the system. This eliminates the risk of manual data entry errors, saving time and reducing headaches.
Additionally, intelligent systems integrated with ERP platforms can instantly cross-check payment details against supplier agreements and flag discrepancies. For instance, if an invoice includes a dollar amount that doesn’t match the purchase order, the system can notify the AP team before the payment is processed. This not only prevents overpayments but also ensures consistent compliance with contract terms.
Another way to reduce human error is to digitize paper invoices. Your business can use optical character recognition (OCR) technology to scan and automatically input invoice data into your payments network, bypassing the need for manual keying and the potential errors that come with that approach.
By incorporating these technologies, construction companies can turn error-prone manual processes into seamless, efficient workflows. The result is not only fewer mistakes but also more time and resources for the AP team to dedicate to tasks that truly add value to the business. - Fraud mitigation.
Unfortunately, no industry is immune from bad actors. Payments fraud continues to be a growing threat for businesses, with cyberattacks, mail theft and check fraud continuing to surge. And no matter how well you think your business is protected, thieves and scammers will often stop at nothing to take advantage of your business.
Mail theft-related check fraud, for example, continues to be a significant risk for businesses that rely on mailing paper checks as payment. Thieves steal physical checks from the mail and then alter them or fraudulently sign them and deposit the funds, or in some cases, use the stolen checks as templates to create counterfeit checks. In one recent six-month period link opens in a new window, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) received 15,417 Bank Secrecy Act reports from more than 800 financial institutions related to this type of fraud, totaling more than $688 million in suspicious activity.
Many banks and financial institutions integrate fraud mitigation measures into their products. Still, others take it a step further with a positive pay system. This technology allows your company to submit an electronic file to your bank each day detailing the checks that the business issues. Then, as each check is presented for payment, the system electronically compares it to the information in your file. It then flags any discrepancies and reports them through a special email alert, where you can see an image of the check and use an online system to select whether or not you’d like the bank to make the payment. Similarly, ACH transactions and wires can be monitored and flagged when your filter criteria are unmet.
This type of positive pay system isn’t a system of the future; it’s a system offered now by banks that take fraud mitigation seriously. With one quick call to your bank, you can see if they provide positive pay services and what those services specifically cover. - Strategic initiatives.
In today’s competitive environment, strategy is crucial. You want everyone on your finance and accounting teams to be doing the highest-value work possible. These teams need to provide real-time data and meaningful analysis to the executive team to help guide their strategic decisions. To accomplish this, you must free team members from as many low-level tasks as possible.
In many construction businesses, accounts payable employees still spend significant time opening mail and email, checking invoices and tracking down approvals. Then, after the payment is made, they have to reconcile, file and store each one. These time-consuming and inefficient tasks erode profits by using significant employee work hours for each step of the process and in after-action auditing.
The automation provided by custom-made payments solutions is a great way to reduce this workload and increase the efficiency of your finance teams. Companies that have made the switch report substantial efficiency gains. It’s not uncommon for businesses to reduce the time spent dealing with payments by 10 hours or more per day, which can then be spent on value-added services.
Construction companies that have been in business for a while also tend to spend valuable time navigating multiple payments systems, each with its own file syntax. This lack of payments standardization obviously decreases efficiency, but upgrading your enterprise-wide payments network can be costly and time-consuming. Instead, you can use a tech-driven payments solution that interfaces with your existing ERP software to produce a consolidated, single payments file. Suppliers can be paid from this single payments file in their preferred method, whether that is a traditional check, ACH or a virtual credit card.
This type of solution would collect and upload supplier payments and other information directly into your existing accounting system, making reconciliation easier and less time-intensive. It also makes it simple to eliminate paper by having your invoices collected, digitized and integrated into your accounting workflow.
Once complete, this type of AP automation can significantly cut your cost per invoice and save physical storage costs and auditing time.
A future-proof approach.
The construction industry is complex and faces challenges that require innovative solutions. To be successful, financial managers need to balance the day-to-day requirements of their departments with making time for initiatives that support the business’s growth strategy. In today’s economic environment, they also must lead the way on cost control.
Construction firms typically invest countless hours reconciling payments, tracking vendor information and chasing down approvals. It is an expensive process that is prone to human error and leaves the organization at a higher risk of fraud. You can search high and low for the most cost-effective suppliers or execute the most cost-advantaged contract, but addressing this process is equally important.
Technological innovations in payments solutions give financial leaders a new tool that allows them to be more agile. It is now possible to replace paper-based and other manual processes with automated systems powered by AI and other advanced technologies, making your back-office tasks faster and more accurate than ever. By adopting cutting-edge tools for cash flow management, fraud mitigation and error reduction, financial managers have an unprecedented ability to modernize operations and drive success.
What’s more, automation doesn’t just solve today’s problems — it sets businesses up to meet the complexities of the future. These tools bring efficiency, improve accuracy and empower teams to focus on strategic initiatives that strengthen the company’s competitive position. Your teams will be able to spend more time on high-impact initiatives, such as forecasting, analysis and risk management.
Now is the time to rethink how your finance teams approach accounts payable. Back-office modernization will fundamentally improve the way your company operates. Whether your goals are to improve cash flow, solidify subcontractor trust, increase accuracy, mitigate fraud or give your finance team the bandwidth to tackle more strategic priorities, the right payments solution is key.
Start by reviewing your existing systems and processes and identifying the areas that would most benefit from automation. This will inform your search for the ideal provider.
As you compare options, off-the-shelf solutions will likely seem inadequate. Don’t worry. Leading providers — including those within financial institutions — now develop customizable, scalable platforms designed for the unique needs of construction businesses. They also can help you integrate their systems seamlessly with your existing ERP and other business systems.
Keep in mind that you don’t need to change everything about your current payments provider and system in order to reap the benefits of new technology. Another option is to add the services of a new payments provider while keeping your existing banking relationship. Many systems offer flexibility to integrate seamlessly with existing banking relationships without overhauling their entire back-office operation. Depending on the complexity and cost of integration, this may give you the best result.
The key is not to sit back and wait for automation and innovation to come to you. Instead, lead the way by creating a plan to implement payments solutions customized for your business. By leveraging cutting-edge technology, you’ll be able to position your financial infrastructure — and your business — for long-term success.
CommercePayments® solutions are provided by Commerce Bank.
