Connecting Procurement and Payment: The Key to Streamlining Your Construction Business

Cash is king. It’s one of the oldest business idioms, and it’s still true today. Even with modern technology and the accelerated pace of business, balancing cash in and outflows is still a core factor in your success.

That’s true for every type of business, but it’s even more critical in the construction industry, where projects span months or even years, payments are tied to performance, and it’s a careful balance between delivering on time and within budget and ensuring that you meet your financial obligations.

With high levels of complexity and razor-thin margins, construction finance teams have a more daunting job than most other industries, and that’s exactly why they need a little extra help.

In this article, we’ll take a closer look at what construction procurement and payment platforms do and how they can help your team stay in the black and increase both productivity and profits.

What Do Construction Procurement and Payments Platforms Do?

Most construction companies use various software tools to manage different parts of the construction process.

Typically, an estimating department will use one tool, project management and field operations another, and accounting and finance will have their own software and workflows. This creates a patchwork system that requires a lot of manual and duplicate data entry that can break down completely when one team falls behind on their updates.

This, in turn, creates delays in other aspects of the project – much like the critical path on your project schedule. When something goes wrong, everything that depends on that task or deliverable is negatively affected.

Construction procurement and payments platforms help eliminate those breakdowns by allowing construction companies to digitize the data flow from one department or team to another. Imagine it as a bridge that enables the information in one system to easily be transferred to another. Instead of bottlenecks, human errors, and manual re-entry, your team gets easy access to the information they need when they need it, when they need it.

By leveraging a digital procurement platform, your estimating team can upload their bills of material into one centralized system, which is automatically synced from the procurement platform to the ERP. This makes it easy for your procurement team to find them and begin ordering and for your accounting team to receive and process purchase orders and invoices promptly.

Easier Ordering and Requisitions

A digital construction procurement system speeds up and smooths out purchasing and procurement after the project is awarded by allowing the procurement and operations teams to access important information quickly and make better ordering choices.

Procurement processes are often triggered by operations and project management teams, who need to request or requisition products or services based on their work schedule and progress on site.

However, using old paper-based methods or email can make this a long, tedious exercise. From order placement to management approval and on-site receiving, manual data entry exponentially increases both the time it takes to complete the procurement process and the chances something will go wrong along the way. Access to connected data from digital procurement and payment systems allows construction companies to create workflows that dramatically reduce the time required for this process.

This means that while finance and management teams still have control over the timing of orders and their effect on cash flow, project managers and operations teams can get the materials they need to keep the job moving faster, with minimal paperwork and fewer manual data entry requirements.

Improving Your Accounts Payable Process

Managing cash flow is always important for any business, especially in construction, but it’s also crucial to maintaining good relationships with your suppliers.

Construction companies with a reputation as slow payers might be lower on the priority list when there are supply chain delays or material shortages, which could translate into longer lead times to get the materials you need. At the same time, when you have a reputation as a great payer, you’re more likely to have some room to negotiate everything from prices to payment terms and delivery times.

Likewise, most vendors will give their larger customers some leeway regarding payments. However, many won’t hesitate to put your account on hold when you exceed their payment thresholds (usually some combination of the time it takes your payment to reach their bank account and the value of your outstanding balance).

These thresholds will differ from one supplier to the next, but in general, the more money you owe and the longer your suppliers are waiting, the more likely they are to place restrictions of some kind on your account.

Sometimes, situations like these arise not because of payment decisions but because invoices fall through the cracks and aren’t reported to your accounts payable team as they should have.

Connected construction procurement and cloud-based ERP allow your team to place orders on time while helping to ensure that purchase orders, invoices, and statements are received and processed as quickly as possible.

Accurate Cost Control

Cost control is a constant burden for construction teams.

Your estimators need to calculate costs accurately and carefully to create a competitive proposal before bidding or winning a project – without leaving money on the table. Likewise, while jobs are in progress, project managers and operational staff must balance the need to keep costs low with the need to improve efficiency and production rates. Finally, after completing the project, management and finance teams compare estimated costs with actual expenses to calculate profits accurately, learn from mistakes, and improve future bids.

Having an easy-to-access single source of truth for data in a construction company and the ability to assign costs to the correct project easily makes all these steps faster, easier, and more cost-effective, giving every team the opportunity to grow and improve with every job.

Leveraging Automation and AI

Improving your procurement and payment processes directly impacts productivity and profitability at every level and stage of the project.

While there are many ways to manage this process, forward-thinking companies leverage automation, integration, and artificial intelligence to automatically process invoices and ensure that payments are made on time.

The more internal systems and platforms you can connect and integrate to allow the flow of data from one department and team to another, the better. When you can build checks and balances into the process and include reminders and automatic updates, it takes digital construction procurement management to another level.

Trimble has taken this concept even further by creating AI-enabled automatic invoicing. So, you no longer have to rely solely on manual data entry, greatly reducing the risk of human error.

Contact our team today if you'd like to hear more about Trimble’s smart construction procurement and payment solutions. We’re ready to answer questions, schedule a live demo, or find the products that deliver what your construction company needs most!