Finance departments for construction companies often run into maddening obstacles when manually processing invoices and payments. Synchronizing mounds of information and documents into their accounting systems is no easy feat.
The accounts payable team searches for information in three or more disconnected software packages to hunt down and untangle a maze of inconsistent and disorganized data.
Many construction finance pros face these problems. They have to move back and forth constantly among different software in multiple places to process payments and invoices and synchronize all that with their accounting systems. It’s inefficient, time consuming, costly and mistake prone.
These problems slow payments and therefore strain relationships with customers, vendors and suppliers.
So we need to ask: How to fix these problems?
So we need to ask: Why is this happening, and how do we fix the construction industry’s payment problems?
It comes down to software programming languages. Often, they have trouble communicating and being productive together because they simply can’t understand what each other is saying.
The problems occur when different and siloed payment, invoice and accounting software languages try to “communicate.” Information gets delayed or doesn’t arrive at all. And even when it does arrive, it tends to be wrong.
The good news is there’s a solution that could help businesses improve the way they process invoices and payments. A solution that enables growth, consistency and accuracy.
Answer: Integrate all into one automated system
Simply integrate all payment, invoice and accounting software into a single automated system viewable on one tightly integrated computer dashboard.
This is a concept gaining momentum in the construction industry.
From one computer dashboard, AP teams can easily find everything they need to know, and quickly do whatever they need to do, from the time your company buys a product until it pays for it.
At any time from a mobile device or computer, you could quickly execute, research or search for anything you need in the entire purchase-to-pay process.
All this is possible because the three different softwares, connected by application programming interface (API) “plugs,” smoothly and rapidly make data transfers between all three software programs.
This all-in-one concept can have a very positive impact on your daily life as a finance pro.
One place for answers
Along these same lines, it’s also helpful to know about the steps in the procure-to-pay process and having one system that a customer can go do for answers to these questions:
- What was purchased?
- What it was received?
- How the company was billed?
- Who approved the invoice?
- How it was coded?
- Payment status?
- How the bill was paid?
Ways to Accelerate Payments
Now let’s flesh out ways this software concept could help accelerate your company’s payments, invoices and accounting processes:
Potential payment benefits
Finance pros gain more control of the timing of payments using this tightly integrated system.
They can look at the automatically linked invoice and payment digitized documents side-by-side on a single computer dashboard.
Based on this, they can quickly compare the documents to ensure accuracy, investigate details and decide if it’s the right time – or not — to send the payment or hold off.
All this amounts to one last, and important, checkpoint before payments get sent. This is especially valuable in the constantly changing and fast-moving construction industry payment system.
Why? Because the finance pro may see on the dashboard a timely note that the vendor to be paid didn’t finish contracted work. That might be a good reason not to make the payment until the job gets done.
Last-minute issues tougher to detect
A manual process, by contrast, is much less efficient and susceptible to making unwise payments. Why? Because a finance pro would have to rummage through piles of disorganized paper invoices and payment documents on their desks to make sure they match up before approving the payment. Last-minute issues would be much more difficult to spot compared with the digitized records.
For additional flexibility, speed and control, finance pros can manage this invoice and payment process from their smartphones, tablets and PCs whenever they want.
These payments would be sent to the vendor swiftly and securely using the payment method they prefer. Then the automated system stores the invoice and payment digital documents for quick access if needed.
With a manual system, invoice and payment paper documents are attached with paper clips and staplers and get stored in a filing cabinet often crammed with other disheveled papers.
Potential invoice benefits
Similar to payments, processing of invoices could become faster, easier and more reliable. The invoice software could feature accounts payable applications, automated routing of invoices and optical character recognition (OCR) that scans and converts data electronically from a paper to a digital invoice.
The software automatically pre-fills all the data into the correct fields such as the invoices amount, date, vendor, and job to trigger the auto-population of coding.
From this one location you could also:
- code and approve invoices using an automated workflow to your accounting system — without re-keying data
- “drag and drop” invoices without needing to print or scan them
- search in multiple ways for payment and invoice data or job costs
- send digital images such as pictures of purchase orders and checks and
- receive automatic notifications when invoices exceed a specified amount.
I am saving roughly one week per month by using AvidXchange and able to focus on the other aspects of my job. Now I push one button and the payment is processed and off to the vendor.
– Maggie J., Office Manger at Ridgeline Construction
Potential accounting system benefits
This single-location system could also improve efficiencies of a company’s accounting software.
Once an invoice gets approved, for example, it would flow to the accounting system where it would be posted. Then a payment would be processed and sent.
Within the accounting system, the finance team could access current and accurate invoice and payment information with just a few clicks.
Businesses will also be able to use all accounting system features such as finance, project management, customer relationship management, operations and document management.
This new concept — the integration of payment, invoice and accounting software into one system — addresses a major accounts payable problem: the difficulties finding, processing and approving invoices quickly then making on-time, mistake-free payments.
Solving this widespread problem in the construction industry is especially valuable now given the industry’s uneven ride through the pandemic.
So whether your team performs work for building contractors, commercial developers or property managers, here are three actions you may want to consider:
- Learn all you can about the importance of APIs and how they can help create smooth integrations of your financial software packages.It really does come down to making sure these different software programs can send and receive information rapidly and accurately with no concerns about delayed transmissions or corrupted data.
APIs are the linchpins that make sure information transfer goes smoothly. But some make for more seamless transfers than others. Carefully evaluate the quality of APIs using your own payment, invoice and accounting systems.
- Make sure you bring in software experts to this integration process.
“Some integrations are attempted by people who lack technical expertise,” according to an article by Datix. This often leads to a lack of understanding of the scope of the integration and all it involves. “If you only consider business processes in your project, you could jeopardize data quality, experience slow processing and incur security risks.”
The stakes are too high in terms of time and money spent to try to integrate three different software packages into a single system on your own. The software experts will be strategically important in helping you company navigate this type of sophisticated software project.
- Investigate ways to process your invoices and payments and connect to your accounting system using a single dashboardso everything’s easy to find, search, and execute. You don’t want to keep shifting around to different software and dashboards constantly.
That’s a much slower process than a single-location system. Plus it’s lost time you could spend on more strategically valuable projects to grow your business.
The post How to Untangle the Construction Industry’s Payment Problems appeared first on AvidXchange.