Contractor financing issues and other improper planning are two of the most common causes of delays in construction. Whether you work in residential, commercial, or industrial contracting, all contractors can benefit from a more efficient payment system. A fully integrated construction payment management system allows builders to make their administration more efficient. It reduces the need for redundant and mundane tasks that are subject to human error.
Instead, it offloads these billing and documentation processes to be centrally managed for you. This way, you can get back to the project itself.
Plus, these systems help to better plan tasks and objectives, thus creating better estimates with stronger control over job costs. But with so many construction payment management system options, it can be difficult to determine the best solution for your business.
Read on below for more information on the benefits of using a construction payment management system, and how to locate the best choice for your company.
What is a Construction Payment Management System?
There are many ways to bill construction projects, depending on your line of work. Many companies bill as they go along—known as progress payments or AIA billing. Payments are typically made monthly, based on the percentage of work that is complete.
For pricing structures, there are several common versions.
The first is time and material contracts, based on the actual number of hours worked. It also includes the cost of materials purchased for the job during this time period. This method requires careful keeping of labor records and invoices for materials.
The next is lump sum contracts that involve a set contract price. For smaller projects, this does not require extensive paperwork. But for larger projects, it’s critical for contractors to maintain all documentation to provide an accurate price at the culmination of the project.
A cost-plus contract works similar to time and materials, as it bases the total contract price on actual construction costs. But in these contracts, subcontractors add a fee to the overhead cost. This means the builder must keep track of their own documentation, as well as any subcontractor’s paperwork, too.
Finally, with a unit price contract, the price for work is set ahead of time. This number is simply multiplied by the number of units completed in that period. In this situation, the contractor must maintain proper documentation to demonstrate the amount of work completed in the event of a discrepancy.
Overall, each type of billing requires careful maintenance of all paperwork, sometimes to include that of the subcontractors as well. While there are many benefits to this type of billing, it can make the overall administration process more complicated.
With this in mind, it’s imperative to employ a construction payment management system to keep track of all the moving parts.
Why Do Construction Companies Need One?
Within the US, construction creates nearly $1.3 trillion worth of structures annually with more than 680,000 employees.
In the construction industry, time is money. The more time spent on administrative tasks, the less time spent on the work that really matters—getting construction projects done. A good construction payment management system can be a game-changer in making your business more efficient.
Today’s contractors are stuck spending nearly half of their time on administrative work. While this is important to the business, it takes away valuable time from the construction projects themselves.
Some of these burdensome and distracting processes can be instead automated. Not only will this save time and effort, but it also reduces the chance of human error.
Plus, it helps keep all teams in compliance. Any contractor can confirm—there are few things more frustrating than chasing down paperwork from employees or subcontractors.
With so many varying requirements, it’s important to keep up with this documentation to ensure legal and regulatory compliance. Plus, they keep your company on track with the given timeline and budget.
This is important as the project wraps up—your customer may come looking for the paperwork to substantiate your claims and costs. Without it, you may end up in hot water that could easily be avoided.
With this in mind, it’s important to make use of a construction payment management system that will enable your company to check off all the boxes. It will keep everyone on the same page, and ensure documents are correctly filed and easy to retrieve.
But like many things in the construction industry—this is much easier said than done. It’s important to carefully research your options, to ensure you are maximizing the benefits of a payment management system.
Locating the Best Payment Management Systems on the Market
While the benefits of an efficient payment management system are clear, it may not always be easy to identify which is the best solution for your business. The actual features of the system will vary, and the best choice will depend on the size and preferences of your company.
But overall, there are several key factors that your selected construction payment management system should include.
The system should be simple to set up, with a proper onboarding program to quickly get you up to speed. From there, invoicing should be simplified. This eliminates the need for spreadsheets that can be time-consuming and plagued with errors.
With less chance for errors and misalignment, your company can stay on track. This includes streamlined project dashboards and automated notifications, to help the entire project stay on time and stay organized.
Organization is key here. By maintaining an effective construction payment management system, your company and any subcontractors will stay up-to-date with what is needed in each draw. The system should be able to alert you of what is missing, so you can reduce wasted time.
A good construction payment management system should also help reduce risk. This can be done by consolidating compliance documents centrally, so you can get it right every time.
While they need to include all of the above components, these solutions should not break the bank. Keep your eye out for pay-as-you-go solutions that only charge you for what you use and when you use it. This way, you can continue to scale up as your business grows without getting stuck to any contracts or extended subscriptions.
While other construction payment management solutions may be difficult to navigate, there is an efficient yet effective solution to help your company build bigger and better.
Try MX Build
MX Build is focused on helping contractors and subcontractors stay organized, efficient, and compliant with all billing and documentation. As it was made by builders for builders, MX Build understands the key processes that commonly hold up contractors.
MX allows you to create and update your Schedule of Values directly into the MX Build tool. From there, both subcontractors and general contractors can collaborate in a single source. This ensures the same data is maintained—improving communication and reducing disputes along the way.
The system also sets actionable reminders, to keep everyone aligned on the same steps. The team will stay on track and in line with regulatory requirements.
Plus, the MX Build restructures your invoicing. The system generates AIA G702 and G703 documents automatically.
There are controls in key fields to ensure contractors and subcontractors do not make common invoice mistakes that could wind up creating headaches down the line.
Overall, MX aims to integrate the full draw process into one single efficient tool. This reduces human error and manual input requirements to eliminate end-of-month delays. Plus, even more time is saved with integration into your General Ledger and flexible electronic payments.
Even with all of these benefits, MX Build does not have to break the bank. Contractors only pay for the tools they use, with no subscriptions or service contracts required. There are no tricks or catches down the line—just helpful service to keep contractors moving along in the right direction.
MX has been trusted by notable companies including Microsoft Azure, Visa, and Quickbooks. With a focus on increasing efficiency and reducing headaches, it can work wonders for any contractor. Consider trying MX Build for your company to reduce the frustratingly tedious processes of construction payment management.
Leave Construction Payment Management to the Experts
Construction payment management systems will help make your business more accurate and efficient in administration. This way, you can focus on what really matters.
Luckily, MX Build was made by builders for builders—and it’s here to help.
MX Build allows you to perform AIA-style invoicing without the need for spreadsheets. It includes all of the above-mentioned criteria, working hard to automate burdensome tasks that can slow down key projects.
With new features continuing to roll out, now is a great time to upgrade your company’s construction payment management system.