In the construction world, money talks but moves slowly. The average day's sales outstanding (DSO) for the construction industry is 51 days, among the worst of any sector in the nation. While this issue has plagued the industry for decades, the adoption of technology has allowed construction companies to drastically speed up their payment workflows—including their draw request to the owner and payments to their subcontractors—without compromising internal controls.
Some GCs pay their subcontractors on net 30 terms instead of “pay-when-paid.” This helps retain critical jobsite talent but requires a large amount of capital. When pairing this highly-leveraged cash flow scenario with manual accounts payable processes that lack visibility and financial controls, there is a huge amount of risk.
For general contractors that still embrace the pay-when-paid model, there’s a less direct risk, but the capital burden shifts to the subcontractors. Floating labor and materials while waiting for funds to trickle down from a draw forces subcontractors to go out of pocket or tap into lines of credit to make ends meet. However, in today’s tight labor market, subcontractors can choose to avoid projects where money moves slowly. It’s critical to keep project cash flows on track, now more than ever.
Adequate capital is only part of the solution. Supplementing manual accounts payable processes with software can help. Payment Management by Built streamlines the entire pay application process and saves construction teams a significant amount of time on project billing.
Built provides general contractors with the tools to help their subcontractors accurately complete pay applications and sign lien waivers directly in the app. When compliance documentation is necessary, GCs can prompt their subcontractors to submit directly via the Built platform. Both parties will receive auto-reminders to make sure coverage never lapses. Built also makes it easy to track notices and lower-tier waivers on every project. When it's time to pay for completed work, GCs can send subcontractors secure, timely payments via ACH transfer in exchange for a signed unconditional lien waiver.
Built’s solution helps all parties on a project take a more streamlined approach to project billing. Increased operational efficiency ensures GCs can take on more project volume and grow their business without taking on additional headcount or risk.