The construction industry is more than bricks and steel. It’s the backbone of modern society. It provides the essential infrastructure we rely on in our daily lives. Yet, construction companies face pressure to operate more efficiently as supply chain volatility continues. Although the bulk of the hard work goes on in the field, the back office can be well positioned to address these efficiency needs, helping construction businesses remain profitable even in uncertain times. 

An example of this is accounts payable (AP) automation. Adopting this technology will give your construction firm a stronger financial foundation to support its business. Through digitization and streamlining of payment processes, you'll benefit from increased financial visibility and agility.

Industry Hesitance: A False Economy

Compared to other industries, the construction sector has been particularly slow in adopting technology that can offer labor-saving benefits. Several factors contribute to this attitude: preference for familiar methods, worries about implementation costs, and the perceived complexity of adoption. Although they see the utility of these tools, construction companies often consider them discretionary expenses that can be postponed when financial constraints tighten. 

However, this is a false economy. While those companies think they’re saving money, what they’re actually doing is missing out on cost reductions, which increases their long-term expenses rather than lowering costs. Manual AP processes are slow and error-prone. They obscure financial visibility at a time when clarity matters most. Late payment penalties, missed early payment discounts, duplicate payments, and other issues increase the costs of sticking with manual methods. 

The Financial Visibility Imperative

When financial visibility matters most, manual AP methods provide an unclear picture. AP automation solves this problem by replacing monthly reports with real-time dashboards, each showing detailed insights into payables, cash flow, and budget forecasting. This type of visibility powers agile decision-making that makes it far easier to weather economic storms. 

You'll be able to quickly identify spending patterns, accurately forecast cash requirements, and make data-driven decisions about how resources are allocated and projects are chosen. When combined with digital payment methods, such as virtual cards, these systems bring improved security and reduced fraud.  

Reducing Overhead Without Sacrificing Quality

AP automation reduces overhead through three primary mechanisms:

Cuts Manual Processing Costs

Manual processing requires handling paper, entering data, and filing documents. With accounts payable automation, the time you spend here is reduced to mere seconds. Invoices are handled electronically, data is automatically extracted, and approvals are all digital. Even better, staff have more time to focus on critical tasks.

Reduces late payments and penalties

With manual processes, human error results in some invoices not being paid on time or being paid incorrectly. These late payments and errors incur fees and threaten vendor relationships–and, as a result, projects. Many vendors offer discounts for early payments, so even payments that are made on time could be leaving money on the table. Automation eliminates these errors and lost opportunities.

Streamlines vendor management and communication

Material delivery timing can make or break a project. Keeping strong relationships with vendors translates directly to the success of your construction jobs. With automated systems, vendors also have transparency into your payment status, reducing payment inquiries and strengthening partnerships. 

Making a Business Case for Change

To overcome resistance to adopting new technology, construction firms should take a gradual approach. Accounts payable automation can be implemented in three phases, making adoption easier:

• Assessment: Start by identifying bottlenecks in your existing AP workflow. Calculate how much time is spent on manual processes, quantify error rates, and use this data to calculate the true cost of your current methods.
• Plan: Create a roadmap to overcome the bottlenecks uncovered during the assessment. Work with IT, finance, and operations teams to identify integration needs and ensure any solution will work within your existing systems (such as your ERP). Establish a realistic timeline, define what success looks like, and identify team members responsible for each phase of the rollout.
• Evaluate: Evaluate the results of your pilot program by comparing key performance metrics, such as invoice cycle time, approval delays, and error frequency, against your baseline. Survey users for feedback on usability and effectiveness. Use these insights to make adjustments before expanding the solution to additional teams or departments.

• Scale: Once you’re satisfied with the results from the pilot program, roll out the solution company-wide. Be sure to include comprehensive staff training so the pilot program’s successes are repeated at scale. 

Getting buy-in can be difficult. To reduce internal resistance, share success stories from around the industry, compare your company to competitors who have made the switch, and calculate the specific ROI metrics most relevant to your company. 

Aligning Automation With Business Goals

Although implemented by the back office, AP automation aligns with several construction business goals:

• Recession resilience: Reduced fixed costs and better cost management help maintain profitability during downturns. Having fewer paper-based processes also contributes to sustainability goals.
• Accelerated project delivery: With AP running more smoothly, project managers get approvals faster, vendors deliver materials more promptly, and operations are more adaptable.
• Improved vendor relationships: Timely and accurate payments keep supply chain relationships strong, an important factor during material shortages.

Building a Better Back Office

As economic uncertainty continues to loom, construction companies must look at eliminating all forms of inefficiency. AP automation is a way to remove a large, often overlooked bottleneck in construction operations. The cost savings that result will help recession-proof your company, giving you the tools you need to stay competitive. That makes this a necessity, not a luxury.

Your workers undertake every project with the goal of building structures that withstand the elements. With AP automation, your financial systems can benefit from the same resilience. Construction firms that build in that resilience will not only weather current challenges, but also grant themselves a foundation to emerge stronger when growth opportunities return.