In times of uncertainty, payment questions can be a threat to survival than just a nuisance.
The construction industry, in the USA alone, is notorious for payment disorders. Who knew that building cloud scratches were easier than building a smooth B2B payment process?
Imagine this: A general contractor ends a multimillion dollar project, just to bury yourself under a mountain of paperwork and wait months to be paid. Subcontractors and suppliers also feel the pinch and often let juggles juggling bills while waiting for checks that seem to crawl through the postal system.
This is not just hearsay; It is the latest Pymnts intelligence from the “B2B and Digital Payments Tracker® series“” That found that 71% of the subcontractors had delayed payments from general contractors, an increase of 60% in 2022.
The average payment cycle extended on 57 days, and these payment chopes can have serious consequences. Slow payments race the supply chain, with smaller companies often carry the main load of delays. Some subcontractors have even gone down while waiting to be paid.
The report showed that 77% of the subcontractors had to cover the material costs out of their own pocket, a share That was has increased annually since 2021.
A contribution to these topics is the trust of the industry in manual payment processes.
Paper paths and payments fail
While most sectors have accepted Fintech innovations such as virtual cards and digital payment platforms, many construction companies are still on the slow track and rely on manual B2B payments, including paper checks and oh transfers.
For example, virtual cards offer digital credit options with individual uses that improve security and make payment monitoring easier in real timethus reduce non -authorized transactions and rationalization Accounting processes.
As stated from the report, around 69% of construction companies continue to use paper tests for transactions. This leads to a domino effect of delays, disputes and financial headaches. Only 23% took over virtual card payments last year.
The reasons are just as layered as a skyscraper foundation, from legacy systems to firmly anchored sellers. But the tradition comes with a price.
Speed is not the only benefit. Automated payment systems reduce human errors and improve transparency. This in turn promotes better relationships with subcontractors and suppliers – important actors in every construction project. Faster payments mean happier providers, fewer project delays and possibly lower project costs.
In 2024, 86% of the general contractors stated that they would receive payments faster if developers used digital payment methods. This shift not only improves cash flow, but also promotes stronger relationships between developers and contractors.
Read more: Breaking Ground: Solving the delayed payments from construction with digital Tools
However, not everyone is on board. Smaller companies often have difficulty lying new technologies due to cost problems and limited technical knowledge. Some industry veterans remain skeptical and prefer the tangible feeling of a paper test about digital transactions.
In order to navigate and mitigate the challenges due to delayed payments, the Pymnts Intelligence notes that the parties involved in the construction industry:
- Transition to digital payment systems: Remove from paper -based transactions and use uniform digital platforms that are seamlessly integrated into the existing accounting software. This transition can reduce the processing times and the administrative stress.
- Pilot Digital payments with selected partners: Implement digital payment solutions with a sub -group of trustworthy contractors or subcontractors to ensure smooth transition and to create confidence in the new systems.
- Invest in a comprehensive training of the staff: Offer thorough training for both Office and field supervisory authorities for new digital tools to ensure effective introduction and use.
If construction projects become larger and more complex, the pressure to modernize payment processes will be tightened. The construction industry was always about building the future. It could be time The Your payment processes act the same.