How does construction management software help improve cash flow?

June 6th, 2022 in Construction Managemet

How does construction management software help improve cash flow?

For a commercial construction contractor, project profitability and cash flow are always top of mind. Contractors are paying vendors and sub-contractors out of pocket, and our counting on owners to make progress payments on time to recoup those costs.  

What can result in payments getting delayed? 

  • A lack of supporting documentation of expenses 
  • Administrative delays in compiling invoices 
  • Missing documents from vendors

These problems can cause an invoice to be rejected or submitted late, causing a gap between accounts payable and accounts receivable and forcing contractors to increase lines of credit and incur interest expenses.

Enter Construction Management Software 

Construction correspondence is traditionally done using several tools such as email, paper forms, and text messages. Documents are stored in filing cabinets or on project manager hard drives. 

Cloud-based construction management software is used to streamline communications and store all information in a central cloud database. Information is constantly updated in real-time as change requests are approved and as budgets are updated. 

Construction management software can help ensure that invoices will be quick to create and contain accurate information:

  • All change orders are tracked in the software, and a schedule of values is created to back up the related costs. 
  • All forms are appropriately formatted, and all documents are kept in a central location. No time is lost at each milestone looking for records in emails or wasting time on formatting documents.  
  • The Schedule of values is linked to payment applications; there is no ambiguity about what is being invoiced.  

With correspondence running through a cloud-solutions, problems that can cause cash flow problems can be mitigated, thus reducing stress and interest expenses. 

Finally, construction management software can help with the final retainage payment. Often, a percentage of each invoice is held back until project completion. At the end of a long project, this amount is due. If the amounts retained were not carefully tracked throughout the project, retainage amounts can be lost or can be disputed.

Related posts