I attended the Fintech South conference in the Mercedes Benz Stadium in Atlanta on behalf of Flashtract this past April. The conference featured thought leaders across the fintech space, particularly in the world of payment processing. Attending conferences such as this are key for Flashtract to gain valuable relationships with the key players in the industry, as well as learn what the latest developments are across the market, Particularly as it relates to construction.
Fintech South gives a great look at where the industry could be headed as it adapts and adopts the latest and greatest software and tools. The following blog post discusses my three biggest takeaways from FinTech South and how they impact the construction payment process.
Data Security and Fintech
As you would expect at a Fintech conference, a lot of the topics centered around data security. Fintech companies are seeking to play a larger role in everyday transactions and the ability to guarantee ironclad security has become of paramount importance, especially as businesses become increasingly focused on information security and customer privacy.
Commercial construction is a $2 trillion industry annually in the United States. It isn’t unusual for a multi-million-dollar transaction to have 10 or more touchpoints, across multiple companies, between a contractor’s payment application and a lender approving a draw request. Every time payment information or financial data has to be transmitted to a new party, either through software or a paper document, the risk of a security breach or fraud is increased.
Data security is critical in the construction industry, yet risky practices prevail. Personally, I have seen that many contractors are hesitant to adopt payment management software because of security and data privacy concerns. As a result of these concerns, contractors still largely rely on a paperwork-heavy manual payment process. This paperbound process is error-prone, far less secure, and creates difficulty tracking payments and other pertinent information.
As lenders and other companies adjacent to the construction industry require better data security practices, the construction industry will need to adopt new technologies that can offer the requisite level of security and better tracking of payments and billing. Several companies, like Textura Payment Management, eSub, and PayApps.com, have tried to modernize the construction payment process. These solutions have excelled at digitizing individual parts of the construction payment process, but none offer an affordable and complete solution.
Scaling a Business with Fintech Tools
Small businesses are using fintech tools to help them quickly scale and gain a competitive advantage. Fintech tools that seamlessly integrate with business-critical industry-standard software, such as Quickbooks, Sage, and ComputerEase, will be adopted quickly. For the construction industry, it is easy to see where fintech software could come into play. By using construction payment application software, contractors can reduce the time it takes to process payments. When payments are processed more efficiently, relationships are strengthened.
It’s no secret that subcontractors give more attention to projects that pay quicker, but many contractors and owners are hesitant to pay more quickly due to cash flow concerns. While this is a valid concern, Mckinsey reports that construction projects typically take 20 percent longer to finish than scheduled and are up to 80 percent over budget. These numbers show that something must change. The labor market is tighter than ever and if you want your project to finish on time and under budget you must find some way to differentiate your project as an owner or contractor. The number one way to separate yourself from the competition is the use of construction billing software that brings transparency to the payment process as well as the ability to pay more quickly.
The construction industry has shown that early adopters of payment management software are rewarded with better subcontractor relationships and more projects that finish faster than the industry average. When subcontractors have cash on hand, larger crews can be dedicated to your job and work gets done sooner rather than later. Even if payments aren’t distributed faster, adding visibility into the payment approval process for your trade partners adds comfort and confidence.
The Future of Payment
As technology becomes increasingly entrenched in everyday life, the ways we make payments are changing too. With the introduction of credit and debit cards in 1970, to the introduction of online banking in 1997, the way humans exchange money is constantly evolving. Cash is becoming less and less the norm in everyday payment. A key reason for this is that cash is harder to track, and budgets are more easily managed when everything is digitized.
Additionally, paper is all but obsolete in most industries, meaning paper-based payments are on their way out as well. In industries such as construction, the use of construction invoicing software can offer better tracking of cash flow and payments. The ability to easily track this information can be key in making sure projects stay on-track and on-budget. Finding a secure yet efficient construction payment management system will be paramount for construction companies to grow in the near future as the number of payments being handled electronically increases. Additionally, a study conducted by the Federal Reserve showed that mobile banking is on the rise with a quarter of all Americans using online banking in 2014 with a steady increase to a third of all individuals in 2015, and more than 60% of Americans in 2016.
Many skeptics still say that contractors are stuck in their ways and payments will remain paper based. While this is somewhat true, many contractors are still looking for more efficient ways to pay and be paid. As everyday Americans continue to evolve in the way they pay, so must all other industries.
How Flashtract Can Help
Flashtract is a highly secure platform, meaning payments and billing information is protected, yet accessible to the right people. When contractors, workers, and third-parties can be securely billed and efficiently paid, projects will run more smoothly.
By using Flashtract, contractors can rest assured that all billing information can be easily accessed and integrated with leading accounting software packages, saving hours of tedious work. This will allow construction companies to grow more efficiently, as they can focus on building, instead of the time-consuming billing process. Furthermore, because Flashtract offers the ability to review and approve work remotely, time consuming and costly site visits can be significantly reduced. When contractors, workers and third-parties are allowed to do what they do best, rather than focus on the logistics of payment and approvals, projects can flow seamlessly.
In industries such as construction, having systems in place that offer better tracking of cashflow and payment are key in making sure projects stay on-track and on-budget. Flashtract’s cloud-based platform offers documentation and tracking for all funds spent on a project. Contractors and owners can ensure that their projects are being completed on-time and on-budget. All payments are housed within Flashtract’s platform, so every payment is tracked and only released with the approval of key stakeholders. If the construction industry intends to grow efficiently, contractors and owners will need to take advantage of the latest construction payment management tools that can digitize payments and cut down time spent on the billing process.
The Fintech South conference continues to be the leading fintech gathering in the southeast, if not the US, and Flashtract was thrilled to be represented. As advancements in fintech continue to be made every day, it is important for us to stay up to speed and to ensure that we are adapting to the latest developments and integrating them with Flashtract when possible. I look forward to returning in the coming years to see what developments are being made, and hopefully to be able to offer insights from our own growth as a company. For more information about Flashtract’s construction payment software, and how you can use it on your next project to save your company both time and money please contact me via [email protected] or visit www.flashtract.com.