If you’re in the construction business, you know all about pay apps — and the challenges they bring. Your business might even spend considerable time and money trying to streamline the invoicing process and reduce stress over pay apps.
Employees in most industries expect to get paid on a certain day of the week or month without exceptions. Due to a complicated billing process, workers in the construction industry face a much different payment schedule. The many working parts of construction billing require multiple invoices and attachments to verify completed steps in a project. Each of these working parts must be approved for payments to be issued. The nature of pay apps can lead to delayed payments for every member of the team.
Many factors can slow down payments and invoice completions in the construction industry. Most projects begin with an accepted bid by a general contractor to oversee the completion of a specific job. However, there’s rarely only one team working on any construction project. Instead, a variety of contractors and subcontractors are involved. Each step within a project requires standardized billing invoice forms with supporting documents that require approval. If these documents aren’t submitted on time, payments are delayed. Additional causes of delay may include errors, missing documents, changing work requirements (change orders), and missing photos.
Why Pay Apps Lead to Added Stress for General Contractors
Payment delays aren’t the only reason why pay apps lead to stress for general contractors. In fact, every part of the payment process has potential issues that could slow project completion. They can also delay payments for subcontractors. Construction projects begin with purchase orders that provide funds to get the supplies needed for a project. This is only the first document in a long series that must be approved before moving to the next step.
Pay applications, or pay apps, are the documents that organize the billing process of a construction project that spans over months or years. Since these jobs take so long to complete, contractors and subcontractors get payment for various steps along the way. Additional funds are also exchanged to purchase supplies to complete the project. Verification of each completed step, receipts, and plan changes must be documented and approved before payments are received. These are a few of the stressful situations general contractors face due to pay apps:
Documents used in pay apps, like change orders, purchase orders, and lien waivers, are used throughout the course of an ongoing construction project. When these items aren’t submitted or approved on time, the next steps in the project can be delayed.
Standardized pay apps require detailed information that must be entered precisely for accurate payments. When pay apps have missing or inaccurate information, they can be considered void. Then the process must start over.
Time Lost to Manual Data Entry
Processing pay apps is a manual office task that takes hours each week. The process isn’t only stressful for general contractors. It’s a complicated process for office staff members.
A variety of supporting documents must accompany every pay app. Missing photos, lien waivers, change orders, vendor invoices, or receipts can lead to inaccurate or delayed payments.
Potential Compliance Issues
Construction projects must meet various building codes and ordinances. Detailed documentation of the entire project is one way to prove compliance. It also provides the necessary documentation to ensure all buildings are safe and up to code. When documents or photos are missing, non-compliance can lead to fines or legal charges.
5 Ways General Contractors Can Reduce Stress Over Pay Apps
Most contractors know that pay apps are a complicated but necessary part of any construction project. However, many general contractors don’t realize there may be potential solutions to streamline the process and make it easier for every employee involved in a job. Take these steps to reduce stress over pay apps.
1. Schedule an Office Meeting
Your accounts payable team is responsible for managing your pay apps. If your payment process is running smoothly, this is the team making it happen. A meeting with your office members will probably reveal a hectic process that requires several hours each week to complete properly. Even with this level of effort, there are likely issues that slip through the cracks.
As a general contractor, you likely get stress from a few different sources about timely, accurate pay apps. Your office staff works in the midst of the confusion. Workers are constantly pursuing inaccurate or missing lien waivers, as well as communicating the proper change order procedures to various subcontractors. Additionally, hours of manual data entry lead to potential mistakes that can lead to compliance issues and inaccurate pay apps. A meeting with your accounts payable team will highlight areas that slow down the process. Then you can decide where you should implement changes.
2. Create Communication Channels
Communication between the back office, general contractor, and various subcontractors is an essential part of gathering the information and documentation for accurate pay apps. It also provides a way for a general contractor to keep the property owner updated on both the progress of the operation and the related payment information. A general contractor needs a variety of contact methods to keep in touch with subcontractors, office staff, vendors, and the property owner. They must have the ability to note potential issues before they arise and provide timely solutions.
Technology-based communication solutions offer a variety of ways to connect with various members of the team during a project. These options provide additional advantages by including the opportunity for paperless transfer of important information and visual documentation.
Investing in a variety of communication techniques continues to be a necessity for remote communication and the social distancing requirements that will undoubtedly be in place over the course of the COVID-19 vaccine process. Continual communication with contractors in the field also helps eliminate errors and leads to more productive team meetings.
3. Examine Your Lien Waiver Process
It’s no secret that construction projects often take several months to complete. Payments made along the way are a vital part of providing workers with the funds they need throughout the course of a job. Vendors, contractors, and subcontractors use lien waivers during various parts of a project. The documents serve as a type of receipt for payments made for services or labor throughout the course of a job. When a contractor or subcontractor signs a lien waiver, they waive the right to file a lien after payment.
All too often, construction offices have no set process to take care of how lien waivers are submitted. This means each subcontractor and vendor may have a different view of how and when lien waivers should be turned in. Without a standardized procedure, the accounts payable team often has to waste hours each week tracking down updated and correct information to provide accurate pay apps. You can’t reduce stress over pay apps without creating a plan. Creating a streamlined, universal process allows you to create expectations for every member working on a project and even automate reminders to ensure lien waivers are submitted on time.
4. Standardize Billing Documents to Reduce Stress Over Pay Apps
Billing documents are a necessary evil in the construction world. Your team won’t receive payment for completed work unless they properly document it. Construction billing documents aren’t universal. so the process has plenty of opportunities for error. Luckily, there are ways to make the process less cumbersome and more accurate. Creating standardized documents for your billing process can eliminate the stress associated with potential payment errors and compliance issues. Standardizing documents used on every project, like pay apps, lien waivers, schedule of values, and purchase orders, can streamline your payment process. Also, standardization will help subcontractors and vendors know exactly what to expect.
5. Consider Software Solutions
Manual, paper-based billing and payments in construction are inefficient and often inaccurate, leading to late payments and companies that lose money every year. Software solutions designed for construction can streamline every part of the payment process. This:
- Ensures accurate information moves more quickly
- Eliminates hours of manual data entry each week
- Ultimately helps reduce stress over pay apps
Construction is a unique industry with many working parts, and a software solution designed for the unique challenges in the construction billing process can provide these advantages:
- Automated reminders for pay apps: Missing pay apps from subcontractors lead to delayed billing and time spent chasing down missing documents. Automated reminders automatically target late submissions.
- Paperless document transfer: People can receive pay apps, lien waivers, and related documents wirelessly. Then they can review them for errors and store them conveniently.
- Simplified pay app approval: Approve or decline pay apps and e-sign documents with a few clicks for faster billing.
- Comprehensive, updated reports: Export your changing project budget as a spreadsheet to update accounts payable.
It’s easy to see why pay apps and the construction billing process leads to a variety of stressors for general contractors and other employees. Making changes in the way your process works and finding ways to automate document submissions can provide a reliable process each member of your team can count on. Creating a streamlined, customizable, uniform payment process will also reduce stress over pay apps and provide accurate, on-time billing for a better payment system.