Fast Payment Cycles Equal Fast Project Completion
It’s no surprise to anyone involved in the construction space that the industry works in an extreme backlog due to lengthy payment cycles. According to a 2018 report from PwC, it takes longer to get paid in the construction space than in nearly any other industry.
These delayed payment cycles can create many inefficiencies, as businesses often have to wait until the work is completed before they can bill their customers, resulting in long payment cycle times. A survey from Levelset revealed that less than 50% of contractors received payment within 30 days of invoicing. Delayed payments result in contractors being forced to take out loans to cover their operating costs, which can pose significant project delays, and a poor contractor experience.
On top of that, construction usually involves multiple contractors and subcontractors, each dealing with complex equipment and different timelines for payment, making the payment cycle even more complex to manage. According to the Construction Cash Flow and Payment report conducted by Levelset in 2021, only 11% of construction businesses reported that they are always paid in full.
Good cash flow management is crucial to the financial health of any organization, as it ensures that the organization has enough liquidity to meet its short-term obligations. Reducing payment cycle time can help improve an organization’s cash flow management and provide visibility into inflows and outflows, freeing up working capital. A platform to manage progress billing will accelerate the completion of your projects and bring down its turnaround time. Moreover, billing platforms enable multiple users to access the same data and work on invoices together.
There are multiple platforms to manage progress billing. Based on business needs, companies should decide which platform aligns best with their goals. For instance, Exto’s progress billing provides a billing method in which businesses invoice their customers for work that has been completed to date rather than waiting for the entire project to be finished. This method allows companies to bill accurately and provides a tool to track and generate invoices based on that progress. They can track cash flowing closely and automate invoicing and payments.
Work management software with progress billing features can also help businesses easily track where bottlenecks are occurring and take steps to address them in time, shortening project timelines, and reduce costs.
Fast Payment Cycles: Reduce Payment Cycle Downtime with Exto
Exto automates payment steps, allowing easy tracking and managing of cash flows, remote monitoring of the entire contractor invoicing process, and simplifies document control.
With Exto, you can manage your item-rate list, consolidate multiple site measurements into a single invoice with an eMeasurement book, and send invoices to your ERP system. You can also control and certify measurement certificates through a flexible, customizable workflow. The result? Accurate, on-time invoices and reduced manual errors.
Exto Client Reduces Payment Cycle
A special purpose vehicle (SPV) supported by the government of India that works on supplying water and managing wastewaters in the Indian state of Rajasthan was facing roadblocks in its $610M project. They lacked a consolidated document repository, were investing significant time collecting data, and subsequently, it took a long time to generate reports.
After implementing Exto, they reduced their reporting time by 80%, reduced their billing-cycle time by 60%, and now have 100% real-time project visibility.
Begin your Progress Billing Transformation Journey
Contact us today to learn how our holistic work management platform can help you optimize fast payment cycles and free up working capital.