Automation opportunity: Solving the data gap in construction payments

Construction payments are anything but simple, which makes harnessing data around critical payment processes highly impactful for construction leaders. In an industry where payment flows may involve contractors, subcontractors, suppliers, employees, and clients, knowing the 'who, what, and why' of each payment isn't just important—it's critical. But accessing this has been a bigger challenge than some may realize.

Construction firms face data accessibility gaps

Many firms struggle to access the data analytics and integrations they need to make informed, impactful business and payment decisions. According to research from Datos Insights, 40% of construction firms report that integrating payment data into their accounting/ERP systems is one of their biggest gaps in payment processes. Similarly, 43% report the inability to view payment transactions in real-time as a noticeable gap.¹

And it doesn't stop there; while around 60% of construction firms currently access transaction-related APIs within their accounting software, just 42% have access to market info APIs (for FX pricing, transaction data, etc.), while only 35% have access to insights driver APIs that enrich data for intelligence.¹ This translates to nearly half of construction firms needing more integrated data capabilities required for a modern payments experience.

Why these data gaps matter

These gaps in connectivity create real-world problems for construction firms. But what does this really mean? Looking deeper, it indicates that nearly half of firms face¹:

• Reduced cash management capabilities and a decreased ability to forecast cash flow or cash position, which creates challenges in project and financial management.
• Poor integration across business platforms, leading to reduced ability to seamlessly track payments, expenses, budgets, and expected revenues within project cycles.
• Increased friction within accounts receivable/payable cycles.
• Challenges in managing cost allocation, retainage, financing, and other critical construction metrics.

However, this current state of data connectivity also presents a significant opportunity. Namely, for construction firms that can partner with the right payment partners to facilitate the flexible data access and visibility needed to succeed in a modern business environment.

The data opportunity: Visibility and flexibility

Having a full-scale view of payments is a game-changer for construction firms. The drivers behind this are simple – whether sending or receiving payments, construction firms benefit greatly when they have:

• Real-time awareness of payment speed and costs
• Deep insights into their payments tied to pricing, equipment, labor rates and other crucial operational metrics
• Improved cash management to inform better and more competitive decisions

These capabilities allow construction firms not just to run their business, but to truly optimize and thrive, letting them scale operations, improve financial performance, and remain competitive in an industry that continues to move towards digitization as a differentiator. However, achieving this level of visibility isn't a flip of a switch. It requires robust integration between various systems – most importantly with the central ERP – to make these data capabilities readily available.

The power of integrated payments data

For construction firms, digital tools are just as critical as what's on the work site, and enterprise resource planning (ERP) systems are one of the most important. These platforms are the bedrock foundation of modern construction operations, helping manage everything from finances to purchasing and internal operations.

Construction firms use a variety of ERPs, ranging from industry-standard platforms like Oracle NetSuite, SAP, and Sage, to construction-specific solutions such as Viewpoint, Penta, and CMiC. These specialized systems offer features tailored to the unique needs of construction and contracting firms.

But ERPs require solid data to function effectively, which is why integration between payment partners, processes, and ERPs is critical. Proper integration of payment data gives firms 1:1 connectivity between their payments, finances, operations, and more. By choosing a digital payments partner that integrates with their ERP, construction firms can dramatically improve operational efficiency and increase financial control and success through better data accessibility.

How to choose the right payments solution

Digital payments are rapidly transforming how construction firms do business, but for the 40% or more of firms still lacking integrated access to payments data, the time to adopt is now.¹ However, choosing the right payments partner to achieve this can be challenging. To do so effectively, look out for partners with the following capabilities:

• Powerful digital payments: Dynamic range of data-rich digital payments, including virtual cards, e-checks, ACH, and more.
• Seamless ERP integration: Smooth integration with existing systems for consistent data flow.
• Data visibility: Faster insights into payment speed, costs, and operational metrics.
• Construction-focused features: Solutions tailored to industry needs like progress billing and supplier payments, along with remittance capabilities, payee preferences, and more.
• Scalability: Ability to grow with businesses and adapt to needs.

Firms that successfully partner with flexible, trusted payments partners that offer the above capabilities may not only improve their financial performance but dramatically improve their operational and competitive standing moving forward, letting them truly modernize as construction leaders.

Source:

1. Datos Insights Q3 2024 survey of 1,037 global mid- and large-sized organizations