While on-site construction work continues in many states, COVID-19 has changed the game for construction businesses, forcing most office staff to work from home. Separated from their office resources, credit and accounts receivable teams find themselves with fewer tools and slower communication. At the same time, they’re facing an even bigger workload. Getting paid is becoming more difficult, as everyone in construction tries to hold onto their cash. Right now, the challenge of keeping money coming in is even harder, when staff don’t have access to their regular office tools. Here are some ways collecting payment for construction work is getting harder – and what your team needs to do to manage payments while working remotely.
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Managing construction payments remotely is challenging for everyone
Even in “normal” times, getting paid in construction is a challenge. In a pre-coronavirus survey, 80% of construction businesses said they spend a significant amount of time chasing down payment. Changing your processes quickly to adapt to the new environment will make it easier to collect on outstanding invoices. And that’s true whether you are an office manager for a small supplier, or part of a credit team for a multi-state general contractor.
You’re not the only one working from home. Your customers’ office teams are probably remote, too – and they are struggling to navigate the same challenges. They’re likely feeling overwhelmed in their home offices, trying to collect and track payment applications, lien waivers, and other documents from every contractor or supplier on all of their projects.
Project managers and GCs are liable to let documents slip through the cracks. Even your regular customers that you trust to pay on time, every time.
Update credit & lien policies to reduce risk of non-payment
There is real concert right now that project funding could stall, upending your construction jobs. Update your credit policy to include a strict mechanics lien policy. It is more important than ever that contractors and suppliers protect their payment rights for every project they have on their books.
Let project team members know that you plan to exercise your lien rights when necessary. Make sure your credit team is keeping a close eye on lien and notice deadlines for every open project. Lien and notice software makes it easy to track deadlines across projects in multiple states, where requirements can be totally different.
Even a simple cloud-based spreadsheet (such as Google Sheets) can help keep everyone on the same page. It’s critical that your team can see at a glance what has been filed and what has not.
While it’s important to protect your lien rights, you’d rather not file a mechanics lien unless absolutely necessary. Take every step you can take to speed up payment – and prevent having to file a lien for non-payment.
Tips for faster collection when working remotely
Construction businesses across the country are making changes to adapt. If you didn’t have the technology or processes to manage jobsite work and submit payment paperwork remotely before, it’s even more difficult during the coronavirus. Outside of the construction site, managing the payment process is one of the most critical office functions for any construction business. Getting paid for your work is especially important now, as site production is down and uncertainty is high.
You may have to invest in some additional hardware so your employees can access your software and information and run it efficiently. Not all employees have access to the same quality of hardware or even an internet connection. Look at each person’s situation to determine how the company can help with this, even if temporarily.
Set up automatic invoice reminders & notices
The more you can automate tedious office processes, the easier it will be to boost staff productivity while they adjust to the new normal. Set up automatic invoice reminders to go out at regular intervals after submitting a pay application.
At the same time, set up automatic preliminary notices to go out at the start of every job. If you don’t use a lien filing service that can do this for you, try setting up automatic email alerts. Recently, a US District Court in Maryland ruled that for federal Miller Act claims, sending notice by email is as good as by mail. What counts is that the notice was received.
At the very least, set calendar reminders or alarms to follow up with every customer after every invoice goes out the door.
Put your construction documents in the cloud
How companies use technology during this time is going to be crucial for their success going forward. Technology makes it possible to keep working from home or in a more mobile environment. Everything you can do to help your employees or coworkers save time and get more done will pay off in the long run.
In order to keep construction payments coming in, you have to keep sending invoices out to GCs or property owners.
Accounting & invoicing software for real-time updates
Consider cloud-based software for accounting, invoicing, and financial management. Cloud-based programs, like Quickbooks or Levelset, are accessible from any place that has an internet connection. It’s often as simple as navigating to a web page, downloading the mobile app, or setting up a remote connection on your computer. Your office staff in charge of collections needs to have up-to-date access to your accounts receivable at all times.
Document storage software gives everyone instant access
Use cloud-based document storage for all project management, construction contracts, and other administrative documents. With cloud storage, all members of a team – from the construction manager to the AR specialist – can have access to the same documents in real time.
Everyone needs to stay up to date when the general contractor issues change orders or the project owner updates jobsite modifications. Most services perform multiple back-ups and have redundant servers, so you don’t have to worry about data loss. There are also ways to secure storage so only relevant team members have access to sensitive data. As with other cloud-based technology, data is accessible anywhere with an internet connection and you save space on your office server.
Keep payment processes & roles intact
We all need as much normalcy as we can get, so it probably isn’t a good idea to change all your regular work procedures at this time. For example, if Brenda approves vendor invoices, make sure she’s still in charge of approving them. At the same time, explore software solutions that can help her do her job more effectively from home.
If you don’t have a way to send payment paperwork electronically, look at some other means to physically get them to the person in charge. If Robert collected, complied, and reviewed pay application documents before COVID-19, he should stay on it. Make sure he still has an easy process to communicate with the project manager or other staff that normally sends them to customers.
Keep everyone’s job duties and responsibilities as consistent as possible. When changes are made it can be confusing and frustrating for the whole team. Unless absolutely necessary, keep company contacts the same, so outside vendors and customers continue to communicate with the people they are familiar with.
Be consistent, but flexible
Try to keep things consistent, but there are times when changes may need to be made. If someone is out on leave or is sick, address how their duties will be handled with your team. Good communication avoids frustration down the road. You may need to relax some requirements or provide more oversight for employees who are now off-site.
There are challenges to working from home. It can be difficult to concentrate on reading job costing reports and filling out payment applications, when kids are arguing in the other room or the internet connection isn’t reliable.
Once things have settled down a bit, it may be a good time to review your invoicing process and collections policy and see if there are ways to simplify or streamline them. Analyze your current process and identify where things could be made easier. Assign team members to explore construction payment software or project management technology to present to the owner or CEO.
Discuss roadblocks and points of frustration with your team and see what ideas they come up with for addressing them. Use these ideas to improve your process, so you can improve efficiency now and into the recovery.
Communicate, communicate, communicate
One lesson of this pandemic is that there are multiple ways of communicating with people, and they are not created equally. We will all be more appreciative of face-to-face meetings when we can get back to them.
When everyone is working remotely, checking in with your customers is more important, but can be more difficult. Reach out to customers via email, phone calls, or even video chats. If they have questions about a billing application, a video call may be the easiest and fastest way to answer them, so payment can be processed.
Not all construction companies use the latest technology when it comes to their office work. This is a chance to learn and adapt to what is available. Research using cloud storage or the best practices for video conferencing. When all else fails, pick up the phone and call someone.
Make sure you have the cell phone numbers for all of your customer contacts, so you can follow up with them directly. Don’t assume that they are checking the voicemails on their office phones.
Explore invoicing & payment alternatives
During “normal” times, construction payments can take upwards of 83 days to receive. Many companies just can’t afford to wait that long in today’s environment. Offering your customers alternatives to paying by paper check (by direct deposit, credit card, etc.) will improve your cash flow and help you keep your business running and your employees paid.
Send payment applications by email. This saves days in mailing time. You can include job reports, a schedule of values, and other docs via attachments. You can even track the email to be sure it was opened and read.
Use online invoicing services. There are companies that provide strictly invoicing online. You don’t have to buy a whole accounting package if all you want to do is send invoices electronically. Many also allow you to offer payment by ACH or credit cards.
Diversify your payment processing options (ACH, credit cards, wires, etc.). Some accounting software packages provide these services, as well as online invoicing services. Making payment more convenient for your customers means you will probably get paid sooner. Most of these services charge a fee for processing, so keep that in mind and shop around for the best deal.
Collect & Protect Payments
At some point, the construction industry will be on the other side of this mess and back to “normal.” Meanwhile, it’s critical that construction office teams adapt to the current environment, and protect your business from uncertainty and risk. Continue your existing processes as much as possible, and look to technology solutions for assistance. Communicate with your customers and your team. You can also look at payment alternatives, as they will expedite payment receipt and help you keep the lights on.
Collecting payments while you – and your customers – work remotely is a greater challenge than it was before. It’s critical to have the tools and policies in place that help your construction office team succeed.