Late payments are adding a staggering $40 billion a year to construction costs – it’s one of the key findings from the recently published Construction Payment Report 2018.
The report, sponsored by Contract Simply and conducted in partnership with bid procurement platform Building Connected, surveyed 1,300 respondents from a variety of trades. The results? Nearly 90 percent (88%) of contractors wait longer than 30 days for payment; while 46 percent say that they cover the gap with business or personal savings and credit lines, which result in extra financing fees. Furthermore, 80 percent of contractors surveyed say they’ve had to file mechanics’ liens against a project to ensure they receive the money owed them, incurring unplanned legal expenses.
The study also revealed that 70 percent of contractors would be willing to discount their invoices in exchange for payment within 30 days, which would put an estimated $18 billion back in the pocket of builders, developers and lenders.
Paying promptly can also ensure that developers and general contractors will be able to attract the best subcontractors in a time of labor shortages. According to the 2017 FMI Construction Industry Survey, 89 percent of companies in the construction vertical are experiencing staffing shortages. The study states, “Recruiting talent has long been a challenge for the construction industry, and it will only become more severe in the future—across a broad range of industry sectors.”
We at Inspyrus, would like to offer up a blueprint for invoice and payment innovation to end these construction industry’s woes — our award-winning Inspyrus Invoice Automation, Inspyrus Total Discounting and Inspyrus Total Pay, which transforms 100 percent of the manual effort managing multiple invoice payment methods (including checks) into touchless electronic payments.