Online payments address one of the worst problems we are facing in the construction industry: Late payments.
In every business, especially construction, where we have fluctuating revenue and upfront project costs, cash flow is king.
If your cash flow is disrupted by multiple non-/late-payments, it could be disastrous for your business. Being unable to fulfill financial obligations, make payroll on time, and fund vital parts of your growth, can be the start of a downward spiral that is difficult or impossible to recover from.
In a report by PWC (2019/2020 Working Capital Report), PWC outlines that it took an average of 83 days for a contractor to get paid.
According to Glen Anderson, vice-president of Finance and Administration for Buildings at Edmonton-based PCL Construction, not all late-payments are for the same reasons, and it hits the subcontractors the hardest.
“GCs have historically had a very heavy hand to get their way with subcontractors.
To give you an example, a contractor may withhold a million dollar payment on a subcontractor for a $50,000 issue just to get their attention. But that creates immense cash flow issues, and can force smaller businesses into bankruptcy for unfair reasons. So prompt payment is really to add a degree of fairness to the treatment of subcontractors by generals, and also by owners.”
While we won’t be paying off $50,000 invoices with our credit cards any time soon, homeowners are incentivized by rewards, ease-of-use, and deferred payment to pay off their $5,000 painting job or roof repair using their credit card, which allows us to have the funds settled in 1-2 days at a small fee.
A time-value exercise is appropriate here.
What would you prefer?
A. $4,900 tomorrow
B. $5,000 1-3 months from now. (Or the risk of not getting paid at all.)
It makes sense that we are one of the slowest industries to adapt to digitization and technological changes. Everything we build is tangible, in the real world.
This is not a reason for us to stay on this path.
How many hours are lost in your business due to the lacking technological infrastructure to automate the hundreds of repetitive tasks your team is tasked with?
Without automation, invoicing and payment approval wastes dozens of hours in your accountant’s day. Time that could be better spent growing your business. Adopting digital invoicing technology and online payment solutions help streamline your entire process and ensures your cash flow stays strong.
There are several ways to start accepting online payments for your services.
Here are three options:
1. Digital Invoices: Most modern ERP and accounting suites have an option for digital payment. All you need to do is enable payments by credit card and connect it to your bank.
2. Stand-alone Payment Gateways: Stripe is our gateway of choice. They have state-of-the-art payment integrations and allow you to create recurring payments (for rentals, subscriptions) and have a host of analytics that will help you optimize your revenue strategy.
3. Online Order Forms: By far the most effective way of gathering leads and converting them to paying customers. Your customer often knows exactly what they are looking for, and a simple calculator on your website will allow them to order your services and pay a deposit or in full.
The impact of a strong economy on a construction business is two-fold: as business volume increases, so does the need to keep up with the growing demand by hiring more employees, expanding retail and office space, and implementing innovative ways to reduce overhead costs.
Over the past decade, practically every industry has been experiencing fast, unprecedented, and industry-defining change in reaction to mobile devices and the internet, and they all benefited consumers with a reduction in price, increasing ease-of-use, and a better service experience.
For example, look at what Airbnb has done to the hotel and accommodations industry.
Beyond the brilliance of taking a privately-owned, underutilized asset and turning it into a revenue generating asset for the owner, the costs for lodging and accommodation have plummeted for consumers.
Another clear example is what Uber has done in the transportation industry.
They provided automated payments, frictionless and informative ordering, and a cheaper price.
When was the last time you took a Yellow Cab?
As technology evolves, so do the industries that surround us.
The only way to stay ahead of the competition today is to leverage technology to your advantage. Smaller construction companies have an advantage over larger competitors when it comes to adapting to new technology and economic changes. They are more agile and able to adapt to changing market conditions and new technology.
Automate repetitive tasks within your operations using API (Application Programming Interface, how different software communicates) connectors, reduce friction for your customer when it comes to ordering services and payments, and increase your service quality by providing lightning-fast response times and dispute resolution.
What the assembly line did for manufacturing, API’s and automation will do for modern businesses.
1. Software & Communications Automation: Zapier lets you connect your independent software so that an action in one application triggers and action in another. Zapier has a staggering amount of connections and the possibilities are nearly endless.
2. Website Automation & Digital Forms: Typeform turns clunky PDF forms & surveys into a powerful communication tool for your business. Create forms, surveys, quizzes to communicate with your customers and audience, customize anything, and validate your best ideas with your team and customers.
3. Automate Customer Support Workflow: With Zendesk, you can easily integrate key information from customers, business applications, and backend systems. And that makes it easier to collaborate and resolve customer inquiries quickly.
People are increasingly expecting to control their interaction with businesses through on-demand orders, payments, and scheduling. People are spending more time and money online than ever before, and this trend is increasing.
Why? People love frictionless interactions.
Just about anything can be ordered through an app today. From food, to lawn care, to cleaning services, to mobile auto repair and cars. Why should construction be any different? You may say because of project complexity, or intangibles that are difficult to automate.
We are not going to build a skyscraper through an app anytime soon, but what about having your roof redone? Your house framed, drywalled, and painted? Your condominiums snow removed?
These types of projects are easily estimated and automated, and will be the first to benefit from these new technological tools.
1. Map out your customer journey and figure out how to answer their questions to the point that they are ready to order. Every customer takes a similar journey before engaging with your business. Defining what that journey looks like and how you can guide the customer from the time they identify their need, to the time that they agree to your services is essential to eliminating as much friction as possible.
2. Automate the provision of answers as much as possible, without sacrificing the customers ability to personalize their request. Now that you have your customers journey mapped out, you need to think about which questions they are asking as they are browsing your site. The big three questions are:
Can you solve my problem?
How much will it cost me?
Do I trust you?
3. Provide a service guarantee and make sure your presentation is polished. If you are engaging with potential customers, you will need to answer the trust question before closing the sale. One of the best ways of doing this is by providing a service guarantee, and having your deliverables defined with precision.
Consumer confidence and trust is heavily based on a company’s online presence and how they are presenting themselves.
In 2004, a research group in the UK studied what inspired trust among visitors of websites.
They were trying to understand the impact of web design (layout, branding, user experience) vs. the actual content (articles, verbiage) on the website. What they found was surprising.
When respondents rated a site as distrustful, 94% of participants reported that they distrusted the site due to its poor layout, confusing labels, and other design elements of the site.
On the other hand, only 6% of people in the study reported that their distrust of the site was based on the content and verbiage of the site. This shows that web design is by far the most important factor in establishing trust with your potential customers.