Construction firms facing lower housing starts and rising mortgage rates that are turning off potential home buyers are increasingly turning to digital payment solutions as a way to increase cash flow and clear accounts receivable (AR) faster and cheaply.
This is analyzed in depth in “Building Better Cash Flow In Construction With Digital Payments,” a PYMNTS and American Express collaboration, and the January/February edition of the B2B and Digital Payments Tracker® Series, detailing the pressures construction firms face and how they’re responding by greater reliance on digital tools.
Per the report, “Getting paid on time is a major roadblock in the construction industry, disrupting cash flow for U.S. construction professionals. Only 11% of construction professionals say they are paid in full on every job, and the impacts can be devastating,” adding that 97% of construction professionals are strained due to slow payments and cash flow issues.
Digital payments tech is alleviating some of these headaches, as more companies in the sector come around to the speed and operational efficiency of digitizing, specifically around AR.
“Almost half of middle market professionals surveyed said investing in technology was a top priority over the next 12 months, with four in 10 increasing their budget specifically for adding technology,” according to the Tracker. “Automation is a focus area for 36%, with 30% deploying it to streamline back-office processes, such as cloud-based accounts payable (AP) tools. On the accounts receivable (AR) side, manual processes create pain in the construction sector, with 26% of firms viewing manual processes as a challenge.”
As late payments constituted 12% of construction costs last year — eating into profits for these companies — the report notes that the sector is digitizing more rapidly in 2023.
“According to PYMNTS’ research, the construction industry is averaging roughly five technologies to be rolled out in the next year,” per the report, which adds that “contractors are overwhelmingly aiming for faster payments and easier cash flow management. PYMNTS’ research found 33% were planning to adopt integration between AP and AR and 31% plan on adding instant bank verification and virtual cards for making payments to suppliers.”
Get the report: Building Better Cash Flow In Construction With Digital Payments
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