‍In this Article…

• Learn more about cash flow challenges in construction.
• Explore the benefits of construction billing software.
• Find practical ways to implement construction billing software for your business.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered legal or financial advice. For any financial concerns or questions regarding construction, please consult a qualified legal or accounting professional.

If you are a contractor you know that there’s nothing worse than cash flow problems or project delays. Not only are there associated administrative and billing headaches, but cash flow and project delays feed into one another. When there’s struggles with your construction business’ cash flow, then projects get delayed. And if projects get delayed, the cash isn’t flowing in. 

Project delays are so connected to cash flow challenges that The Association of Professional Builders states that for a home build of $750,000, it “can cost a builder around $670 every day the job is delayed.” This not only affects that project, but can have a domino effect, jeopardizing your other projects and your entire construction business.

Thankfully, there is construction billing software. It is the key to eliminating administrative headaches, improving cash flow, and reducing delays. This article explores the cash flow challenges in construction, the benefits of construction billing software, and how to implement billing software for your business.

The Cash Flow Challenge in Construction

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In addition to utilizing construction billing software, using a payments platform with instant access to funds can greatly improve cash flow.

Truss Payments offers instant access to the funds deposited in your account. Go from receiving an invoice payment to instantly spending that money on supplies.

All home builders face cash flow challenges on a regular basis. These problems with cash flow usually happen because of either payment delays or project delays. And that is why builders must manage their cash flow. 

Even short delays can be detrimental to a construction business’ finances. Let’s refer back to The Association of Professional Builders, which also states, “One week of delay, which in theory doesn’t sound that bad, actually ends up costing builders thousands of dollars in cold hard cash.”

Taking the association’s theory of a $750,000 build with a daily cost to a builder of $670, consider these scenarios:

One-Week Delay

• You had ordered lumber from the warehouse for the next phase on your $750,000 new home build.
• The warehouse informs you that there has been a disruption in their supply chain and that they can’t deliver the lumber to you until next week.
• Now your build will be behind a week.
• The delay causes immediate and long-term problems, such as:
  
  • Paying your workers when there isn’t much to do.
  • Extending your telehandler rental.
  • Having to pay overtime to your employees to maintain your schedule and not cause a delay to your next project.
• This one-week delay would cost your business $3,350 over 5 days.
  
  • $670 x 5 days = $3,350
• Over 6 days it would be $4,020.
  
  • $670 x 6 days = $4,020

Two-Week Delay

• You’ve completed a home build, but your business once again had to wait too long for final payment.
• This payment delay on the completed project is now delaying your next project, a $750,000 home build.
• The new project is delayed by two weeks.
• That’s $6,700 for 10 days.
• Or $8,040 for 12 days.

Even for a million-dollar construction business, $8,040 is significant, leading to poor cash flow management and these consequences:

• Delays to paying your subcontractors and suppliers.
• Not meeting payroll.
• More paid toward borrowing and interest.
• Not being able to make material purchases for other projects, leading to delays.
• Less profit.
• And the worst-case scenario when delays are frequent and plentiful: cash flow problems that lead to failure of a construction business despite it having profitable projects.

The old, manual way of construction billing only made these problems worse through inefficiencies, errors, and delays. However, today, there is construction billing software.

What is Construction Billing Software?

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For a more in-depth review of the finance software options for general contractors, please read the Truss article “The 6 Best Financial Management Software Options for General Contractors.”

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The construction industry is unique in many ways, including with regards to accounting. Traditional accounting software is often inadequate for the industry as it slows down payments, creates errors, and wastes time. Construction billing software is designed specifically for contractors, builders, and construction companies. By automating invoicing, accepting digital payments instantly, and easy follow up, you get paid faster and keeps your business moving.  

Construction billing software will include features for some or all of the following uses:

• Progress billing.
• AIA billing formats.
• Time and materials.
• Unit pricing.
• Cost-plus contracts.

The features of construction billing software are intended to assist not just with basic accounting and invoicing, like traditional accounting software would, but be an integral part of streamlining the management of a construction company.

Popular Construction Billing Software Options

1. Truss Payments

• The main purpose of Truss is to streamline payments and improve cash flow for construction companies and contractors.
• Truss assists builders with managing receivables, payables, and expenses.
• In addition, unlike most construction billing software, Truss offers business checking accounts. It’s a great way to truly streamline your construction company’s finances from one platform.

2. Procore

• Procore differs from Truss, in that its main focus isn’t payments and cash flow.
• It primarily focuses on project management, while also offering financial management features.
• With regards to finance and billing, Procore has budget tracking and forecasting features.

3. Sage

• Sage is similar to Procore, in that it differs from Truss, and like Procore, focuses on project management.
• Its features relating to finance and billing include job costing and expense tracking.

These construction billing software features sound great on paper, but how can they truly improve your company’s cash flow? Let’s find out more in the next section…

How Construction Billing Software Improves Cash Flow

Paper checks are another obstacle to improving cash flow. 

Jake Bruton, owner of Aarow Building, and his team of homebuilders and remodelers serving the Columbia and Kansas City, Missouri areas, have been using Truss Payments to make their payment processing more efficient. Prior to Truss, the Aarow Building team faced project and payment delays, plus hours of tedious administrative tasks every week, all because of paper checks.

However, Bruton mentions, “We’re dealing with paper in a digital world.” And many clients still want to pay with paper checks. Well, Truss has that covered too. Easily and quickly deposit a paper check into your Truss account by taking a photo of it with your phone.

Read more about the positive impact Truss had on Aarow Building and its cash flow in their customer story.

The bells and whistles of construction billing software look impressive. However, what really matters is how the software has a positive impact on your business’ day-to-day operations–especially regarding your cash flow and bottom line.

The construction industry moves fast, and you need billing software to provide you with tangible benefits quickly. After all, every delay to your project can mean thousands of dollars in lost revenue.

The key benefits of construction billing software include streamlined invoicing, fast, accurate payments, and clear visibility into your company’s finances. Let’s dig deeper into these benefits.

Accelerating the Billing Cycle

With construction billing software, your business’ entire invoice-to-payment process can be accelerated. This gets that much-needed cash flowing into your business faster so you can purchase supplies, pay staff and subcontractors, and keep your projects moving forward.

Construction billing software improves, or even automates, the time-consuming tasks that cause delays to your business and its cash flow. The software does so through:

1. Automated Invoice Generation


• Certain construction billing software can automatically generate an invoice.
• It does so based on the progress of a project, time entries, or even material usage.
• Automated invoices make billing more quickly and it also reduces the risk of errors.

2. Digital Delivery and Payment Processing

• Go digital and eliminate mail delays and time-consuming paper check processing.
• Provide various payment options to your clients, like ACH or credit card, right online.
• Send invoices via email or text message.
• Even automate your payment reminders to motivate clients to pay in a more-timely manner.
• Truss Payments offers all of these features for receivables via its easy-to-use online payments platform.

3. Standardized Billing Templates

• Billing templates can accelerate payment processing further.
• These templates ensure each invoice from your company includes the required information that clients and lenders expect.
• In addition to accelerating the payment process by automating this task, ensuring that all the required information is there reduces the payment delays caused by simple formatting issues.

Improving Billing Accuracy

As hinted at above with automated invoices, the risk of errors in billing can cause significant payment and project delays. When any sort of error appears on an invoice, your clients will likely request a correction or a clarification. It takes long enough to go from invoice to payment, and this only makes matters worse.

To avoid costly and time-consuming errors, use construction billing software, which reduces the risk of errors with:

1. Real-Time Cost Tracking

• Forget about tracking costs manually or relying on a standard accounting system to track your business’ costs. 
• Construction billing software provides accurate, up-to-date cost tracking.
• This ensures that every invoice you send reflects the work your team completed and the materials they used to complete the work.

2. Change Order Management

• Managing change orders is a standout feature of construction billing software. 
• It ensures that you have documented your change orders properly and that the change orders are included in your invoices.
• Without the assistance of billing software, you run the risk of unbilled change orders–another potential hit to your business’ cash flow and bottom line.
• Truss Payments makes change orders and updated invoices easy.
  
  • To learn more about how Truss streamlines change orders, read this article.

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Enhancing Financial Visibility and Forecasting

As a business owner, knowing your current financial status and having an idea of your business’ future projections is critical. Having a clear view of your finances not only enables you to manage your cash flow proactively, it guides you in steering your business toward growth.

Construction billing software can enhance your business’ financial visibility and forecasting with features like:

1. Real-Time Financial Dashboards


• Dashboards offer quick views of your outstanding invoices, upcoming payment milestones, and an overall view of your business’ financial health.
• Use the data from these dashboards to spot potential issues before they threaten your business.
• Truss allows you to track the progress of your payments in real-time and even allows you to view estimated deposit dates. It’s like having a crystal ball for your business’ finances.

2. Aging Reports and Cash Flow Forecasting


• Detailed aging reports give your business a view of overdue payments.
• Forecasting tools help you to predict your business’ future cash position using data from scheduled billing milestones and payment patterns.

3. Client Payment History Tracking


• Know which of your clients usually make late payments.
• Adjust your billing strategy to avoid cash flow problems from these delays.
• Maybe require larger deposits or more progress payments to be sent.

Implementing Construction Billing Software for Your Business

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Construction billing software can be enhanced even further with QuickBooks integration.

Ensure that any software option that you’re considering offers integration with QuickBooks. Truss provides seamless integration with the popular software to make your accounting and billing even easier.

Construction billing software can truly improve your business’ cash flow and reduce both payment and project delays. However, implementing software into your business and its processes requires preparation.

Here are things to consider when choosing and implementing construction billing software for your business:

1. Assess Your Current Processes

• Evaluate your business’ current billing processes.
• Identify specific pain points for you and your team.
• What processes is your team still doing manually?
• What software are you currently using and where does it fail to assist in improving your cash flow?

2. Consider Cloud vs. On-Premises Options

• Is the billing software that you are considering for your business cloud-based? Or does it require on-premises IT infrastructure?
  
  • You’re going to want billing software that is cloud-based and offers a mobile app, like Truss does.
    
    • Construction billing software must adapt from the job site to the office, and a cloud-based solution is the only way to achieve this.

3. Prepare for Training

• Don’t expect your team–or even you–to jump right into a new billing software system without some training.
• Allow time and provide resources for the onboarding of your team members who will be using the software.
• And look for a billing software provider that offers comprehensive support and will be there for you every step of the way.

4. Start With Critical Features

• After assessing your current processes and your team’s pain points, consider what critical features your business needs from its billing software.
• Focus on these critical features before moving on to more-advanced features.
  
  • There’s two reasons for this:

1. It targets the software toward aspects of your business where you will notice the most-immediate benefits.
2. It prevents your team members from being overwhelmed with the new software.

Key Takeaways

Construction billing software is a must-have for any contractor today. It streamlines financial processes, reduces payment and project delays, and it improves your business’ cash flow by:

• Accelerating the invoice-to-payment cycle.
• Reducing errors and improving accuracy.
• Providing a clearer financial picture of your business.

For contractors looking to improve cash flow and reduce delays, implementing construction-specific billing software is a top priority. Truss Payments is the all-in-one banking solution built for construction businesses of every size. Manage invoices, bills, and cards all in one place. Book a demo with the Truss Payments team today to begin improving your business’ cash flow.