Technology is helping construction companies improve cash flow and reduce late payments - offering greater resilience and enhanced business health in a challenging economy.
MELBOURNE, Australia, Aug. 2, 2023 /PRNewswire/ -- Payapps, a global construction software solution trusted by main contractors and subcontractors to simplify and standardise progress claims and approvals, has released the findings of its Resilience In Construction Research Report for 2023. The new report reveals that enhanced digital adoption could significantly reduce the construction industry's insolvency rate by improving cash flow and reducing late payments, offering greater resilience and enhanced business health in today's challenging economy.
The construction industry in Australia alone has witnessed a notable increase in company collapses during the past year as builders grapple with the conclusion of pandemic-related economic support, challenges within traditional payment systems, and the effects of rapid inflation and rising interest rates. Recent data unveiled by the Australian Securities and Investments Commission (ASIC) indicates that over 7,500 companies underwent administration or had an external controller appointed for the first time throughout the 2022-2023 financial year.
Being paid late remains a problem in the construction industry.
According to the report, one of the critical challenges contributing to the increase in insolvency rates is potentially late or delayed payments for work done. Over a quarter (27%) of construction companies, including builders and subcontractors, said late payments have heavily impacted on their financials. However, the report by Payapps highlights digitally advanced companies have a remarkable difference in cash flow management, with only 11% of tech-savvy firms reporting struggles compared to an impressive 47% boasting excellent cash flow management capabilities. This striking contrast reinforces technology's undeniable impact on a business's financial resilience and sustainability.
Brett Stephenson, Chief Revenue Officer at Payapps, believes that these companies are experiencing better cashflow management because technology automates various tasks and processes, reducing manual efforts and streamlining workflows.
"Our report shows that companies using well-integrated construction technology have faster payment cycles and better cash flow than those without. Nearly three times as many digitally ahead businesses say that technology has helped their company achieve better financial management compared to those who are digitally behind. This is critical in the current market conditions, where many construction companies struggle to stay afloat. By embracing digital technologies, construction companies can make better data-driven decisions for their business, for greater financial stability and improved cash flow."
Stephenson also highlighted how Payapps is helping thousands of construction companies improve cash flow by integrating with various construction and accounting software, providing real-time visibility into project progress, expenses, and financial data. "This visibility empowers companies to identify potential issues early, make informed decisions, and take proactive measures to optimise cash flow, ensuring financial stability and resilience in the ever-changing construction environment," Stephenson said. "By automating progress claims and approvals, Payapps accelerates payment cycles, enabling companies to receive funds faster and potentially maintain a healthy cash flow," he said.
Research also uncovers broader resilience benefits with construction technology investment, use and integration.
The Resilience In Construction Research Report for 2023 also highlights other benefits of digital adoption, including supply chain management improvement, talent retention, and productivity enhancement. Digitally advanced businesses have excellent relationships and reputations with critical stakeholders and are better equipped to attract and retain talent.
- More than twice as many digitally ahead businesses (37%) say technology is a critical factor in improving their relationship with their supply chain, compared to those who are digitally behind (16%)
- Digitally ahead, businesses are almost twice as likely to see productivity boosts as those who are digitally behind.
- Almost twice as many digitally ahead businesses (47%) are looking to attract and retain talent by investing in technology to improve business processes compared to those who are digitally behind.
To access the full Resilience In Construction Research Report for 2023, click here. The global survey conducted by ACA Research on behalf of Payapps included 500 financial decision-makers from commercial construction companies in Australia, Ireland, New Zealand, and the United Kingdom, encompassing main contractors and subcontractors.
Payapps is a cloud-based collaboration tool for the construction industry. It helps main contractors and subcontractors simplify and expedite project progress claims and approvals, including variations and retentions. A simpler and faster digital process ensures greater transparency, increased accuracy, improved compliance, reduced financial risk, fewer disputes, and fairer outcomes. Payapps significantly cuts progress claim approval times whilst helping to meet regulatory requirements. Compliance is improved and made easier with documentation verification integrated with the approval process. Seamless integration with a wide range of project, construction and financial management software helps provide real-time data on all project payment requests and approvals.