Last month, Procore attended CFMA‘s Annual Conference where one of the hot topics was healthy cash flow. In order to grow their businesses in a post-pandemic world, contractors increasingly need to solve the challenge of cash flow. For small and medium-sized business contractors that are looking for ways to scale, it all starts with better cost management practices. With improved insights, contractors can increase visibility for finance teams so they can make better decisions. This starts at the project level—enabling all project stakeholders to streamline and standardize operational procedures that provide finance teams with the right information at the right time, causing a domino effect towards healthy cash flow.
So what are some steps that you can take to do that? Here are a few:
Leverage a Real-Time Cost Management Solution
With projects getting more complex and clients demanding shorter timelines, contractors are facing new expectations around cost and schedule while under increasing pressures from rising material costs and a limited workforce. All these challenges are leading businesses to invest in solutions that increase visibility into project financials to help drive better cost management. “The second wave of construction’s digital transformation is here and it’s collaborative. Real-time cost management is at the forefront of it,” says Katie Rapp, Product Marketing Lead for Procore’s Financial Management portfolio, during her session at CFMA’s event.
So, what is real-time cost management? It’s the marrying of project management and financial management so both field and office teams can have instant access to accurate, up-to-date information on the financial health of their projects. With this information, both teams can gain real-time insights that allow them to make informed decisions that maximize resources and protect margins. With Procore’s Real-Time Labor Productivity feature, teams can see the financial impact of labor and productivity the moment a timesheet is submitted in the field. With these insights, project teams can course correct to avoid cost overruns and keep the project cash positive—a key aspect for healthy cash flow.
Accelerate the Change Management Process
What makes real-time cost management so unique is the ability to better connect field and office teams to ensure both are operating off the most accurate and up-to-date information. As part of this, a more streamlined change management workflow is possible. After all, one of the reasons businesses often see interrupted cash flow is due to delayed change order payments. Therefore, accelerating the change management process should be a priority.
Earlier this year, Procore released a new feature that connected the T&M ticket workflow to the change order workflow, allowing office teams to quickly and easily create a change order request for T&M work verified in the field. “The faster we can secure a formal agreement for work done on a time and material basis, collect verification of the work completed, and submit formal change orders, the more likely we are to invoice and receive due payments for out-of-scope work on projects,” says Sussan Jarvis, Project Manager at A-1 Modular Inc.
Explore Alternative Material Financing Options
Billd, a leading provider of financing for commercial subcontractors and a Procore partner on the App Marketplace, released an industry report in May 2021 with data that suggests persistent cash flow problems will prevent many contractors from achieving their growth goals. The report found that 75% of contractors surveyed say they plan to grow their businesses in 2021. However, less than 4% of survey participants have supplier terms longer than 60 days, while it generally takes between 60-90 days for contractors to get paid. With these mismatched timelines, healthy cash flow is at stake.
To help contractors address this challenge and strive towards their growth plans, Billd provides material financing with 120-day terms that better align with construction payment cycles. "We don't view construction companies as having higher risk than other industries — we just understand the nature of their business and how the payment cycles work," says Doyle. "If contractors truly want to conquer their cash-flow issues and grow their businesses, they need better terms that align with their payment cycles."
As the saying goes, insanity is doing the same thing over and over again expecting different results. If your business is still struggling with cash flow challenges, it’s time to explore new methods for addressing them—and a cost management solution should be at the top of the list.We’re hosting a customer roundtable webinar on August 25th to learn from a few Procore customers how they’re leveraging real-time cost management to improve cash flow. Click here to reserve your spot.