Industry News

5 Reasons to automate payment systems in your contracting business

Kristen Frisa

The construction industry is quickly realizing the advantages of digital tools to improve business operations. However, within this technical revolution, builders often pursue tech tools that will help them become more efficient and productive in their field operations and leave accounting and payment systems behind. Automating your payment systems early on can have many benefits, and it makes sense to make this switch sooner rather than later.

It’s pretty obvious why construction teams focus on improving their business processes first. Building is what the construction industry is really about. It makes sense to digitize operations to improve budgets, schedule projects, manage the workforce, and communicate, all of which can help site teams build better and faster.

But let’s not abandon office and accounting staff in the realm of pen-and-clipboard. Using digital tools to streamline workflows in the office, including automated payment systems for Accounts Payables and Receivables, yields many advantages for contractors.

1. Reduce paperwork bottlenecks

Site teams depend on paperwork that flows through the head office in order to keep the job moving. Contractors may be running multiple job sites at any given time, all of which require the office to process invoices, create purchase orders, write up reports, and schedule subcontractors.

If the office team is bogged down under mountains of paperwork, site teams may wind up waiting for paperwork before physical work can continue.

Automating the workflow to lighten the workload for office staff helps clear up paperwork bottlenecks and gets things moving again. For each project a contractor embarks on, there may be several subcontractors who receive regular payments. Add that to all the money flowing out for operational expenses, and there could be a huge volume of payables to handle each and every month, all of which has to run through the accounting team. Using legacy systems, there may have been several steps involved in processing one of these payments.

Think about all the steps involved in getting each check out the door:

  1. The office team has to write the check.
  2. It goes to the boss to be signed.
  3. It has to be mailed to or picked up by the recipient, who will have to take a trip to the bank to cash it.

Yuck. That’s a lot of extra steps.

By digitizing these payments, you are saving yourself and your payees a ton of headaches. Even more, your accounting team gets the time back to complete other, more high-value tasks by reducing the backed-up paperwork that stalls project progress.

2. Cut costs

Checks are costly, too. For starters, there are material costs to cut paper checks, the labor hours it takes to process them, and postage fees to send them out. Overall, each check can cost a whopping $15-$25 per payment, with some checks costing up to $50 each. With all the payments you make as a contractor, this is no small expense, and it doesn’t even account for all the time it takes your staff to complete these steps.

Digitizing and automating your payments cuts not only the nuts-and-bolts costs, but also the labor hours it takes to disperse the cash.

3. Decrease risks

Did you know that checks are the number one most vulnerable payment method for fraud? People tend to worry about the security of online payments without realizing all of the ways fraudsters can manipulate checks. Checks can be vulnerable to forged signatures, alteration, duplication, or counterfeiting.

Fraud still impacts 47% of businesses, and those producing a large number of checks are the most common target.

In comparison, online payment processing with MazumaGo offers bank-level security to process payments directly between banks, to avoid many of the risks associated with payment fraud.

Automating payments through online payment systems decreases the risks of user input error and accidental ACH entry mistakes, too, so payment gets to where it needs to go the first time.

4. Improve cash flow

Cash flow is a critical component of keeping your projects afloat. As a contractor, you have to continually put out money on labor, supplies, and equipment rentals, and you rely on incoming money to help foot these bills.

It makes sense for you to remove as many barriers as possible for incoming money. Automating your payment systems ensures money flows seamlessly from one bank account to another without any further steps from you.

Automated systems for both funds in and funds out regulate your financial picture so you can see clearly when cash flow issues may arise, and work to fix the problem before it hits a crisis point.

With MazumaGo, you can speed up your receivables by up to 10 days by collecting payments via email instead of paper checks. Thanks to real-time tracking, you know the minute your customer pays and funds arrive in your account - giving you a clear picture of your cash flow every step of the way.

5. Clear the bottleneck, maintain good relationships

Relationships are critical for contracting businesses. Good supplier relations keep the materials coming so building can progress, and happy subcontractors make themselves available for your next project.

And what makes your partners happiest of all? Being paid correctly and on time.

Dip your toe in

Adopting new processes into your business can feel risky: what happens if you pay for a technology that doesn’t work out for you? It’s a good idea to start off with smaller changes so you can get the feel for migrating your systems, without the big risks.

Switching over to automated payment methods is a small, easy-to-achieve change that could pack a big payoff. With MazumaGo, you’re ready to go in about 10 minutes, then you can set up new payees over email. You’ll be impressed at the time and money savings you can realize from such a small change, and it could open hearts and minds to more time-saving technology!

Efficiency in your accounting team, facilitated by automated payment systems, is an important step to grease the wheels for your upcoming projects. Save your team time, cut your costs, and keep the cash flowing securely by automating your payment systems now.

Check out how MazumaGo can help automate payments systems for your contracting business. Keep money flowing to your growing business.

Make business payments move.