When it comes to construction, balancing your books is as important as balancing your crossbeams. Today’s blog looks at new construction accounts payable technology that can help you grow your business like you grow your projects from the ground up—carefully, confidently, and with a solid base.

Construction Accounts Payable Basics

In broad teams, accounts payable refer to the amount of money that your construction company owes to its various suppliers, subcontractors, vendors, and other third-party service providers. The financial scope of accounts payable can include materials, labor, equipment rentals, permits, land use fees, utilities, and other expenses incurred during your construction projects.

As such, managing your accounts payable is a crucial part of the financial management of any construction company. As construction projects involve numerous moving parts, keeping track of all the bills and payments can be a daunting task, often requiring the full attention of one or more accountants, not to mention the watchful eyes of managers and high-level owners.

To help ensure the process moves smoothly day-to-day, your construction company needs to maintain accurate and up-to-date records of all the invoices received from its suppliers and subcontractors. With these records, you will be able to make timely payments to avoid late fees, penalties, or worse, costly delays.

Today, accounts payable are typically managed through one or more pieces of accounting software that allow your team to easily keep track of their payables, manage their cash flow, and ensure that all payments are made in an efficient and timely manner.

Beyond daily management, the right software can help you grow your business. For example, depending on your chosen software, you can generate reports to help your company analyze their expenses and identify areas where cost savings are possible—paving the way for future growth.

In summary, accounts payable is a critical aspect of the financial management of construction projects, as they represent the money a construction company owes to its suppliers and subcontractors. Therefore, proper management of accounts payable is essential to ensure the timely payment of bills, maintain healthy relationships with suppliers, and improve the overall profitability of the construction business.

Next, let’s look at how you could implement new construction project management and accounts payable software to transform how you grow and maintain your company.

Maintaining Your Construction Company With Accounts Payable Software

As project complexity grows, so too does the need for the right software on the back end to manage it. To understand how more powerful software could help you with operations, let’s look at two common problems we have helped construction companies address—double-entry and margin calculation.

Firstly, with double-entry, every transaction has two components. Since every transaction affects two ledger accounts, the double-entry system of bookkeeping is founded on this distinction—debit and credit.

In every transaction, a debit entry is made in one account, while a credit entry is made in another. This means that each transaction must be recorded in two accounts, one of which will be debited for the value received and the other credited for the value provided.

As you can see, two entries are required for each payable, leading to double the entry time. Even with automated software, this adds up in office labor, all the while introducing twice as many opportunities for mistakes into the accounting workflow.

With project management and accounts payable software like BuildBase Office, vendors and subcontractors can invoice directly within the software portal, ensuring simultaneous updates to balances as well as timely payments.

Next, with built-in margin calculation, purchasers can glean immediate insights from their orders. In an ever-changing market (like the highly inflated and unprecedented supply chains that occurred during the COVID-19 pandemic), any timely insight can lead to significant savings.

Rather than relying on old information, habit, or vendors who change their pricing with little notice, an AI-backed software that integrates margin calculation into the base accounts payable workflow can be an invaluable tool in remaining competitive.

Growing Your Construction Company With Accounts Payable Software

We’ve looked at how the right accounts payable software can transform your day-to-day operations. Now, let’s look at the growth opportunities and what they could mean for your business in the years to come.

Better accounts payable management can lead to better company growth in several ways. First, by managing accounts payable effectively, your construction company can avoid late payment fees, delays, and penalties—each of which can negatively impact your all-important cash flow. Better cash flow management allows for more efficient use of available resources and allows your company to invest in high-return growth opportunities like hiring salespeople and taking on new contracts.

Similarly, proper accounts payable software ensures that the company’s financial records are accurate and up-to-date. This will help improve the company’s financial stability, which can be critical in securing financing for future growth initiatives. Plus, should any audit approach, it will benefit you and your company to have a clear record of financial action on-hand.

Plus, better accounts payable management can help you build stronger relationships with suppliers and subcontractors. On-time payments help establish a baseline of trust that may lead to better pricing, more favorable terms, and the odd helping hand with short orders or expedited turnarounds—each of which can help your company save money and grow faster.

Lastly, digital accounts payable management can help identify areas where your construction company can save money, such as negotiating better prices with suppliers, optimizing inventory levels per project, and reducing overall waste. You can reinvest these cost savings in the business to ensure growth and a firmer footing for your next project.

Learn more about Project Management Software for Construction!

Overall, better accounts payable management through construction project management software can help you maintain and improve your company’s financial health, build stronger relationships with suppliers and subcontractors, and save money—all of which can contribute to better company growth.