Construction businesses have been slowly burning costs in back office operations such as invoice processing. The article is dedicated to understanding the need to automate invoice processing in construction businesses.
Construction industry is amongst the biggest pillars in imagining the modern world. From skyscrapers to personal spaces we call home, are a boon given to us by the construction industry. Albeit that the industry still struggles with old school practices for its paperwork that includes invoice processing too.
It comes out every time as an impediment that needs to be crossed in order to complete the AP (accounts payable) work. However, all this could be solved. The key to automate invoice processing in construction businesses is just a step away.
This article has been written to help you realize the benefits of invoice automation in construction companies, and to help them decide whether to take a step or not.
Inflation across the globe has already hit the market and is creating substantial buzz. It is forcing companies to closely monitor their expenditures and transactions to figure out remedial measures to surpass the challenge. However, aggregation of huge amounts of information from raw invoices spends more time and resources, time and resources that can be utilized elsewhere.
Automation on the other hand can be a great way of cutting costs and optimizing processes overall. As we know, the covid period has been a bane to the construction business. Manufacturing of supplies was halted and the sudden resurgence of the market & gaps in the production and demand has led to high prices of the raw material. As per a JLL report, this record high in prices is not going anywhere soon.
Albeit that there are multiple places where the cost is chipping off construction business’s pockets that includes back office work. With automation in accounts payable, the cost of processing a single invoice can be reduced from 60-70%. As per a Goldman Sachs report, the cost of manually processing an invoice in construction can cost around $16 per invoice. However, companies who have adopted the route of AP automation are enjoying invoice processing at $6 per invoice. Keeping the scale of a company into perspective, this could significantly affect the financial sinkholes that are drawing avoidable costs into the pipeline. Adding to it, there are several other costs associated such as:
And many others. This also includes the $4-20$ that the companies have to pay on a papercheck issued to a vendor. Besides this invoice automation in construction business will increase the capacity of contractors to react faster, and bring in solutions to reduce costs by multiple margins by creating cost cutting strategies. Also, it will help in ensuring a much more streamlined back office procedure that is otherwise incoherent and an already existing huge challenge in the construction business.
Here are some of the top challenges faced by construction companies for invoice processing operations. These are:
Construction makes up huge piles of data from different processes. The problem of inconsistent invoice processing stems from it. There are no standardized methods of deconstructing invoice data from an invoice especially if it belongs to different invoices from different processes. This leads to inconsistencies that are troublesome while handling invoice data and generating audit reports for creating mitigation strategies.
No two invoices of the same type of service are the same (generally) in the construction business. The contractors often end-up negotiating for the prices of services they provide. This means the pricing parameters in the business are not steady. This fluctuation creates more challenges while aggregating data manually because the clerks have to be on their toes. It's because they can’t assume the prices instead are required to record them every step of the way.
A majority of employees working in construction are untrained with a standardized methodology of aggregating and processing data. They often don’t understand the nature of invoices, the means of billing, the right format, or the standard template, etc. This creates multiple hiccups that can be easily solved by an automated system because it follows a standardized path for every use case.
Late invoices are an ongoing pandemic in multiple industries including construction. Organizations take supplies and materials from their vendors on credits. However, upon timely payment they are given certain benefits in terms of early payment discounts, and higher credibility in the market. Yet due to tedious invoice processing methodologies that are largely manual, the process becomes slow and unproductive, reducing the chances of fetching those early payment discounts.
With the majority of processes largely physical in nature, the back office work often takes a toll especially in a small construction company. It is because there is no dedicated accounts payable team to handle the invoices. This work is delegated to any of the employees bearing the responsibility of the associated use case. For instance, if someone is responsible for purchasing bricks and cements from the suppliers, the task of recording the data is also delegated to it. This creates holes and inconsistencies in data that can later on be seen on the balance sheets.
A bigger problem in the construction business is the lack of understanding of terms & conditions. The issue stems from the problem of not having adequate time. Also, the time that is left, is spent on handling the data manually. This creates an approach among contractors where they end-up looking at all the terms & conditions similarly. It is similar to what we do while installing software. This often ends up becoming unfruitful for the organization creating problems in terms of payments and flexibility associated with it.
Considering invoice processing in construction companies, it can be a strenuous process. However, here are some benefits of automating the process:
Keeping in mind the fact that it is essential to track transactions on a daily basis to keep a company’s finances afloat, capturing daily transactions is essential. AP departments would be going through daily transactions, recording financial data to maintain monthly, quarterly, and yearly balance to create general ledgers. However, the sheer magnitude of transactions makes it difficult to accumulate all the data accurately. Using an automated invoice processing solution would benefit a construction with enhanced speed, and provide higher sustainable efficiency and productivity with the process.
A major concern that arises with invoice processing is the tracking of the same. Journals are prepared with transactional entries that define the nature of the transaction but not where it came from. An automated invoice would be capable of capturing that data helping the AP departments and finance departments to track where the money came from and where it went to.
With manual processing i.e. by manual data entry, there is one more task that is added to the kitty of operations. However with an automated system, it is simply a use case that can be predefined while aggregating transactional data. In fact, the user can create two separate sheets for the same. One signifying the transaction, and another one signifying the transaction as well as its source. This process is as easy as switching on a fan with an automated system.
Automated invoice processing in construction companies provides the capability of departments to automatically forward financial information to the concerned authority. This can be done with the collaboration of an IDP and an RPA working in alignment with the financial data. The IDP would easily extract any bit of information that is held in the construction companies invoices. Adding to it, the RPA would forward that information to the concerned authority depending upon its predefined function without any manual intervention.
Monthly, quarterly, and yearly audits are a regular chore in companies. These can be from a third-party or simply internal. However, the fact that it requires detailed reports that are audit-ready is a huge use case. Plenty of time is spent on creating reports that indulges on every data point. This is time consuming and often strenuous for the teams. Yet, the biggest issue is the accuracy of data that can withhold an audit for quality checks. This issue is simply non-existent with automated invoice processing systems for construction companies. The data is as accurate as one wants it to be and is simply audit ready without doing any amount of manual work that can halt other processes for the time being because of priority issues.
Covid-19 has opened up the floodgates for work from home (WFH). Previously, the capability to work from anywhere was a mere luxury (however important in multiple cases). But with the advent of more and more people demanding WFH, companies are determined to find SaaS based solutions offering remote access.
An automated invoice processing system for construction companies such as an IDP can be accessed from anywhere on a click of a button. It will provide all the functionality to its users anywhere in the world as it would on-premise. This empowers the employees to work from anywhere providing the capability to be 100% without any additional infrastructural cost such as dedicated office spaces, internet connections, electricity, etc. The employees only require a working internet connection in their space, and they’d be capable of providing real-time work without necessarily being present in the office.
Almost every organization is using some sort of CRM, CMS, or ERP system. These downstream systems allow construction companies to create a centralized repository for important information such as invoice data. However many of the digital systems do not have the capacity to redeem from an existing old school system. Also, there are some who are simply in the process of converting their physical data to digital.
In both of these cases, it is essential that the automated invoice processing system they use for their construction business is compatible with their existing architecture. It includes various applications such as ZOHO, Hubspot, Wordpress, Salesforce, SAP, etc. The capacity to feed data directly to these systems is a boon. Adding to it, some organizations would still be storing data locally and using old Excel spreadsheets for data accumulation. An automated invoice processing system for data aggregation aka an IDP like VisionERA would easily do that and integrate with the required apps using APIs. This process can be achieved without making any huge changes to the existing system.
Previously, there were two primary modes of processing data in construction companies i.e. manual processing and OCR. While manual processing requires a dedicated team, an OCR would need multiple days to set up. Adding to it, an OCR would only work on predefined templates and couldn’t process unstructured data. However with modern IDP systems, the implementation is close to installing a software on a system and it can efficiently process unstructured data.
Accounts payable in construction works much alike to any other industry. Supplies are taken from the vendors on credit and later on paid within a stipulated time period. This time period could range from 60 to 90 days in majority cases.
However, construction companies often tend to cross this barrier because of the slow, tedious,and confusing process. Also, this is a task that doesn’t even produce necessary revenue yet is important to keep the finances stable. This process goes through multiple verification checks, audits, general entries into the ledger, etc. And after all this, the final payment is made to the supplier.
This process can be made much faster by using IDP. Why? It is because the majority of tasks are carried out manually because the data is simply unstructured in nature. And yet, the challenge of inaccurate data still exists.
What can IDP do?...
IDP (Intelligent Document Processing) platforms like VisionERA are a one-stop solution to the majority of document processing challenges in construction businesses. It lets the user create its own workflow and let them include documents with custom values. This means that if an invoice has A,B, and C entries that are not similar in 10 different invoices from 10 different companies, VisionERA would let you define those entries as the same, and repeat the same function in the future.
Albeit that, it allows seamless data extraction from the customer’s and suppliers invoice, validates it from the existing data or any other source of truth, applies triangulation logic, etc. and produces results on thousands of invoices in a single click. This capability of VisionERA makes it a stellar solution for any construction business looking forward to reinforcing their accounts payable operation. Adding to it, the processing logic can be changed anytime via the workflow depending upon the compliances to fit the company’s needs better. Also if integration to an existing architecture is a challenge, the platform can be installed easily like any other SaaS based software and be made ready to use in an unimaginable less time. This all can happen without disrupting anything in the existing architecture and seamless integration to downstream apps such as CRM, CMS, ERP, etc via APIs is just a step away.
IDPs can do what companies have been imagining for years. It is a innovative solution to document processing challenges that not only empowers employees but brings multiple gifts along with it such as:
Adding to it, one also gets to join hands in reducing carbon footprint by reducing the inflow of paper based documents and being truly digital. It can harness the capability of the talent available in your organization in a true sense and can automate invoice processing in construction companies, the easiest way possible.
Note: You can get started with VisionERA today itself without having to pay a single penny. Our $0 invoicing policy lets our customers pay only after seeing satisfactory results. No risk and absolutely no obligations!
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