How AP Automation Supports a Modern Construction Financial Stack

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Your invoice sits next to your coffee mug from last week.

Your project management software is showing a delay in receiving steel delivery.

Meanwhile, your accounting software indicates that a vendor balance does not agree with what the site team has indicated they received.

Everything appears fine, yet this will cause issues in getting anything completed.

You can continue moving along, but you will need to verify data in three different systems before trusting a single number.

This is generally the way that construction finance becomes muddled.

Rather than having a significant breakdown, it often comes from numerous small discrepancies that grow and spread.

When attempting to streamline your tools and bring order to your operations, construction accounts payable with AP Automation tends to fall somewhere in the middle of cleaning up your stack.

As More Systems Are Introduced, They Can All Generate Different Variations Of The Truth

By now, you probably have a stack of some sort.

In addition to a general ledger (or ERP/accounting) platform and possibly project management software, you likely have procurement tools; many outdated spreadsheets; and email is performing functions beyond what it was originally intended to do.

Each tool provides a portion of the overall picture.

It begins to get difficult when AP needs to manually convert between each system.

An invoice arrives; someone enters it into the accounting system; another person verifies it against the purchase order; and another person sends an email to the project manager asking if he/she has approved the work.

This hinders timely payments; however, it also generates subtle errors.

For example, the amount of the invoice could be correct in one location and slightly incorrect in another. As time goes on, your reports begin to look more accurate than they truly are.

AP Automation Provides A Connection Between Routine Tasks

This is why AP Automation finds its value. While it is not a shiny new feature added onto existing layers of technology, it is simply reducing redundant entry, approval chasing, and document drifting.

If an invoice can be entered once and matched against purchase orders/receipts, routed to the appropriate approver without sending multiple forwarded emails, your financial stack will behave more like one cohesive system. This benefits you every Tuesday, not just during the month-end close-out. Your staff will spend less time validating the legitimacy of costs incurred and more time making decisions based upon the validated information.

Job Costing Becomes More Stable With Standardization

Construction companies have very small profit margins. Because of this, there is not enough room in those margins to have ambiguity in coding or delay corrections.

One misplaced expense, regardless of its size, can easily distort a project’s overall view.

The amount of consistency in coding that occurs when an AP (Accounts Payable) department is operating under standard guidelines is greatly improved.

The process for approval also becomes clearer.

Locating backup documentation becomes easier. So as a result, job costing will be able to show more clearly what is happening on site vs. simply recalling events and entering them into the accounting system at the end of the week.

This is a much quieter improvement than many sales pitches from software vendors would suggest, but it is one that provides a great deal of value.

A Contemporary Stack Should Reduce Friction Rather Than Reorganize It

There is likely no better rule of thumb to use as an evaluation for a current or future stack.

If a process requires you to continue to instruct your staff to manually generate invoices, look through their email inbox for lost invoices, manually reconcile side-by-side spreadsheets for accounts payable, etc., then that tool is NOT reducing friction and will never be truly streamlining. 

Construction financial task stacks today need to reduce the friction created by the same everyday financial tasks.

AP automation is a great example because it affects cash flow, vendor relations, project scheduling, and various reporting processes all at once.

Therefore, if all of those processes are still chaotic, then the whole stack can’t settle down.