Start Looking Forward
By Steve Wightman|BuildPay CEO
The construction industry, as we know it, is changing rapidly and technology finally has a ticket on the train. There are going to be rapid benefits to an industry without productivity improvement in 80 years. Processes will be more efficient, effective, and transparent, so that our industry can be more focused on getting back to what we like: building.
Probably the most unpleasant task across all construction is chasing payment. Failure to collect has taken down many builders. Pursuit of payment is often burdensome, contentious, and downright unfair. It takes time away from doing the many other tasks that have a real impact on project delivery and profit margins. When it’s not flowing freely the pain gets passed to the next guy, and the next, and on-and-on until the suffering has been distributed to everyone. The further your role is from the funding source, the harder it is to improve cash flow. Many a night of sleep has been lost wondering if the funds have somehow leaked out to pay for work on another project. No matter where you are in the chain; if there are upstream financial issues you are rarely going to know about it until it’s too late.
When I managed my first construction project I learned a lot, but was always curious about one thing: If funds were being provided by a financial institution to fund construction, why wasn’t the distribution of those funds controlled more in line with the interests of all the project players and even the funder!
The reasonable answers I got supported the role of the person I was asking. I remained curious, but was green enough to be satisfied that withholding payment was necessary to assure performance despite potentially inhibiting performance at least as much as motivating it? I eventually got pretty good at it and had success.
It’s not a big secret that the construction industry has the worst cash flow of any industry in the world. It’s not like threatening to withhold work and threatening to withhold payment aren’t an integral part of everyday tactics between every pairing. I wondered why no one wanted to find a way to somehow be assured that the funds for their work/materials could not jump the rails between all the stops. Schedules and productivity would also stay on the rails? Waiting for it to flow to you is rough, but not knowing if it exists, or where it is, irks even the most patient of us.
So why the secret? How hard can it be to see into the funders account? Almost always, the funds are in an account at a funding institution, who usually has a stake in assuring the work is done without liens. How hard can it be to make the funds-flow transparent? We can make drones that see and measure the site, but we can’t see and measure the project’s payment flow?!? Seems doubtful.
The fact is, every link in the payment chain needs to hold money as long as possible to protect themselves or to use as working capital, which, by-the-way, our industry has the least of for all industries in the world. Our construction management universities teach students these tactics.
“Transparency” is nice to have looking up the chain, but not so attractive to share down the chain. It seems like working capital issues must be solved before transparency will be allowed. Or is it, that transparency solves the working capital problem?
We’ve reimagined construction with payment transparency. Transparency from the funder all the way down the project payment chain would clearly reduce risk. If the funds don’t exist, you don’t take the job or provide the materials. If the funds do exist, and have not leaked out of the project’s chain, it’s easier to compel their release. Projects paying faster get done faster. Projects that get done faster are more profitable. Faster and more profitable projects are move competitive and would have better retention. Materials would cost less and be more available if there were less risk. Using technology to achieve transparency is, technically, not very difficult. Aligning a long and wide hierarchy of users is not so easy.
Then we asked ourselves; if you can deliver transparency, why not use the same technology-connections and transparency to allow users to control the funds? Just like they do today, but no parking the funds in the bank accounts of link after link. Assure virtually all the current rights, permissions and controls. Move the funds direct from the institutional funder to the end provider of work or materials. Remove any incentive or need to hold funds for working capital. No payment delays. No risk. No liens. No need for trade credit at material providers.
So, we built it. The results were as expected: faster, cheaper and less contentious projects to put you back to work.
BuildPay offers patent pending financial technology to construction-funding institutions to connect the entire construction payment chain; enabling fast, direct payments, quicker build times and more competitive pricing without liens and delays tied to accounts receivable. Construction the way it should be. #GotPaid
All construction has one thing in common: it’s all supposed to get paid for. BuildPay is the only company that’s connected at every stage of the project lifecycle and is leveraging advantages from the promises that we make sure are kept.
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