Construction Firms Wait 94 Days on Average to Get Paid

commercial construction

Digital technologies are being built to help solve one of the key challenges facing the construction industry: delayed payments.

The construction industry’s days sales outstanding (DSO) stands at 94 days, according to “Under Construction: Improving Payments in the Construction Industry,” a PYMNTS and Ingo Money collaboration.

Those payment delays impact general contractors, subcontractors, vendors, workers and customers alike, according to the report.

Because of these cash flow disruptions, contractors and subcontractors must increase their bids, pay out of pocket for materials and use credit cards to cover payments, the report said.

In addition, construction workers miss paychecks, vendors don’t get paid and projects get delayed, per the report.

Several FinTech companies have rolled out new digital technologies designed to address these challenges and bring greater financial stability to the construction industry and its players.

“The construction and manufacturing industries must become more competitive employers in an environment where skilled labor is in increasingly short supply,” Dr. Sarah Buchner, founder and CEO of construction-focused FinTech Trunk Tools said in July.

Trunk Tools provides an all-in-one platform for construction firms that, among other benefits, helps employees access part of their wages daily at no extra cost.

Construction payments are typically over complex with multiple parties involved and a plethora of compliance documents, lien waivers and more needing to be exchanged during the payment process,” Handle, a supplier of construction software for material suppliers and specialty contractors, said in April.

To help streamline this process, Handle’s software includes secure payment acceptance that modernizes how the construction industry manages payments, together with solutions for managing credit and payment rights for credit and finance teams in the industry.

Using digital technology to accelerate payments could go a long way toward solving the problems currently faced by the construction industry, PYMNTS Intelligence found.

With faster payments, construction firms can procure materials and hire skilled labor, subcontractors can more quickly meet their financial obligations, workers can access wages faster, and projects can be completed on time and at lower cost, Ingo Money CEO Drew Edwards said in the report.

“Embracing instant payments is not just a choice but a crucial pivot toward a future where technology expedites access to funds, alleviates financial strain and ensures a thriving construction industry,” Edwards said.

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