Remember the ’70s song “Takin’ Care of Business” by Bachman Turner Overdrive? It essentially revolved around getting up every day and completing your daily routine to make a living. We can all relate to that.
That song has been around for quite some time, and as I recall, things were simpler back then. Taking care of business is different and more difficult to complete now, mainly because in today’s high-tech world, “business” as you know it changes rapidly — almost daily. The path to success which you planned out to be a straight line has been turned into a Formula 1 race car track requiring constant adjustment at each turn to reach your goals.
No matter what sector of the construction industry you concentrate on, all you read about these days are the improvements available to your company’s operations as a result of IT, artificial intelligence (AI), robotics, blockchain and whatever else they can come up with. It’s hard to believe and even more difficult to comprehend, but necessary for every one of you to take very, very seriously if you plan to grow your company, or just improve bottom-line profits with what you have.
Tech Adoption Can Build Cash Flow
The future is upon us. It has added more “business” to your company strategy process that will mean more turns on the track and disruptions to your game plan for reaching profitability and value goals.
Companies that properly plan for and implement paradigm shifts in the processing of business transactions will become more efficient by eliminating clerical functions. They have more information and tools for planning and analysis that make it easier for customers and vendors to do business with them.
You can find numerous examples in construction-related publications of companies adopting technology changes, and therefore must recognize that you will eventually need to adapt or fall into the lower sales and profitability tiers. In other words, when it comes to making a choice about such tools, there really is no choice — adapt or die, no other options.
Construction Firms Must Adapt to Maintain Competitive Advantage
But when all is said and done, every business has one goal: generate free cash flow. And you want to generate as much as you can to build equity and grow the business. Will adopting technology help you do this? It sure will if properly planned for and implemented. (How to think this through is material for another column).
So how will technology help?
- No more paper - you will save millions of trees.
- Clerical and processing costs will greatly decrease.
- Personnel costs will decrease.
- You’ll have better connection with customers and vendors.
- There will be ore time for planning and analyzing.
- You’ll have a formal process regarding accounts receivable (AR) and accounts payable (AP).
- You’ll see more productive, billable work in your work year.
- You’ll have more free cash flow.
Speed Up AR and AP Processes
One of the big areas where technology can help with cash flow deals with AR and AP processing. It allows for:
- just about zero paper shuffling
- accurate work-in-process and billing documents
- knowledge of customer and vendor AR and AP policies
- digital money transfers
- up-to-date contact information on both sides of the transaction
- the ability to adjust procedures as necessary to make outcomes even better
Obviously, having a state-of-the-art AR processing system is a must when considering cash flow management. Internal accounting must be tight, and it must be correct and quickly approved for final processing.
Having subs submit their requests for payments to meet your goals is a must. Closing monthly books must be a 7-day event. If you can implement this program and at the same time assist subs to learn your system and input needs, the end result will be cleaner, quicker development of billing, which is delivered digitally with supporting documentation. This reduces billing issues and questions and results in better collection efforts.
You can follow these same procedures for AP, as well. Set vendor standards and have them submit invoices digitally with all required documentation to speed up internal approval. The system can then plan out payments and cash flow movements, offer payment plans to vendors and pay digitally using bank data submitted by the vendor.
Why Your Construction Company Needs a Payments Strategy
The interesting thing here is that the system and AI do most of the data processing, matching and checking for approvals without much personnel involvement. You speed up 100% of the accounting process. You speed up the billing process. You speed up AP processing. You get your money faster and have control over AP payments. Customers will love your new system because it does their work for them, as well. Your vendors will love it because it makes their life easier and they know when and how they will get paid.
Implementing IT, AI and Bots to your business plan is a must if you are the size that can afford it and have a structure that will benefit from the changes. By afford it I mean funding the installation and training. Once implemented, it will easily pay for itself if you “take care of business” to properly use it going forward. Smaller companies can also obtain benefits from adopting IT where it fits, but must be more cautious not to jump into an expensive process without the resources to properly implement and use the system.
How New Technology Can Help Construction and Equipment Rental Finance Professionals
Garry Bartecki is the managing member of GB Financial Services LLP and a consultant to the Associated Equipment Distributors. He can be reached at (708) 347-9109 or [email protected]t.
