How to select a construction payment management solution: Supply chain financial health

Lucie Trepanier, Product Marketing Director | July 27, 2023

In the blog post titled “Eight issues that should be top of mind when considering a construction payment management solution,” we reiterated the well-known saying that in commercial construction cash is king.

Yet subcontractors provide cash upfront to pay for labor and materials before they’re paid by the general contractor for work performed. In a pay-when-paid or even a pay-if-paid situation, that payment can take weeks to come through. Meanwhile, subcontractors need to meet payroll, buy materials, and invest in their business.

Oracle Textura gets rid of the time-consuming and inefficient manual process by simplifying and automating processes for invoicing, approvals, compliance and lien waiver management, and disbursement. This already reduces payment times through gains in efficiency. Plus, general contractors who wish to offer early payments can use the optional Textura Payment Accelerator to run those programs using existing invoicing and payment workflows so subcontractors receive payments even faster and with timing certainty.

As Chris Danner, senior project manager at GW Real Estate says:

“What automatically makes subcontractors’ eyes pop open is telling them that with Oracle Textura they’re going to get paid up to a week ahead of what they’d typically expect. They’re really excited when they hear that.”

The goal is for everyone to get paid as quickly and efficiently as possible—owner to GC to subcontractor to subtiers and suppliers. Let’s see how Oracle Textura supports this process.

Reduce time to pay through gains in efficiency

The first—and biggest—barrier to fast and efficient payment is the maze of emails, phone calls, hand-offs, signatures, rejections, resubmissions, checking of compliance documents, understanding of non-standard subcontractor paperwork, and so on. It looks a little something like this flow chart (figure 1). And that’s just for the draw process. Then add several dozen more steps to manage compliance, lien waivers, and disbursement. This is the opposite of efficient.

In our experience with customers over the years, there could be up to 80 steps in the overall process from invoicing to disbursement. Multiply that by 20 to 30 subcontractors per month per project and you get an inefficient process with a lot of people putting in a lot of overtime to get it all done each month and pay their subcontractors.

Instead, with Oracle Textura, subcontractors fill out only the completed progress against a pre-negotiated schedule of values. This prevents the subcontractor from overbilling for any item and from billing for items outside of the agreement.

From there, Oracle Textura creates an invoice based off the submitted amounts, ensuring no mismatches with numbers, generates all supporting documentation necessary for each specific job, and produces conditional lien waivers off the same data, matching the submitted amounts.

Additionally, Oracle Textura creates an unconditional lien waiver, which is signed upfront by the subcontractor. This alone cuts out the entire process of tracking down lien waivers and signatures later in the process.

The signature on the unconditional lien waiver is removed until the ACH receipt is returned. This builds trust between the general contractor and subcontractor as the general contractor can see the waiver and knows it was signed but cannot obtain the signature until the payment is made. The subcontractor understands the signature is held, so they have no issue signing the waiver up front.

All signatures are collected at this time, meaning there is no back-and-forth later with general contractors asking subcontractors for documents or signatures.

All appropriate information is then automatically routed for approvals. No time is wasted with mail, email, or manual interventions.

Compliance information is maintained by each subcontractor and that information is used by Oracle Textura to automatically evaluate compliance status. Notifications can be automatically sent letting subcontractors solve compliance issues before the invoice submission. This removes one more spot with potential hold-ups.

Oracle Textura delivers payments electronically through ACH format. Subcontractors will maintain their banking information in their profile with no need for the GC to track that information.

Accounting no longer needs to doublecheck numbers against contracts, compliance groups need not take up a step in the chain as the checks and balances are already built into the process. Project managers need only check the central Oracle Textura repository for all necessary information for approvals. Controllers are presented with approved, compliant invoices from which to disburse. All parties can rest assured that physical checks have not been printed, disbursed, deposited, or reconciled.

While your mileage may vary, we estimate that for a typical customer, the number of steps required for the entire process can drop from around 80 to well under 30.

As Alston Construction Chief Financial Officer Adam Nickerson says, “If we went back to the old manual system, I estimate I would need three project accountants for every one now. As fast as we’re growing, that’s a lot of hiring and related expense that we can avoid.”

Reduce time to pay with accelerated payment programs

Sometimes, even when the payment process is as efficient as possible, you’d like to offer early, predictable payments to your subcontractors to help their cash flow and keep your jobs moving forward. But trying to run your own accelerated payment programs manually takes a lot of effort, especially if you’re trying to run the programs across multiple projects.

Oracle Textura Payment Accelerator is an optional feature within Oracle Textura Payment Management Cloud Service that enables you to set up and operate accelerated payment programs within your existing Oracle Textura payment management workflows. This demo video summarizes the capabilities.

The payment accelerator is a simple extension of your existing workflows with similar integrations to your accounting system. Without ever leaving Oracle Textura, you simply navigate to the Oracle Textura Payment Accelerator to set up your payment accounts, manage your programs, or add programs to any of your projects.

You can use either internal or external funding sources to fund your programs. Then, you can invite your subcontractors to enroll when they accept their contract or later on when they enter their invoice. Once enrolled, your trade partners can receive payment as early as when you approve the invoice and disburse—instead of after the owner funds that month’s draw. This provides payments potentially up to several weeks faster and gives your subcontractors certainty around payment timing.

“Offering our trade partners a low-cost, non-debt, predictable source of cash is a great way for us to help improve their cash flow,” says Paul Crandall, chief financial officer at Catamount Constructors. “We appreciate Textura Payment Accelerator’s flexible and configurable setup and operation. Just like the core offering, Payment Accelerator is very efficient. We can run our early payment programs at scale without proportionally hiring.”

Michael Kolassa, principal sales consultant, Oracle Construction and Engineering, contributed to this story.

The Oracle Smart Construction Platform combines our industry-trusted applications with a common data environment and an ecosystem of partners to help owners and delivery teams work together and continuously improve performance. The platform connects teams and data, synchronizes work, and empowers individuals to make informed, proactive decisions. Power performance with proven Oracle Construction and Engineering solutions for scheduling, portfolio management, construction project management, project controls, construction payment management, and more.