Unlocking Cash Flow In Construction: The Role of ProScan+
Cash flow stands as the lifeblood of any business, and in industries like construction, where thin margins and high vulnerability prevail, it becomes paramount. The delicate dance of payments between General Contractors (GC) and Subcontractors (SC) often poses significant challenges, especially in an environment where slow payment terms and cash flow risks can spell disaster.
Construction Payments 101
The typical construction scenario involves a GC overseeing project management while subcontractors handle specific scopes of work. SC, known as the “builders,” face a unique cash flow challenge. They must front the costs for materials and labour upfront, only receiving payment from the GC once the work is complete at the end of the month. This process exposes SC to significant cash flow risks as they continuously front expenses. In an industry where payment terms can stretch up to 90 days, SC often find themselves paying for three months’ worth of materials and labour before receiving payment for the first 30 days. The solution has traditionally been loans, leading to what’s known as material financing.
Legislation Overview
Recognising these challenges, several countries, primarily Commonwealth nations, have implemented legislation to address these issues. The Security of Payments Act, for example, forces GCs to review and approve payment applications promptly, ensuring timely payments to SC and providing a structured dispute resolution process.
Procore’s Role
Procore, with its commitment and progress claim tool, addresses these challenges, converting what was once a manual, clunky, and error-prone system of emails and spreadsheets into a centralised, efficient platform. The tool allows for the creation and review of progress claims, essentially serving as the SC’s payment claim. It streamlines the process, ensuring that GCs comply with legislation by automatically generating the payment schedule.
Navigating the Procore Progress Claim Tool
However, a significant hurdle emerges – SC often prefer not to log into Procore to submit progress claims. Instead, they email their payment claims directly to an accounts inbox. This kicks off a labor-intensive process for GCs, involving manual entry into Procore, potential errors, and a considerable risk of inefficiency. With accounts teams managing inboxes and project managers handling progress claims in Procore, the workflow becomes convoluted, leading to inefficiencies and potential oversights.
The Birth of Proscan+
This is where ProScan+ steps in, offering not just a time-saving tool but a risk prevention solution. Recognising that SCs will continue emailing their claims, ProScan+ connects to GCs’ email addresses and utilising OCR technology, Proscan+ automates the identification of progress claims. The OCR technology eliminates the risk and effort involved in identifying the nature of each email, providing clarity on the project, commitment, and relevant project manager. ProScan+ ensures seamless integration with Procore, minimising manual intervention, reducing risks, and preventing potential adjudication issues.