It Pays To Be On Time: How Software Can Simplify Subcontractor Payment Runs

In the construction industry, paying subcontractors on time is a cornerstone of efficient and successful project management. The sector is notorious for tight margins, strict timelines and complex webs of stakeholders. Every Quanity Surveyor knows this. Each party relies on the others to fulfil their obligations promptly to ensure the smooth progression of projects.

Paying subcontractors on time is not just a matter of good business practice but a necessity for maintaining success within the construction industry. It yields numerous benefits, fosters a positive working relationship and ensures the project runs smoothly. Unfortunately, delays in payment are a common issue that can have serious repercussions for contractors which can ripple through the entire construction ecosystem.

Late Payments: Breakdowns, Delays and Inflated Costs

Strained Relationships

Late payments create tension and cause distrust between contractors and subcontractors. Without timely payments, subcontractors will become less motivated and cooperative, leading to a breakdown in communication and collaboration. This strained relationship will hinder project progress and the quality of work delivered.

Financial Instability for Subcontractors

Subcontractors rely on timely payments to manage their own cash flow and to cover expenses such as wages, materials, and equipment. When subcontractors are not paid on time, it causes significant financial strain, making it difficult for them to sustain their operations. This financial instability will result in subcontractors being unable to complete their work on time or having to abandon the project altogether.

Project Delays

When subcontractors face financial difficulties due to late payments, their rate of work will noticeably slow down, or in serious circumstances, it may stop altogether. This will lead to project delays and further costs for the main contractor. Deadlines will be missed, and the overall project timeline pushed out, affecting client satisfaction and leading to liquidated damages.

Increased Costs

Late payments will indirectly increase costs for contractors. Subcontractors will charge higher rates to compensate for the risk of delayed payments. Additionally, project delays caused by financial instability will lead to increased costs for materials, labour, and other resources needed to complete the project. If word spreads that a contractor is bad at paying, this contractor will face higher premiums from their supply chain or, worse still, have a smaller and lower-quality pool of subcontractors to choose from.

Timely Transfers: Trust, Stability and Savings

Stronger Relationships and Trust

By direct contrast, paying subcontractors on time fosters trust and builds strong working relationships. When subcontractors feel valued and have certainty in their financial dealings, they will be loyal, cooperative, and motivated. This positive relationship promotes and enhances collaboration, the key to complex projects with many moving parts and stakeholders, and can lead to better project outcomes. It also makes your Quantity Surveyor's life easier.

Financial Security and Efficiency

With the necessary funds to efficiently manage cash flow, subcontractors can continue their operations smoothly and maintain a steady workforce, with materials procured on time and tasks completed without disruption. This reliability benefits all parties involved, with the subcontractor sure that payments will be made and the main contractor safe in the knowledge work will be delivered to a high standard and on time.

Cost Savings

Subcontractors will offer better rates or discounts for those who deliver consistent prompt payments. Additionally, avoiding project delays will avoid associated increased costs for labour and materials. Contractors can also avoid potential legal disputes and liquidated damages related to late payments.

Cutting-edge software making prompt payments easier

Evidence-Based Work Logs

A commercial management platform provides a comprehensive solution for tracking subcontractor work. With features such as photos, geo-tags, timesheets, and location trackers, it is easy to confirm that work has been completed as agreed, with all the required information stored in one centralised location. This evidence-based approach ensures transparency and accuracy, making it simpler to approve payments quickly. Your Quantity Surveyor has instant access to who instructed, approved and validated the work.

Automated Invoices

By tracking their work within the system, subcontractors using commercial management software can generate invoices automatically. This eliminates the manual process of creating invoices, reducing errors and saving time for both subcontractors and contractors. Automated invoicing ensures payment requests are timely and accurate, enhancing the likelihood of swift returns.

Easy Approvals

Workflow management streamlines the review and approval process. Contractors can easily review completed work, check evidence logs, and approve payments all within the platform. This integrated approach simplifies the workflow, making it faster and more efficient to issue payments.

Integrations with Payment Systems

Efficient commercial management software can integrate seamlessly with various payment systems. Once work is reviewed and approved, the system can automatically connect to the payment platform to issue payments. This automation reduces the administrative burden on contractors and ensures that subcontractors are paid promptly.

Conclusion

Paying subcontractors on time is essential for maintaining strong working relationships, ensuring project efficiency, and avoiding unnecessary costs.

Utilising a platform like Workstream can greatly simplify the payment process. With a host of features including evidence-based work logs, automated invoicing, workflow management, and integration with payment systems, Workstream makes it easy to pay subcontractors promptly, ensuring the smooth and successful completion of construction projects.

Housing all information in one hub, Workstream promotes collaboration between involved stakeholders which in turn improves results for all. If you’re interested in seeing the results for yourself, click here to schedule a Workstream demo.