Construction applications for payment: Pain point or competitive advantage?

Payapps latest research report, Construction applications for payment: Pain point or competitive advantage?, investigates how technology can improve admin time

The report asked 127 respondents about their experiences with construction applications for payment.

The survey set out to get to the heart of the issue by asking subcontractors how they feel about the way contractors handle applications for payment. The study focused on six areas: managing payment applications, working with contractors, admin burden, compliance, technology use, and experiences of using Payapps.

The clearest outcome is that payment applications remain a significant source of friction for subcontractors.

A lot of time is spent on payment applications

Of the respondents, 55% spend at least 20 hours per month on general administration, and on average, preparing and submitting an application takes 1.5 hours. Inconsistent contractor requirements and the need to work across multiple systems add further complexity with 37% of those required to use multiple systems to submit applications to different contractors.

Furthermore, 67% of respondents say that they still prepare most payment applications using spreadsheets, and 15% say that a single application takes more than three hours. 60% of those still using spreadsheets say that administration affects their day-to-day work either a lot or a fair bit.

37% are required to use multiple systems to submit applications to different contractors.

Respondents were also asked about their experience with pay disputes. 73% said that payment process disputes arise sometimes or often, and 49% say the information provided by contractors is only sometimes clear, or not clear at all.

Administrative loads reduce effectiveness

The key point of the research is that many organisations are being hampered by these processes, either via putting pressure on making sure applications are right, disputes being brought forward, or issues with compliance.

Contractors were asked what they would like to see to give them greater confidence in the process, and 85% agreed that clear and consistent payment schedules would help.

Strong track record of paying on time came second at 77%, with transparent application assessment process at 55%, clear communication during the tender stage at 45%, and standardised digital workflows at 7%.

The commercial consequences for contractors are significant. 84% of subcontractors say a contractor’s payment reputation influences whether they bid for or price future work, and 68% have increased rates or added a risk margin because of slow or unreliable payments. This means poor payment processes can affect not only supplier relationships, but also contractor costs and access to subcontractor capacity.

The overall conclusion is that the application-for-payment process has become more than an administrative function. It is now a commercial and supply-chain issue. Poor processes can increase admin, create disputes, damage cashflow, erode trust and influence whether subcontractors want to work with a contractor again.

Payapps is presented as a way to address the problems identified throughout the survey as it creates a shared digital workflow for submitting, assessing, and approving payment applications.

Of those who have used the Payapps platform:

• 80% rated it extremely, very or somewhat helpful.

• 50% said they had already reduced the time they spent on administration.

• 43% identified better visibility of application status as a benefit.

• 39% cited having everything in one place.

• 30% said applications were easier to submit.

  Read the full report here, and find out more about Payapps here.