In construction, cash flow is a key challenge for subcontractors. Under the industry's traditional financial processes, subcontractors often face long and unpredictable gaps between invoicing and payment. While awaiting payment, they still have to pay for materials, labor and other project expenses, and funding this gap can be challenging—and expensive. The challenging financing environment for small and medium-sized enterprises further complicates matters.
The Oracle Textura Payment Management Cloud Service provides an innovative solution to this problem. Designed specifically to tackle the construction industry's unique payment challenges, the solution enables general contractors to use third-party funding to offer subcontractors the option to be paid earlier—as soon as a few days after invoice approval. The key is leveraging supply chain finance techniques to reduce subcontractor payment waiting times and provide known payment timing. This, in turn, improves cash flow and the management of working capital.
Subcontractors say that participation has provided faster payment, improved cash forecasting, and made it easier to take advantage of their suppliers' own early-pay discounts.
Here's just a sampling of what subcontractors have to say about the benefits of general contractor-offered early payment programs:
"With quick and predictable payment, we don't have to take on the risk that comes with borrowing to fund our materials costs," said Bob Pollock, president of commercial flooring company Continental Interiors.
"The program has improved our cash flow tremendously! Receiving payment so quickly after submitting an invoice is very significant for our business, helping support our growth and continued success," said Leigh Ann Barga, controller at Delaware Glass & Mirror.
"We're getting paid significantly faster, I don't have to wonder when a payment will arrive, and taking advantage of the early payment option is less expensive than using credit," said Ron Montbleau, President/Owner of woodwork and custom furniture makers Montbleau & Associates.
"We're very happy with the early payment program! We're getting paid much sooner when using the program, and knowing when a payment will arrive makes it easier for us to manage our cash flow," said Debbie Kolhagen, financial controller at civil and structural engineering contractor Haines Gipson & Associates Inc.
"The program brings much needed consistency into the payment process. We're getting paid much faster with EPP, and knowing the date of payment really helps us manage our cash flow," said Matt Wilcher of National Coating Restorations, a contractor specializing in commercial painting and coating.
"Not holding up cash flow is huge in this business…it's is a win-win for everybody," said Cindy Pitts, co-owner of excavation contractor F & P Construction. She noted F & P has been able to receive payment 45 to 60 days sooner when electing for early payment compared with the timing in its projects generally.
"Accurate cash forecasting and budgeting are important, and the program is a big help by providing certainty around payment timing," said Cindy Bucci, Controller at Detroit Spectrum Painters.
"As a small business owner I wear many hats, so I welcome the ease of participating in the program. Enrollment was simple, and now we're getting paid quite a bit faster, which helps our cash flow," said Warren Weaver, Owner of Weaver Construction.
Offering early payment to subcontractors via Textura Payment Management also delivers benefits to general contractors in the form of competitive advantages, reduced risk of subcontractor default, and stronger subcontractor relationships.
Read our white paper to learn more about supply chain finance programs in construction, and click here to find out more about how Oracle Textura Payment Management can improve payment outcomes for construction subcontractors and general contractors alike.