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Insights and best practices for construction management technology and project delivery

Kitchell Contractors digitizes subcontractor payment processes with Oracle Textura

Janet Poses
Sr. Marketing Manager

Kitchell Contractors, a mid-sized commercial general contractor in the ENR 400, has grown from building banks and grocery stores, to constructing hotels, hospitals, and public works projects. The company now manages up to 100 projects at a time.

The Phoenix-based company prides itself on being at the forefront of technology adoption—a view that extends from the field to the back office—where the organization has transformed its invoicing, payment, and compliances processes.

As a leader in technology adoption, it is no surprise that Kitchell, a long time Oracle Textura Payment Management customer, was an early adopter of the payment system. The company implemented the construction payment management software in 2007 to standardize and automate their back office processes.

Kitchell’s monthly subcontractor payment cycle entailed an all-hands-on-deck exercise to manage the lengthy process of reviewing and validating invoices to release payment before implementing the payment solution. Soon after, Kitchell’s Chief Financial Officer, Jorge Arellano, joined the financial services team and spent an afternoon folding documents and stuffing envelopes. He knew there had to be a better way.  

Oracle Textura Payment Management Cloud Service

Shortly thereafter, Arellano was introduced to Oracle Textura Payment Management Cloud Service during a presentation. Adopting proven technology to improve efficiency was an easy decision once Arellano saw the potential to streamline and automate Kitchell’s onerous billing and payment processes.

Both Kitchell and their subcontractors benefit from the consistent and streamlined process of managing billings, payments, and compliance by standardizing on the Oracle solution across all their projects. Kitchell includes the requirement to use the tool in all their subcontractor contracts to ensure standardization and equal benefits to all their subcontractors.

“With new technology like Oracle Textura Payment Management, you might not think you need it, but once you have the tool, you can’t imagine living without it,” says Arellano.

The monthly draw process

Oracle Textura Payment Management automatically sends email reminders to subcontractors, minimizing calls and improving the accuracy and timeliness of required work completion documentation.

Project teams and accounting no longer need to complete the validation checks. The Oracle system helps ensure that subcontractor invoices are completed correctly by automatically setting the invoice up for the subcontractors each month.

Subcontractors simply need to update their percentage complete. The system also ensures all numbers add up, previous payments are accurate, and retention is correct.

Even Kitchell’s project managers are saving time with the payment management solution. Project managers can now review and mark up subcontractor invoices directly in the Oracle system.

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“Change is hard, but everyone who has come onboard using Oracle Textura Payment Management, loves it.”

-Jorge Arellano, Chief Financial Officer, Kitchell Contractors

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Kitchell also saves time managing billing for change orders. Oracle Textura Payment Management ensures that subcontractors cannot bill against change orders unless the change orders have been approved and entered in the builder’s accounting package which is integrated with the Oracle solution. Kitchell no longer needs to check their ERP system, Oracle’s JD Edwards Enterprise One, for the change orders, to chase approvals, or match up the invoice.

“The time savings and impact from Oracle Textura Payment Management are huge,” says Arellano.

Process Savings per Month
Draw notification and follow up Approximately 70 hours
Subcontractor billing validation checks Approximately 50 hours
Project management invoice reviews Approximately 100 hours
Total Approximately 220 hours

 

Payment process

There were two and a half full-time employees (FTEs) managing the subcontractor payments prior to implementing the Oracle solution in Kitchell’s office, and that was not enough. Others had to jump in to help during crunch time each month.

At the project level, the subcontractors were divided into three to four subcontractors per project engineer. These project engineers spent practically three-quarters of their time—one week each month (30 hours per project engineer)—identifying and resolving issues.

“Some project engineers even ended up preparing the billings themselves, because it was easier than fixing and validating the subcontractors’ billings,” says Arellano.

Oracle Textura Payment Management also eliminated the need to do a physical check run and manually sort/compile the checks, reducing the resource need from two and a half, to less than one FTE.

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“Our subcontractors are easily getting payment four to five days faster. In the past it took about one week and now they get paid in just one or two days.”

-Jorge Arellano, Chief Financial Officer, Kitchell Contractors

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Recalculating revised billings was another time-consuming manual process that has been streamlined. The process that took two and a half FTEs over five days monthly now takes just half an FTE over that same period.  

“Now, we take the functionality from Oracle Textura Payment Management for granted. It is a given, but I have not forgotten what it used to be like,” says Arellano. “There was a stack of paper almost as tall as a person in our payables department each month.”

The entire flow is more efficient, the approval from the owner is faster, and there is more flexibility. The owner can reject one subcontractor’s payment application and let the rest go forward as opposed to putting the whole package on hold.

“Oracle Textura Payment Management has improved our subcontractor relations,” says Arellano.

Process Savings per month
Project engineer invoice validation Approximately 30 hours per engineer
Replacing physical checks with electronic distribution Approximately 50 hours
Recalculating revised billings Approximately 80 hours
Total Payment Process Savings Approximately 160 hours

 

Compliance processes

Project accountants no longer manually review compliance documents, track lien waivers in spreadsheets, or add sticky note “holds” to paper pay applications. The Oracle solution automatically tracks and recommends/places holds for non-compliance.

Lien releases also used to be manually sent, received, and tracked to manage billings against approved change orders. This previous very manual process has reduced needed resources from two and a half FTEs to under two hours a day.

Many organizations leverage ERP systems to facilitate regulatory compliance. Kitchell has integrated the Oracle tool with Oracle JD Edwards EnterpriseOne ERP. This integration automates the process of entering coded subcontractor invoices into the accounting package and eliminates data entry for accountants.

Now, all change orders and commitments auto upload every night from the ERP to Oracle Textura Payment Management, and invoices move daily from the payment system to the ERP system. Kitchell saves time, but the bigger value is the reduced risk of manual double entry.

Process Savings per month
Tracking and managing lien releases and holds Approximately 50 hours
Managing compliance and billing against change orders Approximately 360 hours
Synchronization between payment and ERP system Approximately 35 hours
Total Compliance Savings Approximately 445 hours

 

Learn how you can save time and reduce risk using Oracle Textura Payment Management.

Oracle Construction and Engineering, the global leader in construction management software and project portfolio management solutions, helps you connect your teams, processes, and data across the project and asset lifecycle. Drive efficiency and control in project delivery with proven solutions for project controls, construction scheduling, portfolio management, BIM/CDE, construction payment management, and more.

 

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