eznetpay blog

We hear it all the time that “time” is money.  This is certainly the case when you are waiting to get paid.  Inefficient payment request methods and lengthy approval cycles can add to the cost of your service or product and cripple your profits.  A general contractor in a meeting commented that they had a ”pretty good” process in place to get paid.  They received all invoices by the 25th of the month and prepared the pay applications to submit for approval by the 10th of the month.  They usually had their check by the 30th of the month.  Not bad in comparison to how it usually goes (60 days, 90 days…).  As a business manager is this good enough?  What if the general contractor could have their funds in THEIR bank account by the 13th of the month?  How much extra income could they realize?  Let’s look at a project where the general contractor is receiving $800,000 of funds on an $8,000,000 project.  The project will take 12 months to complete and as a result the contractor will receive $66,667 per month.  Let’s assume the contractor is borrowing at a rate of 8.5% and will use the monthly funds to pay down on the line of credit.  The contractor is paying $188 per day in interest so the sooner they receive their funds the more savings they realize.  If they can reduce the turn time from 30 days to 13 days that is a monthly interest savings of $3,211, or $38,533 over the project life.  Now multiply this over 10 similar projects per year you have a total savings of $385,330!!  This is huge savings by just increasing the turn times of the A/R by 17 days.  How can you ensure that these turn times occur on a consistent basis?  Use eznetpay… it drives the payment cycle faster and saves significant expense and hassle.

We always hear great quotes from our customers, family and friends or read them in a book.  Some of them are very thought provoking and some of them are brutally honest.  Usually the brutally honest quotes come from experiences involving pain, loss or frustration.  I was in a prospect meeting with a banker learning more about the bank’s construction loan administrative processes.  The discussion highlighted the successful areas of the administration process as well as those things that fell through the cracks.  The banker pointed out those things that fell through the cracks, such as incomplete lien waivers and non-payments to second tier sub-contractors, were very time consuming and expensive for the bank.  Once the dust settled on a couple of bad loans the banker admitted that not only did the bank lose money on the loans but it also lost customer relationships and the bank’s reputation was harmed.  He commented the bank “didn’t have a problem, until it had a problem“.  How true is that in many businesses?  We get so busy we don’t want to evaluate risk, a process that can be improved or a cost that can be eliminated to name a few.  We don’t want to admit that there are problems that could be avoided… until it becomes a problem!  Processes can always be improved if you look for the opportunities.

Can you guess what the top two pain points are in getting paid using paper invoices?  According to PayStream Advisors (www.paystreamadvisors.com) topping the list is the approval process followed by resolving discrepancies.  This won’t surprise the subcontractors and vendors.  The paper based process is bloated with inefficiencies, very costly and frustrating.  It can take 60, 90, 120 days or more to get paper pay applications converted to cash and the bottle neck is in the approval process.  A typical payment application for a construction project can have 5-7 approvers.  An approver gets the pay application, reviews the documents and information, signs it, copies it, stores it and routes it to the next approver via courier, mail or express mail.  This process is replicated several times.  Throw in vacations, sick days, out-of-office days, lost payment applications and so on and you can see why it takes so long.  But what if there is a discrepancy with a payment amount which is the second pain point?  The payment application now has to be handled differently and mailed back (if at all) to the originator.  More delays, frustration, extra cost and weakened business relationships.

All of this pain can be avoided by taking a dose of eznetpay.  eznetpay uses a proprietary workflow technology to automate payment approvals and bring transparency to the process.  All participants requesting payments have real time payment status at their fingertips.  It no longer takes weeks or months to get the necessary approvals for payments.  It now only takes minutes.  But what if there is a discrepancy?  Not a problem.  Any approver can reject the payment application and resend it back to the originator for revision.  Business executed within minutes rather than days.  Subcontractors and vendors value this feature because it is more productive and better business.  Visit us at www.eznetpay.com to learn how you can “request, receive…with ease!”

For contractors, it’s easy to continue to do business as normal without looking for cost saving opportunities especially during busy times.  But do you know you may be leaving money on the table?  Project revenue can be enhanced by taking advantage of trade discounts offered by vendors and subcontractors.  As an incentive to improve cash flow to their businesses, vendors are increasingly offering discounted trade terms.  The usual trade discount offered is 2% net 10 which is a very attractive business proposition to the contractor and possibly the owner.  Have any idea what the effective annual interest rate is for this discount offer?  Try– 36.7%!  As long as your borrowing or opportunity costs do not exceed this effective rate it is always financially prudent to take the “money off the table” and pay within the discount period.  However, these discounts are usually ignored because the current paper based payment request/approval/disbursement process inhibits timely completion of payment applications — until now.  eznetpay can assist contractors and owners to take advantage of discounted trade terms that may be offered.  Through its streamlined, automated technology a contractor can request the payment using eznetpay and route it through the necessary approval sequences while automatically generating any required documentation such as lien waivers and change orders.  Once all of the approvals have been obtained, the money goes directly to the vendor.  Simple, easy and fast!  The vendor gets their money faster and you have taken the “money off the table”. This whole process can be done in as little as a few hours using eznetpay.  So increase your project income, save time, build stronger vendor relationships and go “green” with the use of eznetpay!

A thick envelope arrives from the Clerk of Court and inside is a Mechanic’s Lien and copy of an invoice showing the outstanding balance of an unpaid material bill from a supplier.  The frustrated owner pulls out the pay application and finds the signed lien waiver from the subcontractor for full payment.  The owner calls the supplier and learns that the subcontractor never paid the material bill.   A call to the general contractor now confirms the worst case scenario — the subcontractor is not returning phone calls and can not be located.  The owner will now have to pay the material bill again to release the lien.  How could an owner avoid this risk?  eznetpay can help.  eznetpay can be set up by the pay app administrator to allow for the direct payment of material bills to the suppliers.  The payments will go directly to the suppliers ensuring payment and the lien waivers are automatically executed verifying the funds for materials were received.  Simple, easy and timely.  eznetpay can help ensure a lien-free project and help owners drive down the cost of construction.

Do these questions sound familiar?

• Where is my check?
• Why do I have to wait so long to get paid?
• Why hasn’t the payment been approved?

These are just a few of the more popular questions asked by contractors and vendors involved with construction projects today.  In construction projects, the typical payment request process is paper intensive and time consuming and lacks visibility and accountability to all participants in the process.  It is an outdated process that adds significant cost to a project as well as frustration.  Living from paycheck to paycheck for contractors and vendors is like waiting for the change of seasons for most.  Ask a salaried employee if they could wait another 60 days for their paycheck and you might as well start the exit interview.  Contractors and vendors are no different.  However, times have changed.  Now technology can be the driver for faster payments driving down costs and improving project satisfaction.  Give us a call to see how eznetpay can help you receive your project payments faster.