It takes many teams and many skill sets to move construction projects from paper to concrete. Working with and managing large numbers of subs and suppliers creates complex, multi-tier payment structures that are fraught with potential for errors and delays along the industry’s lengthy payment chain.
Among these many drawn-out structures is the traditional joint check process, which is common in many construction projects. You know the drill: A check is made out to two parties (a subcontractor and a supplier, for example), and both parties must sign it before it can be cashed.
This process is meant to ensure that payments are disbursed properly and make their way down the line of subcontractors and suppliers. But this approach to solving non-payment issues has become overly complex for many reasons:
- It requires manual coordination between parties and management of drawn-out processes.
- It can delay payment for parties further downstream.
- It opens the door for human error to creep in.
- It can be difficult to make sure everyone receives their share.
- It can quickly erode trust and increase risk when things go wrong.
Digital joint checks enable complete payment visibility
Digital joint check platforms do away with the obstacles that create cashflow bottlenecks in an industry already struggling with tight margins — and they’re changing the way outdated payment processes work.
These platforms are about more than digitizing payments. They digitize entire payment workflows to enable a faster, smoother exchange of paperwork and create new industry opportunities.
Just ask Wayne Alley, executive vice president of risk management at general contracting and construction management firm VCC Construction. Through Struxtion’s digital joint check platform, he says VCC has found a way to simplify a historically convoluted process that involved multiple people across multiple departments.
“At minimum, we wasted a couple of hours of time with each joint check we issued,” he explains. “When you deal with 2,500+ subcontractors on an annual basis — even if only half of them need a joint check — you save an hour or two every time you can simply flag it as a joint check and let the system go to work. For us, that translates to several thousands of hours saved every year.”
Just as important as time savings — if not more so — in Alley’s eyes is Struxtion’s ability to provide complete visibility into where money is going and when. Because he oversees the firm’s risk management department, Alley is always evaluating financial implications, thinking about compliance and seeking out strategies to identify and assess possible threats. Digital joint checks reduce the possibility of money being allocated to the wrong job, leaving VCC without the correct lien waiver in place. Alley sleeps better at night knowing that the funds intended for the supply house actually make it there — instead of being hung up with a subcontractor suffering from temporary cashflow issues that could result in potential surprise liens from downstream suppliers.
How digital joint checks work
When you’re ready to issue a digital joint check, the platform user simply sets up the required financial flow between all parties involved. The payments, including required lien waivers, can be triggered simultaneously. Once the payer flags the payments that require lien waivers, the payee then receives notification that the waivers are ready to sign.
The payee is prompted to execute the waiver, a digital payment is scheduled, and then a lien waiver is digitally executed. Lien waivers and payment processing occur accurately and simultaneously.
Offering full transparency for all payment stakeholders, it’s a streamlined, integrated way to manage a formerly complicated and fragmented process.
Platforms that include embedded banking take digital joint checks to the next level by isolating project cashflow in a funds-control situation. To accommodate all payee types for each project, bank accounts can be set up to segregate funds and support distinct payment methods (ACH deposits and paper checks, for example).
Improving the industry’s cashflow to drive efficiency
The capabilities of digital joint check platforms are poised not only to change the way construction companies handle payment flows but also to transform the entire industry. By making sure everyone gets paid in a timely fashion, they help construction companies thrive.
With improved cashflow, companies can put money toward other initiatives and kick off new projects sooner instead of worrying about how and when to pay subs and suppliers.
“It’s about getting the money in the hands of the subs and suppliers in a very controlled manner that involves less paper,” explains Alley. “It streamlined our process and expedited payment with the electronic movement of dollars. It also helps mitigate risks associated with doing it the old-fashioned way. Struxtion’s digital joint check platform has been a game changer in terms of the way we’re able to distribute funds for subcontractors, partners, suppliers and vendors. The more people know about how easy it is, the more they’ll be willing to embrace it.”
Note: Struxtion is a financial technology company and not a FDIC-insured bank. Checking accounts are provided by Lewis & Clark Bank, Member FDIC
