By Claire Wilson, Siteline

In construction, the field and the back office are an organization’s yin and yang—one cannot exist without the other. While those in the field are doing the work required to bring in revenue, the back office is busy managing that revenue to ensure financial stability for the entire organization. The back office also serves as the administrative arm of the business, wrangling payroll, responding to clients, negotiating change orders, handling expenses—the list goes on.

As a business grows, managing these workflows can become increasingly challenging, and productivity can start to slip. To prevent this from happening, here are the best tips to improve back-office efficiency in construction.

1. Examine what’s working—and what’s not.

We are creatures of habit, especially when it comes to our workflow routines. What was effective in the beginning often becomes the norm, and it can be difficult to break free from those patterns. Nevertheless, it’s important to take a step back and evaluate whether these methods are still as efficient as they could be. We should identify areas where improvement is possible, whether through automation or elimination.

To start this evaluation, I recommend going to the source: your employees. Ask them questions such as:

• What are you currently working on (both as an owner and contributor)?
• How would you prioritize the importance of each of these tasks?
• How long does each work obligation take to complete?
• What capabilities are required to fulfill each task?
• Are there any areas of friction that inhibit your ability to complete your work?
• How effective do you feel certain workflows are in meeting company goals and objectives?

Once you have completed this exercise with your team, it will become easier to identify areas that need improvement and areas where non-value-adding work can be eliminated, reducing errors and increasing productivity and efficiency. (In the following sections, I’ll discuss some of the common areas where improvement is often required.) Your team will also appreciate being consulted during this process, and it will help you to gain their support if any changes are implemented as a result.

2. Increase collaboration between project managers and accounting.

The success of your construction business is heavily dependent on the collaboration between the field project managers and back-office accounting teams. This is because both teams rely on each other’s input to get the job done. Therefore, effective communication between them is crucial to avoid any potential financial discrepancies that could negatively impact your business.

Some ideas for streamlining field-to-office communication (and vice versa) include:

• Establishing an efficient chain of communication: By defining clear roles and responsibilities, you eliminate confusion and create accountability within your team. This ensures that everyone knows who to approach for essential information and when to do so while also promoting effective communication between top-level management to those on the ground level.
• Embracing a cloud-first approach: According to AGC’s 2023 Construction Hiring and Business Outlook report, 68% of contractors said they plan to use mobile software technology for daily field reports—most of which are cloud-based. Rather than calling the back office from the job site to report any new developments or updates (an antiquated and error-prone process), having cloud-based tools that facilitate real-time information sharing is pivotal to avoiding communication breakdowns and improving efficiency.
• Creating a single source of truth: In today’s fast-paced construction landscape, there’s no room for information gatekeepers. By digitizing all work-related materials and consolidating them into a centralized location, every team member (regardless of their role or location) can effortlessly access the essential information required to perform their tasks at any given moment.
• Leverage project managers (PMs) to help with collections: PMs often serve as the central communication hub on a construction project. They regularly interact with various stakeholders, including clients, GCs, suppliers, and the construction team. This enables them to facilitate payment discussions, track payment milestones, and take action if payments are delayed. Leveraging their central role to its fullest potential is crucial for ensuring seamless cash flow.

3. Leverage billing projections to predict future dips in backlogs.

Utilizing billing projections to anticipate future dips in project backlogs is an invaluable strategy for growing construction companies. By using billing projections, firms can proactively identify potential financial ebbs and flows, allowing for more informed decision-making. Specifically, this can help you:

• Identify potential cash flow issues early on.
• Implement cost-saving measures to keep your backlogs in check (e.g., expense tracking and control, regular budget reviews, cost benchmarking, and supplier negotiations).
• Place timely and competitive bids on upcoming projects to secure new contracts and maintain a steady workflow.

To employ this strategy effectively, construction companies should maintain accurate and up-to-date billing records, establish clear billing processes, and use software and financial tools that can maintain projections and analyze historical billing data. Additionally, regular monitoring and analysis of these projections can help companies adapt to changing circumstances, ultimately improving their financial stability and sustainability—which brings me to my next point.

4. Regularly analyze accounts receivable (A/R) data.

Analyzing A/R data is critical for managing cash flow and staying profitable in any industry, but especially so for trade contractors who wait an average of 90 days to get paid. Beyond enabling organizations to understand their financial health and identify potential issues, regularly reviewing this data can help in setting more accurate revenue and cash flow projections.

When reviewing your A/R, it’s important to focus specifically on “A/R aging” A.K.A. Days Sales Outstanding (DSO). This metric measures the number of days between submitting an application for payment or invoice to a client and receiving payment for it. Tracking this metric can help your team:

• Stay on top of collections
• Ensure that clients are adhering to their contractual payment timelines
• Identify patterns and trends in late payments
• Determine any upfront costs that need to be covered in order to bid confidently

A comprehensive, up-to-date A/R aging report also lays the groundwork for any A/R escalation plan, which I highly recommend instituting. With a well-defined escalation plan, your team knows exactly how and when to proceed when cash flow issues arise. This helps them focus on how to effectively resolve the issue to get cash in the door faster.

5. Leverage technology to eliminate tedious work.

Manual processes in construction back offices are rife with inefficiencies, making them error-prone, slow, and oftentimes overwhelming to your team. This type of work is ripe for technological intervention.

When implemented correctly, purpose-built software can streamline the redundant, documentation-heavy aspects of the payment process while catching the stuff that often slips through the cracks. Some workflows I’ve seen teams successfully automate include:

• Pay application creation and submission: Assembling and submitting pay applications every month for multiple projects is time-consuming—especially if there are missing or incorrect details that subs need to fix before resubmitting. This can cause delays in payment that negatively impact your cash flow. Technology that streamlines this process can improve efficiency, reduce errors, and speed up payments by ensuring precise and timely billing based on project requirements and completed work.
• Vendor lien waiver collection: A lot of construction companies are still managing lien waivers through spreadsheets, paper lists, email folders, and Post-It notes—methods that can easily lead to mistakes. Thankfully, there’s software that not only submits lien waivers to GCs but also requests them from lower-tier vendors. These solutions can even track the status of lien waivers and send notifications when they have been submitted, are pending, or are outstanding, helping prevent any rejections due to missing lien waivers.
• Change order management: Similar to the above, traditional methods for managing change orders involve a significant amount of paperwork. With a technology-driven change order log, teams can save hours reviewing spreadsheets and tracking down updates. What’s more, these tools provide valuable financial insights for more informed decision-making, reducing inaccuracies, preventing disputes, and making the process more effective.

Embracing technology doesn’t detract from the value of your role; rather, it amplifies it. By automating tedious tasks, you can free up more time to focus on strategic initiatives that drive business growth. Reducing the likelihood of errors can also decrease stress and improve work-life balance. Ultimately, streamlined workflows resulting from technology use can enhance morale and significantly boost productivity.

______________

Time to payment is everything in construction. While it’s natural to be skeptical about making improvements to speed up this process, the results are nothing short of transformative. I’ve worked with a lot of subcontractors, and those who’ve implemented these back-office hacks have experienced transformative results. One managed to slash their speed-to-payment by three weeks, while another achieved an 80% boost in billing workflow efficiency. Another has saved 25 hours each month on data entry billing meetings, while yet another is collecting vendor lien waivers five times faster.

These success stories underscore an important message—these improvements are well within your own sphere of control. It’s not (always) about what the GC is doing; it’s about the actions you take to enhance your own efficiency and financial well-being.

About the Author 

Claire Wilson is Head of Construction Solutions at Siteline, the only pay app and lien waiver management software for trade contractors. Previously, Claire was a project manager at Tishman

Construction in New York City where she worked on monumental projects including Hudson Yards and JP Morgan’s Corporate Headquarters. She has a BS in Civil Engineering from Bucknell University and now serves on the board of the Bay Area Subcontractors Association (BASA).