Contract Simply Uncovers $40 Billion of Excess Costs in Construction Industry
Company Releases Construction Payments Report to Identify Risks Associated With Slow Payments
AUSTIN, Texas, June 6, 2018 (Newswire.com) - Contract Simply, an automated workflow solution that reduces risk in construction loans, released its 2018 Construction Payments Report today at American Banker’s Digital Banking conference.
Contract Simply conducted an industry-wide study to evaluate how slow payments affect development project costs, risks and project completion. It distributed the survey to 1,300 contractors representing a wide diversity of construction trades. The survey’s findings indicate that slow payments in the industry result in $40 billion in superfluous costs annually.
Slow payments have caused a strain on working capital for contractors who typically employ fewer than 20 people. These are small businesses that must float payments for other financial obligations while waiting for disbursement from the general contractor, which results in subcontractors often feeling like they are financing projects.
Will Mitchell, CEO of Contract Simply and a former real estate developer
The survey results revealed that 41 percent of subcontractors wait between 30 and 60 days for payment, while an additional 46 percent of those surveyed wait 60 to 90 days. This confirms the PWC Working Capital report that engineering and construction sectors in the U.S. suffer from over 50 Days Sales Outstanding (DSO).
When asked about managing cash flow, 83 percent of the contractors surveyed have been forced to file a lien due to slow payment, with a majority reporting they have used business savings or a line of credit to float payments to others. For 75 percent of the contractors, this means incremental costs in the form of finance fees and administrative time averaging 3.3 percent of the total project costs, which equates to $40 billion for the industry as a whole.
More than 70 percent of respondents indicated that if construction lenders and borrowers were to offer net 30 payments, they would collectively be willing to provide $21 billion in discounts.
Click here to download a full copy of the report. For more information about Contract Simply, visit www.contractsimply.com.
About Contract Simply
Contract Simply provides process automation software to mitigate risk in construction loans. By reading documents, coordinating approvals and tracking payments, Contract Simply creates efficiencies and identifies opportunities to limit exposure for construction lenders and borrowers. Built in Austin, Contract Simply’s award-winning software cuts days from the construction back-office operations while ensuring compliance and reducing liability for everyone involved. To learn more about how Contract Simply streamlines and automates construction draws for both borrowers and lenders, please visit www.contractsimply.com/request-demo.
Media contact:
Tim Ryan
tim@contractsimply.com
Source: Contract Simply
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