4 practical solutions to optimize the accounts receivable process for your construction business

Business Journals

12-05-2025

The construction industry is facing tremendous pressure from all sides. Material and labor costs remain high. Staffing is in short supply. Interest rates make financing projects more expensive, and complex contract terms slow already lengthy payment cycles.
For CFOs, the stakes are high. Managing accounts receivable (AR) can be an uphill battle. When things don't go well, late payments ripple through the business, delaying payments to subcontractors, pushing back timelines and damaging critical relationships with project partners.
The good news? New tools make it possible for construction companies to transform their AR teams into an operational advantage. Streamlined workflows and improved forecasting saves the finance team valuable time to tackle strategic priorities.
Here are four steps financial leaders can take to improve cash flow, maintain financial stability and position your construction firm for long-term success.
1. Automate credit management
A strong credit policy is your organization's first layer of protection against financial risk. Unfortunately, the traditional manual processes for this are time-consuming and make it difficult to adapt to macroeconomic fluctuations. This can leave your business exposed to a higher credit risk than desired.
Automation changes the game. Tools like the CommercePayments® Integrated Receivables Credit Cloud allow your AR team to automate credit applications — sending, tracking and managing applications in one place. The platform also allows you to review customers' credit periodically to ensure you don't take on more risk than is optimal. You'll make better credit decisions and keep up-to-date analytics at your fingertips.
2. Automate billing and invoicing
Construction projects often involve multiple billing milestones, making manual invoicing cumbersome and error-prone. It also adds time to an already sluggish process. Missing just one milestone or making a single error can turn into a weeks-long payment delay.
Here's the hard truth: Construction companies often wait over three months to collect payment on their invoices — more than double the recommended 45-day threshold for days of sales outstanding (DSO).
Switching to an automated billing and invoicing system can completely transform this process. For example, the CommercePayments® Integrated Receivables Collections Cloud equips construction companies with software to allow customers to view and pay invoices through an online self-service channel. You can send invoices across multiple channels, including email, electronic data interchange, fax, mail or a payments portal.
3. Simplify the order-to-cash cycle
The construction industry's process from delivering a service to collecting payments can be lengthy and complex. Most AR departments must manually match payments to remittance data, often posting files from multiple systems. This means long hours of tedious, low-level work.
Simplifying and standardizing this cycle is key to faster payments. The CommercePayments® Integrated Receivables Cash Application Cloud allows suppliers to link multiple payment types — from varied payment channels, with payment remittance details from diverse sources — and apply the cash to open receivables in their enterprise resource planning (ERP) system. It uses artificial intelligence to consolidate communication and remittance details into one system and uses optical character recognition and automated matching to boost precision and productivity.
4. Proactively manage operations and optimize working capital
Delays are always a risk in construction, and that carries over to AR. Late payments can set off an avalanche of problems, as tight cash flow turns into delays in paying subcontractors, stretching out project timelines and ruining important relationships.
However, handling collections manually is inefficient. It takes time for your AR team to personally review aging reports and decide which accounts to call on and when.
Automation is a great way to manage payments collection proactively. The CommercePayments® Collections Cloud automatically creates worklists for collections team members, directing them to the next best action. It also assists the team in writing correspondence and simplifies tracking call logs, buyer payment commitments and dispute management.
Automation is the key
By using technology to implement these strategies, your business will enjoy the benefits of a proactive approach to AR. You'll be able to align project timeliness and inventory cycles to your billing schedules and have processes in place to reduce gaps in cash flow and ensure projects stay on track. Real-time dashboards will allow you to monitor outstanding invoices, prioritize collections and forecast cash inflows, which is critical information for managing strategy.
This also will free up valuable resources in your accounting department. Your team will spend less time on low-level tasks such as checking invoices, credit management and handling deductions. This will give them more time to handle high-value tasks, such as investigating exceptions, resolving discrepancies and strategically following up on collections.
Pressures in the construction industry will not go away any time soon. Every team member needs to focus on the highest-level tasks possible — setting and executing your business strategy. An investment in AR automation today is an investment in your company's financial stability and long-term success.
CommercePayments® solutions are provided by Commerce Bank.
Automation can have unique effects for every business and transitioning from manual to automated accounts payable can play a vital role in turning your AP department into a profit center. and find the right automation solution for you.