Accounts Payable Automation Software for the Construction Industry: A Comprehensive Guide

Introduction

Managing accounts payable (AP) efficiently is crucial for construction companies that handle complex, project-based workflows involving multiple vendors, subcontractors, and job sites. AP software designed for the construction industry helps streamline processes, allowing teams totrack costs by job, allocate expenses accurately with cost codes, and maintain seamless vendor relationships. This guide will explore the critical features of construction-focused AP software, outline top considerations for choosing the right platform, provide a breakdown of leading AP providers, and discuss potential pitfalls. Finally, we’ll discuss how RedHammer can help optimize your AP workflow.

Key Functionalities of Accounts Payable Software for Construction

Accounts payable processes in construction are unique, often requiring software capable of managing job-specific expenses, tracking cost codes, and handling detailed vendor transactions. Key features in AP software can improve efficiency and accuracy in managing construction-related expenses:

1. Invoice Scanning and AI Technology

Invoice scanning with OCR (Optical Character Recognition) and AI machine learning capabilities helps automate data entry and ensures that invoices are coded accurately by job and cost code. Key benefits include:

• Automated Data Capture: Scans invoices for vendor details, amounts, and job-specific codes, reducing manual entry errors.
• Improved Accuracy: Machine learning enhances accuracy over time by recognizing job-specific patterns and coding conventions.
• Cost Allocation by Job and Cost Code: Automatically categorizes expenses, helping ensure accurate cost tracking for each project, which is crucial for budgeting and profitability analysis.

2. Workflow and Approval Management

For construction companies, approval workflows are essential to ensure expenses are authorized according to project budgets and policies. Workflow and approval management features can:

• Custom Approval Chains: Create approval workflows specific to each job or project, aligning with internal policies and project structures. This ensures that each expense is tied to the correct job and aligns with project budgets.
• Real-Time Notifications: Alerts stakeholders to invoices awaiting approval, preventing delays that could disrupt project timelines and vendor relationships.
• Accountability and Compliance: Logs all approval actions, making it easy to track each invoice’s status and verify authorization at the job and cost-code level.

3. Payment Services

With multiple vendors, subcontractors, and projects, construction companies need a secure, streamlined payment process. AP software supports direct payment capabilities, including ACH, wire transfers, andchecks, to manage vendor payments:

• Efficient Payment Processing: Issue payments directly from the platform, reducing administrative time and ensuring prompt payments to vendors, which is vital for maintaining vendor trust across projects.
• Flexible Scheduling: Schedule payments to optimize cash flow for active projects while meeting terms with various subcontractors and suppliers.
• Transparency: Track payment status and ensure each expense aligns with project budgets and schedules, providing real-time visibility for project managers and accounting teams.

4. Credit Card Integration

AP software that integrates with credit card systems, including virtual cards and purchasing cards, simplifies tracking and managing expenses on a project-by-project basis:

• Expense Control: Pre-set spending limits specific to job-related purchases, ensuring that project expenses stay within budget.
• Rewards and Cash Back: Earn rewards on virtual card payments, which can be beneficial for job-related expenses, especially for high-volume purchasing.
• Automated Reconciliation: Sync card transactions with job cost codes to streamline project accounting, reducing manual tracking and improving accuracy.

5. Expense Management

Expense management tools within AP software are vital for tracking project-specific expenses, from materials to subcontractor services.These features allow companies to:

• Budget by Project: Allocate and track expenses against specific job budgets in real time, helping project managers monitor costs closely.
• Policy Compliance: Enforce spending limits to maintain control over project expenses, reducing the risk of budget overruns.
• Detailed Reporting: Generate reports to review job costs, analyze spending trends, and ensure projects stay within budget, providing valuable insights for future job estimation.

Top Considerations When Choosing Construction AP Automation Software

When selecting AP software for construction, prioritizefunctionality that supports job costing, integration with constructionaccounting systems, and the ability to manage project-specific workflows:

1. Invoice Scanning and AI for Job Costing

• Job and Cost Code Precision: Confirm that the software’s OCR and AI capabilities accurately extract invoice data, including job-specific information such as project names, cost codes, and line-item details.
• Adaptability to Construction Invoices: Construction invoices often have unique formats with project-specific details. Choose software that can handle these formats and categorize expenses by job and cost code without needing manual adjustments. It’s also important to note some software applications have better machine learning models and don’t require significant manual training.

‍2. Seamless Integration with Construction AccountingSystems

• Compatibility with Construction Platforms: Ensure the AP software integrates with your existing construction  accounting software. It is not uncommon for the AP software vendors to exaggerate their integration capabilities. They commonly interchange integration with CSV imports/exports.
• Real-Time Data Sync: Look for software that offers bi-directional data exchange. Real-time syncing ensures job costs are updated in both systems, providing accurate financial visibility for each project.

 3. Project-Specific Workflow Customization

• Flexible Approval Chains by Project: Construction companies often need custom approval workflows based on job-specific requirements. Select AP software that allows flexible, project-based workflows to ensure expenses are approved according to each project’s budget and policy.
• Scalability for Multi-Project Management: Choose software that can scale with your business, accommodating complex workflows across multiple projects or business locations.

 4. Cost Transparency and ROI for Construction Context

• Detailed Pricing Structure: Beyond the base price, understand additional costs like transaction fees, particularly if your business has a high volume of payments. Consider how much the software will save in time and accuracy.
• Project-Based ROI: Evaluate potential ROI, especially regarding job cost tracking and reduction of manual work. Automation can improve project profitability by enhancing budgeting accuracy and avoiding costly errors.

5. Native AP Modules in Construction Accounting Software

Some construction accounting systems have built-in AP modules that may serve simpler needs:

• Benefits: Native AP modules typically integrate well with functions like job costing and payroll, providing a cohesive user experience while reducing the need for external software, lowering costs, and simplifying integration.Native AP modules typically integrate well with functions like job costing and payroll, providing a cohesive user experience while reducing the need for external software, lowering costs, and simplifying integration.
• Considerations:  Built-in AP modules may lack advanced features found in dedicated AP software,particularly for companies with more complex job-costing requirements. Verifythat the module meets your needs for managing cost codes, job-specificapprovals, and vendor relations.

Leading Accounts Payable Software Providers for Construction

In the section below we detail out of AP Automation software solutions, including their pros, cons, integrations with construction accounting software, and pricing information.

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Ramp is primarily an expense management platform with a focus on corporate cards, making it suitable for construction firms that need better control over job-related purchasing.

Pros:

• Offers corporate cards with built-in budgeting, helping companies control spending on job-specific items.
• Offers features like automated receipt matching, real-time expense tracking, and direct integration with accounting software like QuickBooks, Xero, and NetSuite.
• Ramp simplifies accounts payable with automated invoice processing, customizable approval workflows, and seamless payment options integrated directly into its platform
• Cashback rewards on card transactions can be beneficial for large expenses.‍

Cons:

• Primarily focused on expense management, so may lack deeper AP capabilities.
• Unlike some corporate credit cards, Ramp doesn’t offer travel-related benefits like airport lounge access, travel insurance, or airline miles.
• AP payment integration is not bilateral, so if payments are not made in Ramp, it could create additional work.

Pricing: No subscription fees; revenue generated through interchange fees on card transactions.

Integrations: Ramp Integrations

Website: ramp.com

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Bill.com is widely used for automating AP tasks, offering ease of use and integration capabilities that are helpful for construction companies managing project-based expenses.

Pros:

• User-friendly interface with robust automation features for payment approvals and tracking.
• Integrates well with mainstream construction accounting platforms, including job cost fields.
• Supports mobile approvals, allowing for quick authorization of job-related expenses.‍

Cons:

• Transaction fees can add up, increasing overall costs, especially for high-volume transactions.
• Limited customization in complex approval workflows that may be required for large projects.

Pricing: Starts at $39 per user per month. Additional transaction fees apply.

Integrations: Bill.com Integrations

Website: bill.com

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Stampli offers a collaborative AP automation platform with advanced AI, making it an excellent choice for construction companies that need multiple stakeholders to approve project-related expenses.

Pros:

• AI-powered platform that improves invoice processing accuracy for job-specific coding.
• Enables easy collaboration, helping AP teams and project managers communicate around job-based expenses.‍

Cons:

• Limited integrations with construction-specific software, which may require additional setup.
• Custom pricing structure that requires a quote, leading to potentially higher costs for small firms.
• AP payment integration is not bilateral, so if payments are not made in Stampli, it could create additional work.

Pricing: Custom pricing based on transaction volume and company needs.

Integration: Stampli Integrations

Website: stampli.com

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AvidXchange provides comprehensive payment services tailored for companies needing high transaction volumes, which is often the case in construction AP.

Pros:

• Extensive payment options, including support for virtual cards, which can simplify job-related purchases.
• Integrates with a wide range of ERP systems, including Sage 300 CRE, and supports high transaction volumes, making it ideal for large construction companies.‍

Cons:

• The variety of features can be overwhelming for smaller construction firms.
• Costs may be higher, potentially posing a challenge  for companies with smaller AP budgets.

Pricing: Starts at approximately $25 per user permonth, with additional transaction fees for payments.

Integrations: AvidXchange Integrations

Website: avidxchange.com

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Tipalti is an advanced global AP solution that supportsmulti-currency payments, which is valuable for construction companies working internationally.

Pros:

• Multi-currency support simplifies payments to international subcontractors and suppliers.
• Advanced payment reconciliation features help keep job-specific payments organized.‍

Cons:

• Primarily designed for larger enterprises; may have more features than needed for smaller construction companies.
• Limited construction-specific functionalities, potentially requiring customization for job costing.

Pricing: Starts at around $299 per month for the core package, with additional fees for international payments and enhanced support features.

Integrations: Tipalti Integrations

Website: tipalti.com

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Rillion is designed to meet the unique accounts payableneeds of construction and engineering firms, offering comprehensive automation for invoice processing, purchase order matching, and document management.

Pros:

• Strong focus on PO matching, ensuring invoices align with job-specific purchase orders and budgets.
• Integrates with a wide array of ERP and accounting systems, streamlining data flow and ensuring accurate job cost tracking.
• Efficient document management that simplifies audit trails and approval workflows for construction-specific expenses.‍

Cons:

• Advanced features like automated matching and document management may be excessive for smaller firms with simpler AP needs.
• Customization and implementation costs may be higher for small and mid-sized companies.

Pricing: Custom pricing based on the volume oftransactions and company size.

Integrations: Rillion Integrations

Website: rillion.com
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Comparison Chart

Now lets compare each software side by side:

Integration Matrix for AP Software with Construction Accounting Systems

Here is a matrix outlining the integration capabilities of each AP software with popular construction accounting and ERP systems. “INT”indicates a direct integration, “CSV” denotes data transfer via CSV import/export, and a blank space means no integration is available.

Key Points Summary

1. Enhanced AP Features: AP software designed for construction offers critical features such as automated invoice scanning, job-specific workflows, and integrated payment services, making it easier to track expenses accurately by job and cost code.
2. Project-Specific Expense Management: Features like flexible approval workflows and real-time notifications help ensure expenses are allocated correctly, comply with project budgets, and maintain vendor relationships.
3. Importance of Integration: Seamless integration with construction accounting software (such as Sage 300 CRE, QuickBooks, and Viewpoint) helps construction companies avoid data duplication, maintain accurate job costing, and improve financial visibility across projects.
4. ROI and Efficiency: Investing in AP automation software can significantly reduce manual data entry, improve accuracy in job cost allocation, and ultimately boost profitability by enhancing project budget adherence.

How RedHammer Can Help Your Construction Business

At RedHammer, we specialize in guiding construction companies through the AP software selection and implementation process. Here’s how we can support your business:

• Construction-Specific Consulting: We assess your unique AP needs, focusing on job-based expense management, cost codes, and vendor tracking.
• Software Selection and Setup: Our team ensures you choose the right AP software, balancing essential functionality with budget considerations.‍
• End-to-End Implementation: We oversee the setup and integration process, ensuring the AP software aligns with your construction accounting and project management systems.‍
• Employee Training and Change Management: RedHammer provides tailored training to help your team code expenses accurately to jobs, cost codes, and budget lines.‍
• Ongoing Support: We offer continuous support to optimize AP workflows, address evolving project requirements, and keep your AP software running smoothly.

Conclusion

For construction businesses, managing accounts payable requires a unique blend of job-specific tracking, vendor management, and cost control. By selecting the right AP software, you can streamline these processes, reduce administrative time, and improve project profitability. With the right guidance from RedHammer, you’ll be well-positioned to choose, implement, and maximize the benefits of AP automation tailored to the construction industry. Contact RedHammer to discuss how we can assist in optimizing your accounts payable process and support your company’s long-term growth.