⚠️ WARNING: 75 Day Payment Terms are the accepted practice in the AEC industry! 😖
Learn how this outdated payment practice hinders growth and discover the five steps to reduce payment delays to ZERO! 🥳
🎥 Fun Intro
Have you ever walked out of a store without paying for the items you picked up?
Most people would consider this to be a crime, but in the Architecture, Engineering, and Construction (AEC) industry, it's an accepted practice.
While in the store, you are expected to pay for what you've taken immediately.
However, in the AEC industry, it's common to wait an average of 75 days for payment on work that has been completed.
This delay in payment has serious consequences for small and medium-sized businesses, stifling growth and productivity.
So, why are these two situations so different?
In the store, you have products with clearly defined prices and ingredients.
It's a straightforward transaction.
However, in the AEC industry, every project is unique and challenging to define in terms of ingredients and quantities.
This ambiguity leads to delays, budget overruns, and friction between project stakeholders.
But is it possible to make a change and improve the payment process in the AEC space?
To address these issues and foster industry-wide improvements, I propose five practical tips that can make a significant impact on productivity and cash flow in the AEC industry.
The Five Steps
1. Proactive Agreements
The traditional approach of waiting for documents to be completed before seeking feedback and agreement can be time-consuming. Instead, adopting a proactive approach where feedback is sought throughout the process can streamline workflow and ensure better collaboration. By seeking agreement at various stages, rather than waiting until the completion of a document, potential issues can be addressed early on, reducing delays and rework.
2. Clearer Information Requirements
Ambiguous information requirements are a major source of costs, delays, waste, and errors in the AEC industry. By establishing structured and clear information requirements, project teams can easily determine if they have the necessary information, reducing errors and rework. Clarity in information requirements leads to improved efficiency and accuracy in project delivery.
3. Connected CDE (Common Data Environment)
Connecting project deliverables to contracted tasks promotes real-time collaboration and reduces duplicated information across various platforms. By integrating project deliverables with task management, organizations can streamline the flow of information, increase transparency, and reduce administrative burden. This connected approach ensures that all stakeholders have access to the latest information and progress updates, fostering better project outcomes.
4. Autonomous Quality
Relying on post-delivery quality checks can result in delays and rework. Empowering teams to self-check their work before submission can improve efficiency and accuracy. By adopting an autonomous quality approach, teams can identify and address issues proactively, reducing the need for extensive quality control measures after the fact. This streamlined workflow ensures faster project completion and reduces wasteful work and errors.
5. Micro Payments
One of the most significant challenges in the AEC industry is the average 75-day payment term. To address this issue and incentivize timely delivery, implementing a micropayment system can revolutionize how the industry operates. Micropayments directly link the delivery and verification of work to payment, ensuring faster and more frequent payments to contractors. By tying payment to each completed task, individuals and companies within the industry can experience better cash flow and increased motivation.
Implementing Practical Tips for the AEC Industry
Transitioning to Dedicated Database-Driven Tools
Implementing these five practical tips requires a transition from traditional tools like Word and Excel to dedicated database-driven tools specifically designed for the AEC industry.
Revolutionizing the AEC Industry
At Plannerly, we are leading the charge in transforming the AEC industry. We have developed templates, clear requirements, smart contracts, and autonomous checking systems to facilitate the adoption of these five tips.
Modernizing Billing and Payments
To further accelerate this change, we need to modernize billing and payment processes, eliminating outdated methods like sending checks. Our next focus is on developing a micropayment solution that enables secure bank-to-bank transfers with every verified task, reducing payment delays to almost zero.
Join the Revolution
By implementing proactive agreements, clearer information requirements, connected CDE, autonomous quality, and micropayments, we can revolutionize the AEC industry.
If you are a pioneer interested in joining us on this journey, we invite you to get in touch and be a part of this transformative change.
Get in touch via the chat in the bottom right of your screen!
Remember, don't plan late, plan early, and embrace the power of micropayments with Plannerly.
