A strong financial base in construction is as vital for success as a solid physical foundation is for any building project. Despite this, both general contractors and subcontractors struggle with the complexities of the payment process and face significant cash flow obstacles. Paired with razor-thin profit margins, it’s increasingly difficult for construction firms to build and maintain the financial foundation necessary to compete and thrive in the industry.
As part of my role at Autodesk, I have the privilege of speaking with our customers worldwide to learn about their challenges and pain points while operating their businesses. Time and time again, I hear about contractors’ frustrations and struggles with late payments and cash flow and how it negatively impacts their businesses. Late payments and non-payments are, unfortunately, pivotal contributors to declining contractor productivity eventually, in some cases, leading to bankruptcy for many GCs and subcontractors.
Industry research supports these sentiments. According to a 2023 subcontractor market report, 73% of subcontractors come out-of-pocket for materials before receiving payment from the GC or owner. Furthermore, subcontractors can face an excruciatingly long waiting period (83 days on average) to receive payments after completing their work. The inherent business-breaking risk can even lead many subcontractors to refrain from bidding on projects if a general contractor or an owner has a reputation for slow payments.
Faster payment cycles are essential for GCs and subcontractors alike to stay profitable in today’s fast-paced and evolving economic environment. Accelerating the visibility of payments between project stakeholders has been a significant focus area here at Autodesk to expand our strategic vision for a more connected construction industry.
That’s why I’m thrilled we announced Autodesk’s intent to acquire Payapps Limited, a leading global provider of construction payment management solutions. When we join forces with Payapps, we will aim to transform how construction payments are managed.
The construction payment process is notoriously time-consuming and administratively burdensome, with the weight falling heavily on GCs and subcontractors. Many construction firms still need to rely on outdated methods such as Excel spreadsheets and email to manage the entire flow of communication, opening contractors up to greater financial risk due to fragmented and disjointed workflows.
Increasing financial risk. Manual back-and-forth processes and siloed tools not only waste time but also increase the likelihood of errors in the payment process, resulting in missing invoices, incorrect payment terms and overbilling, all of which, ultimately, lead to late payments.
Unnecessary miscommunications and disputes. The lack of visibility and convoluted communications make it difficult to accurately track and monitor payment progress. This leaves more opportunities for miscommunications and disputes, potentially straining relationships between GCs and subcontractors.
High compliance risk. Moreover, manual payment processes also increase compliance risk. If information is missing, overlooked or there’s no audit trail, contractors could face contract and legal penalties in addition to potential fraud and security issues.
At Autodesk, our mission is to shake up the entire digital construction ecosystem, so it’s optimized for success from the start, including all aspects of financial management. We envision a future where sluggish and broken payment processes and systems are a challenge of the past.
Our prospective entry into payment and compliance management solutions with Payapps will fulfill a long-standing need in the construction industry that remains largely unanswered by other technology providers. We’ll be able to help our customers streamline financial operations, reduce payment cycle times, and mitigate financial risks. Together, we will pave the way for a future where construction firms can thrive in an increasingly competitive environment with more efficient payment practices.
Our collaborative partnership with Payapps goes back to September 2022, when we entered a strategic alliance to empower Autodesk Construction Cloud customers to digitize and automate their manual, spreadsheet-driven workflows, helping reduce payment cycle time, enable electronic payment processing, and eliminate potential errors.
Through our initial partnership, we had the opportunity to get to know the Payapps team and immerse ourselves in their company culture. We quickly discovered their steadfast commitment to their customers, which strongly resonated with our own values at Autodesk. This shared alignment in our values, culture, and customer-centric approach made Payapps a natural fit to bring into the Autodesk fold to accelerate the industry’s digital transformation journey together.
Known as Payapps in Australia, New Zealand, the U.K., and Ireland, and GCPay in North America, the company’s best-in-class cloud offerings accelerate the visibility of payments between project stakeholders and have helped construction teams save nearly 350,000 project hours a year. In North America, Payapps’ GCPay solution also helps general contractors manage the lien waiver exchange process with their trade partners to speed up the payment process. Through 2023, Payapps and GCPay collectively processed close to $50 billion in payment applications reflecting the value provided to both general contractors and subcontractors alike.
By expanding payment and compliance management into Autodesk Construction Cloud, we will be able to further expand our Design and Make Platform to provide GCs and subcontractors with new levels of visibility throughout the payment process and beyond. With Payapps agreeing to become part of the Autodesk family, following completion of the acquisition of Payapps by Autodesk, we are confident that our customers will experience the combined technological benefits of both companies, further improving payment management processes in the construction industry.
Late payments and cash flow struggles have long plagued general contractors and subcontractors, making it challenging to stay competitive. With Payapps agreeing to come on board at Autodesk, we’ll aim to optimize payment processes from the start to mitigate financial risks.
Autodesk’s proposed acquisition of Payapps represents our unwavering commitment to equipping the construction industry with the tools it needs to succeed in a rapidly evolving industry. It’s a challenge we’re well-positioned to resolve, and, following completion of the acquisition, we’re excited to bring the benefits of this acquisition to our customers and drive transformation in construction payment management.
See more information about our intent to acquire Payapps here: ADSK News.
Autodesk’s proposed acquisition of Payapps Limited has not been completed; the completion of the proposed acquisition of Payapps Limited is uncertain and is subject to the satisfaction or waiver of various conditions. Prior to the completion of the proposed acquisition, Payapps Limited and Autodesk will continue to operate as separate companies. Subject to the timely satisfaction or waiver of the applicable conditions, Autodesk expects the proposed acquisition of Payapps Limited to complete during Autodesk’s first quarter of Fiscal Year 2025, ending April 30, 2024. Accordingly, it will have no material impact on Autodesk’s fourth quarter and fiscal year 2024 guidance presented on November 21, 2023. The foregoing descriptions of the contemplated effects of the proposed acquisition are subject to the acquisition’s completion and Autodesk’s ability to successfully integrate Payapps in all respects.