Construction Accounts Payable – More than the Bottom Line
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Depending on the size of a firm in the construction industry, the accounts payable job may be a stand-alone role, or it may fall under the responsibilities of an Accounting Manager, Controller, Office Management or even the owner of a small business. Regardless of the title that is responsible for the job, the key skills and competencies will always include:

  • organizing and prioritizing 
  • attention to detail and accuracy 
  • confidentiality 
  • judgment
  • communication skills 
  • vendor relationship skills 
  • information management skills 
  • problem analysis and problem-solving skills 
  • teamwork 
  • professional integrity 
  • ability to meet deadlines 

An article published in Construction Executive magazine last year on receivable tips in construction says that “Contractors and suppliers face a lot of risks in all phases of construction, but some of the most dangerous of all are payment delays and nonpayment. The construction industry is notorious for having these payment issues and it could threaten the life of any construction business on the receiving end. All of these issues will have a huge impact on a company’s cash flow and expose them to greater financial risks if not addressed.”   The article goes on to provide advice on how to collect money owed in the construction industry, including having knowledge of the prospective clients Accounts Payable process, putting prompt payment laws and other government safeguards in action, and systemizing the incentives for early payment.

The first tip is the most enlightening, because despite the contract or agreement you may have in place, it is truly the communication and integrity of the accounts payable professional and their relationship with the check signer that will determine if a mutually beneficial outcome is provided or not.

We all know charming accounts payable professionals who tell you how hard they are working to get you paid despite knowing their check signer on the other end hired them to professionally stall you.  Others hide and don’t communicate, as they are in fear of telling you something you might hold them to and they know it is an ever-moving target with their check signer.

Regardless of the individual in the role and their communication style, it all comes down to communicating the truth about striking your check.    In interviewing financial professionals in our industry, we see patterns of beliefs.  We will hear things like “general contractors or sub-contractors always delay payment”.  Do they, or do they just attract employers who know they assume it is part of the job for payables to delay payment to vendors?

Others we interview discuss characteristics of the employers for whom they work who value relationships. Even when tough times hit, they made a point to communicate and stick to payment terms with each of the vendors upon whom they rely to keep their businesses running.

I often use dating and marriage analogies in staffing. 

If your role at a company includes accounts payable and you accepted a job, you choose whether or not to enter an abusive marriage when you selected your employer. This holds true whether your last “marriage” (place of employment) practiced abusive behaviors or not.  If you make that mistake after working for a relationally healthy employer, you will most likely try to change the environment or get out quickly.

Often, we see the cycle of abuse of financial professionals tied to payables repeat itself through many employers, just as we see people in abusive personal relationships repeat the cycle.  We also see abusers in the industry repeat themselves through generational ownership.  The father taught the son or daughter that it is normal to cycle through sub-contractors and vendors as a normal part of the accounts payable job including getting chased daily for past-due payments regardless of the financial stability of the company.  No different than a person who goes into a personal relationship accepting that being hit by their mate is just part of being together.  IT’S NOT!

Interviewing is like dating. 

Ask the right questions to get the right answers.  Verify, don’t justify. How do you do this for the payable role (whether you are the employer or the potential employee)? Listen and clarify answers.  Focus on behavioral questions as much as skill-related questions.  Yes, it is important to know the software and for both interviewer and applicant to explain their knowledge and experience with approving, paying and recording invoices.  Yet without the ability to communicate effectively and address vendor issues, such as dealing with missing supporting documentation, they may not be the right match for you.
Below are a few interview questions that should come up for discussion, and which either side can initiate:

  1. What do you normally require for a sub-contractor/vendor/supplier to get paid?
  2. Do you assist a sub or vender with completing their paperwork to get paid?
  3. How do you respond to a caller inquiring about a past-due invoice?
  4. How are payments disbursed? (picked up, auto deposit, credit card, etc.)
  5. What policy has been typical in the past or (for the applicant) what policies are in place for accounts payable?
  6. Tell me about some of the relationships you have with sub-contractors or vendors?
  7. How do you address an overpayment or underpayment?
  8. Have you been in a collections situation before?

The goal of these questions is to establish a cultural match.  If you are an employer who values relationships yet hires employees who don’t know how to establish and maintain a relationship, you will risk losing the benefits of mutual relationships.

If you are a payable professional used to working for a company who values relationships and helps their vendors get paid, and then go to a company who doesn’t share that philosophy, you may be terminated or reprimanded for doing so.  Yes, we have witnessed this firsthand and we know how difficult this is especially, when unemployment is high.

If you look at statistics from financial professionals in our industry and see if they operate based on the principle of sustainable growth (or ability to survive recessions and pandemics), you will find the facts will demonstrate the law of reciprocity lives among the choices we make.

To vendors and others who understand the industry and the relevant technology: As the industry narrows the playing field each year with less qualified trade professionals and privately owned sub-contracting firms, do you really want to make it more difficult for yourself by making it more difficult for others?

Accounts Payable could be the most important person in the company if they are backed by the people who value other people, including them.

If you are having collection challenges, give Alex Barthlett at the Lien Zone a call. He will help you or help you get to the right person.

Thank you to all our faithful clients who succeeded the COVID-19 crisis and assisted us to do so by being able to afford a new hire and to develop their existing staff.  We appreciate you.

Sincerely,

Suzanne Breistol

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