Construction companies manage a blizzard of paperwork, and vendor invoices are a major contributor to the avalanche. Most construction companies follow a manual process of copying, routing, approving, filing and data entry for virtually every invoice. The process ties up accounting staff and requires project managers to spend valuable time handling, routing and approving those invoices.

Beyond the time spent shuffling paper, the process also creates a time lag in making job cost information available. It ultimately slows and/or reduces the accuracy of cost-to-complete estimates that are so important to running a job profitably. There’s a better way: electronic processing of vendor invoices. Well-designed-and implemented construction management software with integrated document imaging can stop the paperwork snowstorm, slash processing time, and deliver timely job cost data. Beyond these benefits, each invoice is instantly retrievable from its electronic “file cabinet,” safe within the software’s database. Quick access, improved security and integrated reporting are major benefits of electronic or “paperless” invoice processing.

Step-by Step

The benefits of construction management software integrated with document imaging are significant. But what about security, labor and costs for scanners, software, and data storage? Let’s look at the process step-by-step, and then we’ll identify what’s required to make it happen.

One of the key aspects of this improved workflow is that each stage of the process is simplified or even eliminated. When a vendor invoice arrives, it is scanned and immediately entered into the software. Simultaneously, the image is automatically “indexed” and permanently attached to the invoice within the software. Automatic indexing eliminates the possibility of error. The paper-filing process is eliminated; the original paper invoice can be recycled as soon as it is scanned and entered into the software. (Some companies will place all invoices in a single file by month. This unnecessary step can help make most of us “paper addicts” more comfortable as we learn to rely on the new paperless system.) Routing invoices is immediate, electronic and entirely automatic. There are no inboxes, and there’s no faxing or overnighting. As soon as the invoice is entered it appears on the invoice-approval screen for the first person in the approval process. The routing hierarchy is established in advance. Invoice routing can be determined by the job and/or the specific vendor and even the dollar amount. The approval step is easy. Each approver can be notified by e-mail that invoices are ready. On a single screen, the approver sees a list of their invoices. With a click of the mouse, they can view the actual invoice along with any notes attached by an earlier reviewer.

The payment process also saves time. Only approved invoices can be selected for payment. Reporting is always available to show pending invoices and how long they've been outstanding very helpful at month-end for WIP and for cash requirements reporting.

Making it Happen

How does a construction company make all this happen? The company will need one or more scanners. Very good ones, which can scan as many as 40 pages per minute, cost in the $500 to $700 price range.

The construction management software must include integrated document imaging and electronic invoice approval processing. The network also will need some extra storage. A standard three-drawer file cabinet full of documents will require up to 1 GB (gigabyte) of disk-storage space when stored as electronic images. The cost of 1 GB of disk storage is $3 or less. In terms of security: the software already contains passwords and security levels to control access to information. Electronic invoices are secured by the same system that contains the rest of the company’s financial information. What about the potential for a computer failure to wipe out files? The network includes data security procedures like daily backups and offsite storage. That’s more secure than a file cabinet sitting in the office, where it’s vulnerable to fire, flood and tampering.

In Short

The “paperwork blizzard” is a fact of life in the construction industry. But electronic invoice processing can help tame the beast while saving time and money and making information more easily accessible. (Next month: How construction management software can help the company’s staff create critical cost-to-complete estimates with greater precision and in less time.)

Brad Mathews is vice president of sales and marketing for Seattle-based Dexter + Chaney, developer of Spectrum™ Construction Software. For information, go to www.dexterchaney.com, davev@ci.grandjct.co.us.