Accounts Payable for Construction Companies: Challenges and Solutions

Accounts Payable for Construction Companies: Challenges and Solutions

In the world of building and construction, change is part of the job. Every project brings its own complexities, whether your firm is building homes, high-rise developments, commercial office buildings, industrial sites or major infrastructure works. Despite careful planning and risk management, unexpected challenges can disrupt your timelines, budgets and stakeholders’ expectations. These disruptions don't just affect project execution—they can also create significant challenges for your accounts payable (AP) team.

Whether a client requests a last-minute change, subcontracted work exceeds the initial quote or a supplier runs out of a key material, there are many moving pieces that can complicate construction payment management. If your firm relies on a manual AP process, it can make an already complex payment system even harder to manage. Invoice deadlines don’t wait, but scattered approvals, unresolved cost changes and disconnected systems can stall the payment process and put your projects at risk.

To address these challenges, AP automation brings greater visibility and control to the payables process. It helps you and your team streamline approvals, organize vendor information and maintain a clearer view of your outstanding obligations—so you can stay focused on the work ahead.

The Pitfalls of Manual Payables and How AP Automation Can Help

If you haven’t made the switch to an automated payment solution, these common pain points may sound familiar. To show what’s possible, we’ve highlighted how AP automation can help your team overcome these obstacles and keep payments moving efficiently.

Payments Are Complex

Construction payments rarely follow a simple invoice-to-payment process. Subcontractors are often paid in stages, and holdback requirements can add another layer of complexity. Every expense is assigned to the right project and cost code—a tedious process that can introduce errors when handled manually.

How AP automation can help: AP automation standardizes complex payment workflows so your team can track progress payments, manage holdbacks and accurately assign expenses to cost codes.

Cash Flow Can Be Unpredictable

In the construction industry, money doesn’t always flow in and out on a steady schedule. If your firm is waiting on an incoming payment but still needs to fill supplier invoices or buy materials, cash flow gaps can cause stress and limit your ability to move forward on a project.

How AP automation can help: Your team can better anticipate upcoming obligations and manage cash flow gaps by strategically scheduling payments using an AP automation platform. Some automated payables solutions, such as RBC PayEdge, allow you to pay by credit card (even when the recipient doesn’t accept cards), helping you bridge temporary cash gaps.

Use Case¹: General Contractor Experiences Cash Flow Gaps

Mark is a general contractor with a small, tight-knit crew that works on residential projects. He has learned to expect occasional cash flow gaps: one phase of a project wraps up, and materials need to be ordered for the next phase, but the latest client payment hasn’t arrived yet. In the past, that often meant delaying an order, moving money around or making hard decisions about which expenses could wait.

After Mark’s bookkeeper pointed out how often the team was scrambling to manage the timing, he decided to implement RBC PayEdge. The platform integrated with his existing accounting software, QuickBooks Online, making it simple to adopt without slowing down the team’s day-to-day work. Now, Mark has a clearer view of upcoming obligations and can schedule payments more strategically. And when inevitable cash flow gaps arise, he can use a credit card to cover immediate expenses and keep the project moving.

Real-Time Visibility Is Limited

When payment information is scattered across spreadsheets, inboxes and disjointed systems, your AP team can lose track of approved payments, pending approvals and upcoming payment deadlines. Without a clear, current view, it’s difficult to forecast cash flow and plan for the future.

How AP automation can help: By centralizing sign-offs and payment activity, AP automation makes it easier to track invoices through the approval process and make informed decisions based on up-to-date information.

Strict Deadlines Leave No Room for Delays

Across Canada, prompt-payment rules can set firm timelines for paying invoices and passing funds down the contracting chain. When payments require multiple sign-offs, they can stall in inboxes or get lost in email chains—putting your firm at risk of penalties or disputes.

How AP automation can help: AP automation tracks invoice due dates and automates approval workflows to help your team stay on top of payment deadlines.

Lien Risk Raises the Stakes

An invoice caught in a manual approval process or a missed payment deadline can prompt an unpaid subcontractor or supplier to file a lien to protect the amount owed. This can lead to project delays, additional administrative costs, strained professional relationships and complications with project financing, turning a simple AP issue into a much larger business risk.

How AP automation can help: A centralized digital workflow supports accurate, on-time payments to subcontractors and suppliers while maintaining a clear audit trail of approvals and payment activity.

Every Vendor Has a Different Process

Construction projects often involve multiple subcontractors and suppliers, all with different payment preferences and requirements. For example:

• You’re pursuing Modern Methods of Construction (MMC) and working with a specialized vendor who offers sustainable materials. This vendor requires additional documentation to qualify for green building certifications, incentives and/or rebates.
• You’re coordinating with a subcontractor who uses strict milestone-based billing. Each payment must be tied to approved project phases and supporting documentation.

Keeping track of these details manually can introduce errors that could strain vendor relationships and damage your reputation.

How AP automation can help: With an automated payment solution, you can create customized profiles with each vendor’s payment preferences, account information and payment history—reducing administrative effort while making consistent payments that build trust.

Approvals Are Slow and Scattered

Payment approvals can be hard to pin down when site supervisors and project managers are working in the field across multiple job sites. Requests pile up in inboxes, supporting documentation is hard to find and unpaid invoices slow down time-sensitive projects.

How AP automation can help: Automated workflows route payment requests to the right approvers and create a clearer view of where each invoice stands, reducing bottlenecks and keeping the process moving.

Use Case¹: A Growing Construction Firm Struggles with Manual Payment Approvals

Maya manages accounts payable for a commercial construction firm with several active job sites. Her team has always handled payables manually, but the process has become more challenging as the company has grown. With invoices moving through multiple projects and layers of approval, there was a constant risk that something important would fall through the cracks.

One invoice sat for several days because a project manager’s approval request was buried in his inbox. At the same time, Maya was tracking down an updated insurance certificate for a new subcontractor. Without her constant follow-up, the payment deadline nearly passed.

That near-miss gave the firm the push it needed to implement RBC PayEdge. The automated payables platform integrated with Xero, the company’s accounting software, so it was easy to adopt without disrupting day-to-day work.

Now, approval requests automatically route to the right people, and Maya’s team can quickly see which invoices still need attention. What once required constant follow-up and manual tracking is handled through a centralized workflow—helping the team spot bottlenecks sooner and keep payments moving.

Projects Change Faster Than Paperwork

Construction projects rarely unfold as planned. As work progresses, your team might navigate:

• Expanding project scopes
• Shifting timelines
• Unexpected costs
• Invoice discrepancies from change orders and cost overruns
• Cash flow forecasting hurdles

All of these challenges force your payments team to spend precious time chasing down information, reconciling discrepancies and managing payment delays.

How AP automation can help: AP automation keeps payments, approvals and supporting documentation in one place, helping your accounts payable team maintain up-to-date records and track changing project costs as the work evolves.

Disconnected Systems Create Extra Work

Your team may use one system to manage projects and another to handle accounting, along with spreadsheets and other manual processes to fill in the gaps. When tools aren’t integrated, keeping records aligned takes extra effort, and important details can get lost in the shuffle.

How AP automation can help: AP automation connects payment workflows to your accounting software, making it easier to import payable information, reduce duplicate data entry and maintain a clear digital trail.

Why Building and Construction Firms Choose RBC PayEdge

RBC PayEdge gives building and construction firms the flexibility and control that a manual AP process cannot provide. It brings approvals, payments and supplier information together in one place, offering your team a more reliable way to manage payables as projects evolve.

The result: fewer bottlenecks, stronger supplier relationships and a more efficient payment process.

Gain Centralized Visibility and Control

With RBC PayEdge, your approvals, payments and supplier information are organized in one place. Having a clear view of payment activity and upcoming obligations helps your team make informed decisions based on up-to-date information.

• Track payments at a glance. See which payments are pending, approved or completed from one centralized platform.
• Stay ahead of upcoming obligations. Keep a close eye on upcoming due dates, so you can plan cash commitments more confidently.
• Maintain greater oversight. Keep approvals and supplier details organized without piecing together information from scattered systems.

Streamlined Workflows

Managing payables doesn’t have to mean tracking every step by hand. RBC PayEdge simplifies recurring tasks and makes it easier to automate subcontractor payments while maintaining greater oversight as payments move through the workflow.

• Set the right permissions. Assign roles and approval limits to different users based on the controls your business already has in place.
• Keep approvals moving. Route payment requests digitally, so the right decision-makers can review them without relying on paper handoffs or long email chains.
• Reduce tedious reconciliation work. Once payments are issued, RBC PayEdge automatically updates the corresponding records in your connected accounting software.

Flexible Payment Methods

RBC PayEdge gives your firm more flexibility in how payments are funded, managed and delivered. With multiple payment methods in one platform, it’s easier to manage a large vendor network and stay flexible when cash flow is tight.

• Schedule and track payments. Keep upcoming payments organized and monitor their status.
• Pay by credit card. Fund subcontractor, supplier or vendor payments by credit card even if the person or firm doesn’t accept cards to help bridge temporary cash flow gaps.
• Combine funds from multiple sources. Pull funds from nearly any of your Canadian-domiciled accounts (including many credit unions). RBC PayEdge will combine them into a single automated payment.
• Manage multiple payment methods in one place. Send funds by EFT, ACH, wire transfer, Interac e-Transfer^‡ for business, cheque and more without using a separate process for each form of payment.

Simplify Vendor Management

Customized vendor profiles make it easier to keep important information organized, reduce administrative effort and create a smoother, more consistent payment experience.

• Keep vendor details organized. Create customized profiles with company information, account details and payment preferences for each vendor.
• Deliver a more consistent experience. Make it easier to manage payments efficiently and pay vendors according to their requirements.

Keep a Clear Digital Trail

A clear digital trail makes it easier to maintain accurate records, strengthen internal controls and prepare for audits. RBC PayEdge keeps approvals and payment activity organized and easy to access.

• Keep records organized. Maintain a clear history of approvals and payments in one centralized platform.
• Simplify reporting and audits. Access the documentation your team needs for internal oversight, reporting requirements and audits.

More Ways RBC Can Support Your Team

RBC PayEdge is just one of the ways RBC gives building and construction firms and other small businesses the flexibility they need to make payments. You can also access:

• Royal Business Operating Line: Access working capital when you need it to help cover gaps in operating cash flow and manage day-to-day business needs.
• Business and Commercial Credit Cards: Explore credit card options that can help you manage purchases, track spending and support cash flow.
• Commercial Mortgage: Apply for financing to invest in income-producing real estate properties.
• Other Ways to Make Business Payments: Discover additional solutions for paying vendors, employees and business taxes efficiently.