Calculating the Real ROI of a Quick Pay Program in Construction

Trying to calculate the return on investment (ROI) of a quick pay program for your construction firm? The good news is, if you’re a general contractor (GC), you can probably implement one without having to cover any of the costs. And, if you operate a trade firm or are a subcontractor, early payment system cost savings usually mean the program pays for itself. Give us a few minutes, and we’ll walk you through the mechanics and math.

Why Implement Quick Pay?

Let’s start with the basics. Costs and ROI aside, there are compelling reasons construction companies choose Quick Pay every day.

Benefits of Early Payment Programs for General Contractors

Simply put, GCs typically sign up for Quick Pay because their trade firms and subcontractors need to accelerate cash flow. Construction payment cycles were set up to protect the owner, which means downstream parties often wait months for payment even if they’ve done top-tier work and met all requirements on their end. Ensuring high-performing teams are paid promptly, regardless of industry standards, is good business. Plus, when you work with a top Quick Pay provider like Viva Capital, it’s very easy to get started, and there’s no cost to you. You may even qualify for rebates.

Benefits of Early Payment Programs for Trade Firms and Subcontractors

Trade firms and subcontractors often have major cash outlays for supplies before starting a project, and labor costs that compound throughout the project. Because payments are generally slow, and retention from one project may not be paid out for months, if at all, cash flow is almost always a concern. This can leave professionals short on cash when payroll is due or even unable to purchase supplies that are necessary to complete a job.

Moreover, the way construction contracts are structured usually limits the types of financing downstream teams can access. Often, the only way to secure working capital is through the GC, and even when a GC wants to help, they don’t always have the ability to. Early pay programs solve this challenge, which is why many subcontractors advocate for Quick Pay. Plus, when a GC is partnered up with a company like Viva, subcontractors and trade firms can count on competitive rates and the flexibility to choose when to accept early pay and keep more money in their pockets.

Considerations When Calculating the ROI of a Quick Pay Program as a General Contractor

As we’ve touched on, GCs don’t cover any of the costs associated with implementing a Quick Pay Program, which means you won’t be calculating ROI in a traditional sense. However, if you’re using a system like Viva’s, you will need to add projects to your portal, link any trade firms or subcontractors that you want to have access to Quick Pay, and approve their requests when you feel the work has been completed to your satisfaction. These steps don’t take long, but they signify a time investment in the program, so it makes sense to know beforehand if it’s worth the effort. Below, we’ll take a look at what you have to gain. 

You Can Decrease Your Administrative Load

Given the cash flow strain many subcontractors and trade firms face, you probably field a fair number of calls and texts about payment status. When your team can request early payment as needed and check payment status through the portal, the number of inquiries drops. That’s time and focus you get back every day.

Quick Pay Allows You to Refocus Your Working Capital and Boost Margins

In all, 36 percent of construction professionals say high interest rates or financing costs are one of their biggest concerns, according to the latest Associated General Contractors of America (AGC) Construction Outlook survey. If you’ve been arranging for early pay on your end, you’re probably one of them.

Best-case scenario, you have a cash surplus and can pay from your reserves. This still means your working capital is tied up and can’t be used to accept new or larger projects or pay your own debts. However, given what’s on the line when your team is asking for cash, GCs often scramble and secure loans or lines of credit in their own names. This financing naturally comes with debt and interest payments.

With Quick Pay, the funds are provided by a third party at no cost to you. It’s set up in advance, so there’s no scrambling for subcontractor financing and no debt to pay back. Plus, you can put your working capital toward things that will grow your business.

Trade Firm and Subcontractor Incentive Programs Improve Efficiency and Performance

When teams have the cash flow they require for supplies and labor, projects are naturally much more likely to stay on track. However, teams that know they can submit requests for payment as soon as their work is complete have an even greater incentive to finish their portion as quickly as possible and to your standards, which helps keep your project timelines intact.

Your Relationships with Trade Firms and Subcontractors Will Strengthen

Improving loyalty with Quick Pay also boosts ROI. When teams know they can count on you for early payment, they’re more likely to seek out opportunities to work with you and prioritize your projects. These strong subcontractor relationships ensure your projects go smoothly but also that they are completed on time and to your standards.

You Can Gain a Competitive Advantage That Drives the Growth of Your Construction Firm

In construction, the quality of your team is everything. By giving proven trade firms and subcontractors another reason to continue working with you and incentivizing high-quality output, your reputation in the industry is likely to grow even stronger. This leads to more contracts being awarded, which you can complete with greater proficiency and ease. And, by keeping more working capital in your business, you can accept more projects and grow.

Additional Considerations When Measuring the ROI of Payment Programs

Whether you’re a GC, subcontractor, or managing a trade firm, Quick Pay ROI will hinge on the partner you choose to provide the service.

Work with a Quick Pay Provider That Offers Competitive Rates

It may go without saying, but excessive fees will eat into profit. However, choosing the cheapest option can mean a reduction in service or speed. Work with a provider that offers competitive rates without taking shortcuts. This is something we pride ourselves on at Viva Capital.

A Strong Reputation Can Predict Your Experience

If you’re a GC, read reviews and testimonials before signing up. It’s also helpful to explore case studies that are tied to your area of expertise. For instance, at Viva, you can explore the stories of Diversified Interiors, Medlock Commercial Contractors, and Banes General Contractors, all of which we’ve helped through our Quick Pay Program.

The Tech Stack Can Make or Break the Experience

Setting up and using Quick Pay is a multi-step process, but it doesn’t have to feel like one. When everything is managed within a single online portal, you can see what’s pending at a glance, and automated notifications keep the ball rolling, it all comes together seamlessly.

With Viva’s online portal, setting up projects and linking professionals is fast and easy. Trade firms and subcontractors will also appreciate the streamlined process for requesting early payment and clarity on requirements.

Payment Speed Varies

The platform behind the Quick Pay program you choose plays a role in the administrative side of fast payouts, but it’s important to note that once the green light for payment is given, the actual payment timeline can vary, too.  For instance, some Quick Pay companies may take a couple of days to review documentation and only pay by automated clearinghouse (ACH) or check, which increases the cycle even more. At Viva, we can pay out the same day final documents are received. Plus, trade firms and subcontractors can opt for payments by wire transfer and have their early payment in their account that day.

Experience the Financial Impact of Quick Pay for Yourself

When all is said and done, Quick Pay can be transformative for general contractors and pay for itself for trade firms and subcontractors. As a small business funding specialist for more than 20 years, with a specialized focus on the construction industry, Viva Capital can help ensure your projects stay on track and fortify your relationships with fast, straightforward, and reliable funding. To learn more or explore the fit, talk to a Quick Pay specialist.