The Advantages of a Collaborative Payment Management System for Construction Projects

Traditional construction loan payment processes are disjointed. One process does not naturally flow to the next, which creates delays and errors. The result is frustrated stakeholders and increased risks for all involved.

Adopting a collaborative payment management system provides clear advantages for contractors, lenders, and title agents. Here’s a look at the benefits of an all-in-one solution like LMS Project.

Benefits for Contractors

General contractors can enjoy the following advantages when using a collaborative payment management solution:

Faster Payments

GCs often juggle invoices from suppliers and subcontractors while they wait for title agents to process lien releases and payment requests. In the meantime, GCs experience cash flow disruptions that can put a strain on their operations.

A centralized payment solution allows contractors to get paid faster. Once they submit the required lien release forms, the platform will automatically review the documents and initiate payment. Construction stakeholders get paid in a few days, not a few weeks.

Fewer Cash Flow Disruptions

Collaborative solutions like LMS Project ensure that GCs no longer have to finance projects for weeks or months at a time. Once a construction loan is finalized, money is added to a fund that is managed by LMS Project (or the lender’s in-house team).

The GC submits invoices to the portal and is paid from this fund. Subcontractors and material providers are also paid out of the fund. The fund is replenished with each draw, allowing all stakeholders to receive accurate payments.

General contractors avoid cash flow disruptions while also ensuring that their subcontractors and suppliers get paid on time.

Less Paperwork

Even experienced GCs can get bogged down with the stringent paperwork associated with construction payments. When they spend several hours each week filing invoices and filling out forms, they have less time to focus on their core responsibilities. These distractions increase the risk of project delays and overspending.

A collaborative payment management platform keeps everyone on the same page without the never-ending stream of paperwork. Construction teams will have more time to devote to the project and can conveniently submit requested documents via a user-friendly online portal.

Benefits for Lenders

Collaborative payment management solutions provide the following advantages for lenders:

Improved Compliance

Financial institutions are subject to strict regulatory guidelines. A collaborative payment management solution addresses all major compliance concerns, including:

●     1099 reporting

●     Financial audits

●     Mortgage lending regulations

Lenders can keep detailed records of lien release forms and other relevant forms that demonstrate that client funds were properly managed. Leading solutions like LMS Project also include built-in reconciliation capabilities to prevent discrepancies.

End-to-End Transparency

One of the biggest challenges in construction financing is maintaining visibility into disbursements and ensuring that all payments align with project milestones. LMS provides real-time tracking, allowing lenders to monitor payments, approvals, and document submissions.

Lenders will reduce the risk of overspending and fund mismanagement without slowing down the payment process. LMS Project makes it easy for financial institutions to maintain visibility into construction projects from loan approval to final payment.

Less Risk

Lenders can reduce the risk of overspending and delays by precisely managing every dollar allocated to a construction project. Effective payment management improves the lender’s reputation with customers, title agents, and construction companies.

Benefits for Title Agents

Title agents can use a collaborative payment management system to:

Reduce Administrative Burden

Platforms like LMS Project include customizable workflows with automation capabilities. Title agents can automate tedious tasks like document submission and review, which saves time and decreases the risk of errors.

Cutting down on delays creates a better experience for property owners while ensuring that contractors are promptly paid for the work they do.

Simplify Document Management

Traditionally, title agents have to manage projects using several disconnected communication channels, including text, email, fax, and physical document submission. A centralized solution consolidates workflows and documents so that title agents can stay organized.

Level Up Payment Management With LMS Project

Stop wasting time with antiquated payment management strategies. Make life easier for all stakeholders with LMS Project. Our platform provides a flexible, centralized application for managing construction loans and funding. With LMS, you’ll gain access to the following:

●     Automated construction disbursements

●     Budget tracking

●     A branded portal

●     Invoicing

●     Lien release collection

●     Text notifications

●     Reconciliation tools

●     Digital or check payments

LMS lets you manage construction disbursements on your terms. Use our tools to process payments in-house, outsource the entire process to our team, or adopt a hybrid approach. Book a demo to learn more about LMS Project.