How long does it take your team to communicate on items such as safety hazards, delay impacts, or the need for extra work from the field to your office? More importantly, how long does it take for the Foreman to notify the office before beginning work? Have you considered Digital Time & Materials Tracking?

Digital Time & Materials tracking provides real-time visibility of the trade contractor’s field activities ensures they can better document, quantify installed work items, and get approvals for T&M tickets before the project ends. As a result, trade contractors can verify out-of-scope work faster and shorten the time it takes to get paid for “at-risk” work.

What is a Digital Time & Materials Tracking Tag?

With the Rhumbix digital T&M Tag Tracking solution, you eliminate all the manual steps (e.g., track down, email, scan, deliver or manually enter lost paper tickets) required from the paper’s manual process. The solution requires a few clicks to document out-of-scope work the minute it’s needed for the field. As a result, the back-office receives accurate information in real-time and risk management is mitigated.

Here’s how Rhumbix digital T&M Tags work:

• Track and document out-of-scope requests on any mobile device
• Stakeholder e-signatures are collected in one platform
• Log materials, equipment used, and labor
• Track ticket status with Rhumbix dashboards

How does a digital Time & Materials tag tracking platform help both General Contractors and Subcontractors?

The Time is Now to Transition from Paper to Digital

Digital technology is rapidly changing the landscape of the construction industry. However, estimates from a World Economic Forum report that it will take another ten years for the construction industry to “almost” entirely digitize. Globally, the report indicates a potential savings of $1.2 trillion due to increased productivity and efficiency from technology adoption. The question for contractors is which technologies provide the most significant ROI.   

The manual T&M tagging process is ripe for automation. Generating tickets or tags for documenting work that is potentially out-of-scope work costs contractors hundreds of thousands of dollars annually, among the many other problems caused. Work is documented, and copies retained by the subcontractor, general contractor, and project owner can find their way to the change order, sent to the payment application, and lastly to the subcontractors’ balance sheet. This is a perfect scenario. 

However, the problem with this over-simplistic image of the process is that the reality of T&M tag tracking is defined by delays, inefficiencies, waste, and, ultimately, subcontractors’ being fairly paid for work performed.

What drives these unsatisfactory outcomes? The T&M process is a necessary mandate to execute work before the time-consuming process of negotiating and issuing change orders. There are several reasons why this process is challenging. The most prevalent is the time necessary to process and administer T&M tags that document the work performed. 

What does this mean? Consider the steps in the following workflow:

1. First, T&M tags must be handwritten in the field to document the work.
2. Documentation must be included to explain what, why, and who authorized it, and what resources were involved.
3. The T&M tag must get reviewed and verified in the field.
4. The T&M tag must find its way from the jobsite to both sub and contractor offices.
5. The contractor confirms the work was, in fact, not part of the contract scope.
6. The work’s genesis is explained and understood by the GC and relayed to the owner to justify the additional cost.
7. T&M tags must be priced, with all the necessary backup documentation provided.
8. The data must be digitized, entered into logs, systems, workflows, platforms, spreadsheets, and all manner of “tools” for documenting the work.
9. Eventually, the scope is captured in a change order and sent to the payment application to be compensated.
   

The myriad of data transformations, hand-offs, inefficiencies, and opportunities for the essential information on T&M tags to have errors are potential drivers to delay payment. The challenge is these tickets document work performed that the subcontractor finances with no immediate path for being paid. The manual T&M process that exists to assure predictable delivery of work—for the contractor, owner, and project’s convenience—often leads to highly disadvantaged subcontractors – key stakeholders in delivering successful projects.

 

1. Digital Advantage: Better manage financial risk, profitability, and cash flow on projects.

Subcontractors are burdened with a disproportionately higher working capital cost than general contractors and project owners within the construction system, which plays out in the T&M process. As a result, the construction business is low-margin work, and subcontractors carrying the cost of T&M work can place a substantial strain on their balance sheet.

When construction firms mismanage working capital and their accounts receivables stack up due to slow payment, short-term debt can become long-term debt putting your firm in a poor capital position to grow. Impacts on working capital can have downstream implications for investment, innovation, company growth, or continue operations.

Technology has emerged to streamline workflows, payment processes, reduce latency in the payment cycle, and drive companies’ financial position improvements to tackle these industry challenges. General contractors are also promoting accelerated payment solutions to manage financial risk better and improving factors that drive profitability and cash flow on projects.

While these trends and industry solutions represent substantial opportunities for the industry, improving profitability and better cash flow performance can be achieved by utilizing solutions that digitize T&M tags and provide real-time data to project stakeholders. The following few points outline how this happens.

2. Digital Advantage: Create stronger transparency, visibility, and action.

Automating T&M tags in the field makes real-time data accessible to project stakeholders (e.g., construction managers, architects, and owners). This transparency and visibility ensure that T&M work is identified, understood, and any mitigating or validating actions required can be taken promptly.

T&M data’s susceptibility of being delayed or lost is reduced because it is digital–improving the likelihood for timely processing and payment to the subcontractor.

3. Digital Advantage: Improve collaboration between the field and Back office.

Digital data at the source (entered on the field) drive transparency in the contracting and payment process. Contractors leverage the data for metrics, insights, trending, and forecasting–all driving greater awareness of project cost and contingency management. This creates equitable and optimal conditions for the GC to maintain controls and the subcontractor getting paid for work performed.

The T&M process is complicated with negative behaviors and distrust between all stakeholders, but the benefits brought about by implementing digital solutions can bring substantial benefits for all parties involved. Timely and equitable compensation is a core component to driving improvements in the industry. By digitizing T&M tags from the field, better job costing and cash flow management will follow via easy-to-use mobile solutions and automation with the back office.

4. Digital Advantage: Streamline Field to Payroll to Billing to Financial Reporting

Manual reporting between the field, payroll, billing, and financial reporting is archaic, disconnected, and questionably accurate.

Rhumbix enables construction finance teams to account for T&M dollars that would otherwise not have been recognized, let alone billed.

• Real-time, actionable data flow and automated consolidation of tickets for billing reduce cycle times.
• Digital Time & Materials tracking reduces the number of accounting hours dedicated to billing reduces, while the volume of projects billed can double.
• No more lost T&M work to bill.
• Better billing saves and makes more money.

With streamlined data capture, field supervisors can now present tickets on mobile devices in the field, where the owner representative or GC can approve. “Instead of several days to produce and process a field ticket, Rhumbix reduces it to one day. This efficiency helps contractors replace manual activities with accelerated processes that positively impact cash flow with a 50% reduction in work-to-billed-to-paid time.”

Exceptional Payoffs for Digital Time & Materials Tracking:

• Automated consolidation of field tickets has reduced production time from 50%.
• Greater cash flow via a 50% reduction in work-to-billed-to-paid time.
• Improved accuracy of reporting.
• Improved employee satisfaction eliminating manual activities.

5. Digital Advantage: Connecting the Field and Accounting Teams

Contractors with outdated or paper-based T&M workflows hurt the company’s ability to manage cash flow, slow down payment, and cost too much to maintain.

Paperwork or spreadsheet-based forms with critical data are transmitted to the office, manually entered by staff into accounting ERP systems. The manual process of consolidating T&M data into field tickets for submittals to owners or the GC can take upwards of 30 days. This process’s complexity, the volume of tickets, and document tracking translate into T&M work going unbilled.

Work-to-billed-to-paid time can stretch even longer than 45 days or more. In addition, billing consumes the accounting team’s time and resources, and project managers have zero insights into daily cost data to ensure their projects are within budget.

Common issues in this scenario:

• Inefficient spreadsheet or paper form for field T&M data capture
• Manual and lengthy ticketing process consuming Accounting dept time and resources
• T&M work performed goes unbilled
• Cash flow impacted as work-to-billed-to-paid time stretches out to 45 days
• Lacking real-time measures of productivity and job cost to keep projects on schedule and budget