Transforming Construction Payments: Adaptive's Innovative Approach to Address Slow Payment Issues

The construction industry is troubled by a widespread problem of payment delays, which is made worse by the presence of different factors that make the payment process more complicated.

To tackle this difficulty head-on, Adaptive has developed a revolutionary solution that is specifically designed to speed and simplify the process of making payments on a building site.

(Photo : Pexels/Tima Miroshnichenko )

Slow Payment Issue in the Construction Industry

In the past three decades, payments have been permitted to be made within 30 days due to the construction industry practice, contract provisions, and terms and conditions. Also, employers and principal contractors can extend payment beyond that amount whenever it is feasible.

As a result, the industry has practically normalized late payments, which can have significant repercussions for the profitability of businesses, particularly those that are smaller in size. However, there is a possibility that payment will trickle down to the supply chain, but the cost will effectively trickle upwards.

Construction companies continue to have severe strain on their working capital because of the excessive pricing, which puts even the tiniest of businesses in jeopardy. Accordingly, to prevent firms from facing administration, payments must be made punctually.

Nevertheless, smaller businesses are often the ones that have to wait the longest for their payment applications to make it through the various stages of the approval process, which includes contractor review, employer/client review, assessment, and eventual payment. This puts a greater strain on these businesses and threatens their ability to stay in business.

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Addressing Slow Payment Issues

In the year 2023, the cost of payment delays for construction contracts reached a staggering $273 billion, which accounted for 14% of the overall expenditures for the project during that particular year. Matthew Calvano, Henry Bradlow, and Francisco Enriquez believe that the factor that was responsible for the problem was inefficiencies in the back office. Therefore, in the year 2021, these three people worked together to create Adaptive, a platform with capabilities meant to simplify accounting and payment processing for general construction contractors.

Under the direction of Emergence Capital, Adaptive finished a Series A investment round this week totaling $19 million. The company provides electronic payments, budgeting, expenditure monitoring, and accounts payable among other financial management process automation tools. When customers use the product offered by Adaptive, they can submit documents such as insurance contracts and payment requests in formats such as SMS and PDF. Additionally, they can utilize automation to execute actions on these uploads, such as approved requests and budgets.

According to Calvano, the short-term strategy for expansion is to concentrate on obtaining subcontractor clients by developing goods that are specifically customized for that market sector. He also noted that in the medium term, Adaptive, which currently generates all of its revenue through software, would investigate the possibility of monetizing various integrated payment, insurance, and payroll operations.

For the construction business, Adaptive offers a state-of-the-art financial management solution that blends AI, automation, and user-friendly design. Through the use of its automated financial management software, which was developed exclusively for small and medium-sized construction businesses, the company reportedly can handle this issue. Furthermore, with the latest investment led by Emergence Capital and involvement from Andreessen Horowitz, Definition, Exponent, 3kvc, Box Group, and Gokul Rajaram, the company is on the verge of scaling up its operations, following a period of tremendous expansion. Thus, the total amount of funding that Adaptive has raised is now $26.4 million.

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