By: Rich Uphus | December 19, 2023
In the construction sector, financial oversight is not merely a matter of balancing books; it is an intricate dance of managing contracts, ensuring compliance, and retaining value. At the heart of this dance lies the concept of retainage – a common financial practice meant to guarantee the quality and completion of a contractor's work. However, this practice is often burdened by outdated manual management techniques that pose significant challenges for construction companies and project-based organizations.
Here are 5 of the top retainage challenges –
#1 - The Plight of Manual Missteps
Firstly, the reliance on manual data entry is fraught with the risk of human error. Studies show that manual entry leads to mistakes in as much as 85% of construction projects, according to Construction Business Owner magazine. Such errors can cascade into costly overruns and project delays.
#2 - The Spreadsheet Conundrum
Furthermore, the use of disparate spreadsheets to manage retainage contributes to data silos, confusion, and inefficiency. The Journal of Construction Engineering and Management highlights that over 70% of construction firms still depend on multiple spreadsheets to handle their project finances, which can result in inconsistencies and inaccuracies.
#3 - Time-Intensive Reconciliation
The manual reconciliation of accounts is another time sink for businesses, with companies spending an average of 15 hours per month on these tasks, as per the Construction Financial Management Association. This delay not only strains resources but also hampers cash flow, a lifeline for any project.
#4 - Compliance Complexities
With regulations around retainage varying wildly between jurisdictions, staying compliant becomes challenging. Manual systems simply do not have the agility to keep up with the constant flux of legal requirements.
#5 - Protracted Dispute Resolutions
Lastly, when disputes over retainage arise, the lack of clear and accessible documentation can lead to protracted resolution processes. The National Association of Home Builders reports that 62% of construction disputes are related to retainage. This statistic underscores the need for transparency.
The Way Forward
The labyrinth of challenges presented by manual retainage management can seem daunting for construction companies. Yet, the shift toward digitization and automation heralds a new era of efficiency and control. Statistics underline the urgency of these automated solutions. As reported by the Construction Financial Management Association, companies that have integrated digital solutions into their retainage management report a 25% reduction in dispute resolution times and a 30% increase in overall project management efficiency.
FullClarity Answers the Challenge
The industry's need for streamlined processes in retainage management has given rise to innovative solutions like FullClarity's Retainage for NetSuite . Natively built inside Oracle NetSuite, this tool automates and simplifies the retainage process, offering accuracy, compliance, and much-needed efficiency in construction financial management. Paired with FullClarity Construction for NetSuite which provides comprehensive construction management capabilities, construction companies can revolutionize how they handle project finances, from retainage to revenue recognition.
Andrew Coghlan, CEO and founder of FullClarity, emphasizes this commitment: "At FullClarity, we recognize the unique challenges posed by retainage management in construction. Our aim has always been not just to provide a solution but to fundamentally streamline and revolutionize time-consuming and inefficient areas of our industry. With our suite of tools, we're dedicated to giving construction businesses the edge they need in a competitive marketplace."
While manual retainage management presents a thicket of challenges, the adoption of automated, integrated software solutions promises a path to greater efficiency, accuracy, and financial control. As the industry evolves, tools like those developed by FullClarity are beneficial and essential for the modern construction enterprise looking to build a solid foundation for financial management.
If your construction company is looking for a way to administer its contracts better, FullClarity wants to speak with you. Contact us to arrange a no-obligation consultation with one of our experts.