why-erp-is-not-enough-for-construction-payment-management
Why ERP Isn’t Enough for Construction Payment Management
Digitalisation
General

ERP is a must-have when running day-to-day business operations. It’s a great tool for managing a range of basic processes including finance, HR, manufacturing, and more. 

However, ERP is not procurement software

And, like our headline says, it’s definitely not enough for managing the construction procurement process effectively. The big question now is “Why not?”. 

Well, despite its broader range of capabilities, ERP systems may not have the flexibility and detailed insights needed for industry-specific procurement management. After all, e-Procurement software is more focused and agile. 

In this article, we’ll explore the challenges of ERP systems in construction procurement, and discuss Doxa’s unique solution to meet your procurement needs. 

The Importance of Effective Construction Payment Management

Before going any further, let’s look at why effective payment management should be your top priority:

  • Avoid Project Delays: Timely payments ensure that the project moves according to schedule. Vendors and subcontractors can obtain their claims certifications smoothly, minimising payment interruptions and making sure project timelines are met.
  • Build Strong Relationships: Paying on-time builds good relationships with vendors and subcontractors. This not only improves your company’s reputation, but also opens doors for future collaborations and better project outcomes.
  • Practise Efficient Budgeting and Resource Allocation: A clear grasp of finances allows you to evaluate the effectiveness of current processes. You’re equipped to make informed financial decisions, increasing budgeting accuracy and optimising resource allocation for future projects.
  • Ensure Regulatory Compliance: In many jurisdictions, construction payment processes are governed by specific laws and regulations, such as prompt payment laws and mechanics lien laws. Compliance with these regulations is important to avoid legal disputes and penalties.
  • Maintain Healthy Cash Flow: Good payment management is critical for sustaining a steady cash flow throughout the project lifecycle. This includes managing retainage, handling change orders promptly, and ensuring that payment cycles align with cash inflows from clients.

Challenges of ERP Systems in Construction Procurement 

In this section, we’ll discuss why ERP systems alone are insufficient in managing construction procurement.

erp-system-in-construction-procurement

Photo by Freepik

1. Generic Payment Management Solution

ERP systems offer benefits such as data integration, better efficiency, and reduced costs. However, they are designed as general solutions to cater to various industries.

Therefore, ERP systems usually require customisation to align with specific needs, and do not possess specialised procurement features needed for sectors like construction. 

Companies need to purchase “extra” software products such as contract management services and spend analysis to make up for this gap

According to IBM, this can be time-consuming as the system ”needs to be built from the ground up”. It usually takes years to fully implement this system, severely impacting your return on investment (ROI).

2. Poor Collaborative Features

Most ERP systems are unable to assist collaboration between internal users and external suppliers. Therefore, most communication happens outside the ERP via email, phone calls, or other messaging platforms. 

Moreover, most ERP systems do not have external portals where suppliers can directly submit and receive quotes for Request for Quotes (RFQ), new Purchase Orders (PO), and invoices. 

This issue also affects internal processes, where ERP systems often do not include features for submitting Purchase Requisitions (PR) and, particularly for construction firms, Pre-Requisitions. 

Overall, this leads to a lengthy and tedious communication process, where companies and suppliers must frequently exchange messages, and rely on manual processes.

3. Low Visibility on Spending

ERP systems struggle to create detailed and precise spend analysis reports. Spend analysis measures how effectively a company can understand and monitor where and why money is spent in their operations.

Spend analysis helps you to evaluate and improve your procurement processes. Huyett summarises it best, stating that good spend analysis results in:

  • Better administrative functions (e.g., procurement and documentation)
  • Lower risk of supply chain disruption
  • Efficient internal systems (e.g., faster payment processing)
  • Better relationships with suppliers

Some sources, like Supply Chain Minded, have stated that ERP systems alone are unable to keep up with the complexity of global sourcing, and therefore not the best option as a spend analysis platform. 

4. Complex Payment Approval Processes

Construction projects often involve intricate payment approval workflows, due to multi-tiered approvals, compliance requirements, and variations in payment terms across different contracts and stakeholders. 

By themselves, ERP systems may not have the flexibility to handle these complex workflows. This can result in situations such as:

  • Delays in payment processing
  • Disputes with vendors and subcontractors
  • Potential project disruptions

Combine this with the complicated nature of the ERP system, and the procurement team will face challenges in maintaining control and visibility over spending. 

Revolutionising the Built Environment With Doxa Connex

So, what’s the solution?

This is where Doxa comes in. Doxa Connex is a collaborative trade platform that enables procurement, payments, and financing for construction – the first of its kind in Southeast Asia.

Doxa Connex connects buyers, sellers, and financiers in the same space. Users of Doxa Connex have achieved visible results, including an impressive up to 49.2% reduction in workflow time.

Doxa - A collaborative Trade Platform for Procurement, Payments, Financing and Analytics

Why Should I Integrate My ERP With Doxa Connex?

Now, let’s take a look at how Doxa Connex tackles the challenges faced by ERP systems.

A photo showing the system between suppliers, purchasing site, finance, contracts/QS and subcons. It includes the procurement & payment management for Constructions - Doxa Holdings

Procurement Workflow with Doxa Connex.

1. Tailored Solutions for Construction

Firstly, Doxa Connex’s Subcon module is designed for the construction industry. It’s specially made for main contractors, and aligned with Building and Construction Authority (BCA) Singapore standards.

It can handle specialised construction tasks such as progress claims, payment certificates, variation orders, rounding, batch payments for multiple invoices, and much more.

As a whole, Doxa Connex offers a one-stop-solution for construction procurement, eliminating the need for manual data entry at many stages. This speeds up the process for your procurement and finance teams.

The best part? We can implement this solution in as fast as a few weeks.

2. An Ecosystem of 1,000+ Companies

The Doxa ecosystem includes over 1,000 companies in the region.

We support and enable collaboration between companies and suppliers, providing a platform to directly request, submit and receive quotations, orders, and invoices.

These data or documents are then automatically posted to your ERP or accounting system. This process significantly cuts down the amount of manual work and increases efficiency.

If you find the onboarding process complex and time-consuming, rest assured that Doxa offers FREE onboarding for suppliers. Our team will ensure a smooth and hassle-free transition to Doxa Connex.

3. Single Source of Truth

Doxa Connex acts as a single source of information with a cloud platform. All stakeholders can refer to this system as the primary and centralised source of information.

This system provides easy access to all your data, and assists effective collaboration by collecting all your projects in one place.

Therefore, Doxa Connex drastically improves spend visibility as all members of the company can refer to the same data and fully monitor spending.

Additionally, Doxa Connex contains an embedded analytics and reports feature, which collates and presents the data (e.g., committed spending) captured in your procurement-to-payment workflow.

This tool provides valuable business insight and aids in the decision-making processes. Here are a few of its key features:

    • Near real-time update
    • Interactive and adjustable filters
    • Exportable to Excel
    • Customisable dashboard

4. Easy Access to Bank Financing in Singapore

Partnered with major financial institutions such as Maybank, UOB, OCBC, and more, Doxa Connex offers competitive financing rates for users who submit financing requests through Doxa.

We also provide time-saving approval processes. As the payment process is integrated into the system, you can make direct bank payments and receive real-time payment status updates in Doxa Connex.

The biggest advantage? Submitting invoice financing requests to financial institutions via this platform (rather than independently) increases your likelihood of receiving financing.

5. Smooth Integration With Existing Systems (ERP or Accounting)

Rather than an entirely new system, think of Doxa Connex as boosting the efficiency of current processes. Our platform can integrate seamlessly with existing ERP or Accounting software.

This integration is done through Application Programming Interface (API) or Secure File Transfer Protocol (SFTP).

Doxa Connex will leverage existing data and processes through this integration, and streamline procurement workflows. As a result, your business can operate more smoothly, with reduced cycle times.

6. Enhanced Regulatory Compliance

Doxa Connex ensures compliance with relevant regulations by providing transparency and traceability in the procurement process. It allows stakeholders to track transactions and guarantee accountability.

Moreover, we are compliant with ISO 27001 and ISO 20000 standards, ensuring your sensitive information stays secure. In short, Doxa Connex helps companies to:

  • Track spending
  • Manage supplier relationships
  • Show compliance to clients and regulators

As sustainability is a must in today’s construction landscape, Doxa Connex also provides companies with environmentally conscious procurement options.

We help you keep a low environmental footprint, and avoid government restrictions.

Bonus Features

We’ve taken extra steps to ensure Doxa Connex brings value to users:

Dedicated Mobile App: The Doxa Connex app enhances field connectivity and accessibility. This allows stakeholders, including project managers, subcontractors, and suppliers, to access critical information, submit documentation, and manage tasks on the go.

Doxa Connex’s SolutionERP Challenges
Tailored Solution for Construction

An Ecosystem of 1,000+ Companies

Single Source of Truth

Easy Access to Bank Financing in Singapore

Smooth Integration With Existing Systems

Enhanced Regulatory Compliance
Generic Payment Management Solution

Poor Collaborative Features

Low Visibility on Spendings

Complex Payment Approval Processes

“With all the documents now on the (Doxa Connex) platform, Kimly and our suppliers are able to manage our business processes with greater efficiency.“

– Mr Louis Khoo, Director, Kimly Construction Pte Ltd

What’s the Difference Between Doxa Connex and ERP Systems?

Here is a full comparison between Doxa Connex and ERP systems:

FeatureDoxa ConnexERP System
Seamless data flow and complete transparency across processesYesOnly some
Easily connect with our extensive network of over 1,000 existing suppliersYesNo
Direct quotation negotiation, submission, and comparison capabilities.YesNo
Host-to-Host Payment directly through Banks with real-time updateYesNo
Intelligent 3-way invoicing matching for accuracyYesNo
Management & issuance of payment certificatesYesOnly some
Track purchase spend vs budgetYesNo
Create onsite goods receipt immediatelyYesNo
Setup direct or batched payments via bank accountYesNo
Granular, detailed procurement analytics for data-driven insightsYesNo
Constant feature additions or enhancementsYesNo

Doxa Connex – Construction Procurement to Payment Solution

In conclusion, ERP systems alone are not enough to manage construction procurement. From their generic nature to poor collaborative features, ERPs face many challenges in fulfilling your procurement needs. These shortcomings highlight the need to integrate a more tailored solution into your system.

Enter Doxa Connex – a premier platform connecting buyers, suppliers, and financiers effortlessly. Built on a strong enterprise-grade foundation, our highly flexible platform allows us to enhance workflows for any industry, including the construction sector.

To provide the best value for buyers, we’ve partnered with leading financial institutions including Maybank, UOB, OCBC, and more. Our platform is trusted by prominent players in the construction industry such as Tiong Seng Group, Kimly Construction, and Sim Lian, creating a thriving ecosystem for growth.

Request a session with the Doxa team

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