In the construction industry, managing scope creep, change orders, and unaccounted bills is crucial, especially when cash flow tightens towards the end of a project. Adam Martin of Martin Building Group, featured on the Builders, Budgets, and Beer podcast, emphasizes the importance of real-time approval workflows to avoid these issues. These workflows ensure that every bill is systematically reviewed and approved at multiple levels, leading to accurate job costing, timely decision-making, and prevention of costly mistakes, ultimately maintaining the project's financial and operational integrity. If you’re an owner, project manager (PM), or a financial manager in the construction industry, you know what scope creep, change order mismanagement, unaccounted bills and receipts can lead to, especially towards the end of a project when cash gets tight.

Our recent guest on the Builders, Budgets, and Beer podcast Adam Martin from Martin Building Group emphasizes the importance of real-time approval workflows as a critical way to avoid such headaches in his own construction business. In this blog we will shed more light on why approval workflows are so important and what benefits they bring to builders.

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But first, let’s understand what Approval Workflows are in construction.

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💡 An Approval Workflow refers to the structured process of getting approvals for various aspects of a construction project. These processes ensure that all necessary approvals are obtained in a systematic and efficient manner, minimizing delays, risks, and errors across construction projects.

Approval Workflow Example

To put this in context, let’s imagine a scenario where a general contractor (GC) is managing incoming bills from suppliers and subcontractors for a specific construction project. The approval workflow would get triggered upon the submission of a new bill from a subcontractor into the GC’s accounting system.

Step 1: Office Team Receives the Bill

The updated approval workflow starts with the office team receiving the bill, either via email or mail. The team then downloads or enters the bill into the system, identifies the relevant field team associated with the project, and forwards the bill to the appropriate project manager for review.

Step 2: Project Manager Reviews the Bill

Next, the project manager thoroughly reviews the bill by confirming the accuracy of the job and cost codes, ensuring the work has been completed to the required standard, checking the costs against the budget, and confirming no change order is needed. Lastly, the project manager verifies the payment amount before forwarding the bill for final approval. It's important to note that the project manager must determine whether the cost is billable before sending it for approval in the case of cost-plus contracts.

Step 3: Owner or Controller Approves Bill for Payment

Finally, the bill is sent to the owner or controller, depending on the GC’s operational structure, for final approval. The owner or controller confirms that sufficient funds are available and typically ensures that a draw from the client has been received before proceeding. This step is crucial because receiving the funds from the client before paying out to subcontractors helps maintain healthy cash flow for the GC. Once these steps are completed and the bill is approved, it is authorized for payment and processed by the accounts payable team.

This process helps the GC ensure that only valid, accurate, and budget-compliant bills are paid, reducing the risk of financial discrepancies.

The Many Benefits of Approval Workflows

1. Accurate Job Costing Information

“We’ve seen great wins in managing those approvals in real-time and not waiting till the end…at the end of a project the cash is tight, the owners are exhausted, they’re ready to be done and the last thing you want to do is have to negotiate a big amount of uncollected change orders…and of course it’s all amnesia at that point, those things have been gone and forgotten.” - Adam Martin, Martin Building Group

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Approval workflows ensure that the individuals most familiar with a project's specifics—such as project managers, site supervisors, or department leads—are responsible for confirming work completion and cost accuracy. By routing approvals directly to those with the most context first, these workflows prevent misunderstandings, delays, and errors. This ensures that decisions are based on first-hand knowledge, leading to more accurate financial tracking and project management.

2. Decisions Driven by Real Numbers in Real Time

“We’ve had big wins on real-time approvals for real costs and tracking those numbers.” - Adam Martin, Martin Building Group

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Besides helping you with accurate job costing, approval workflows also facilitate real-time information leading to timely decision-making as the project progresses. With immediate access to up-to-date information, project managers can quickly log change orders, adjust budgets on the fly, and communicate updates. This immediacy helps prevent delays and cost overruns, ensuring that projects stay on track and within budget, even when unplanned changes occur.

3. No More Costly Mistakes

"We caught a duplicate billing that had the same scope, but different invoice numbers and addresses. If not for our approval workflow, this could have easily slipped through and cost us." - Adam Martin, Martin Building Group

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Approval workflows play a crucial role in catching and preventing costly mistakes such as duplicate billings or overcharges. This is a painful reality for many that can be easily prevented with the right approval workflows. By systematically routing bills and invoices through multiple levels of verification, these workflows ensure that each transaction is thoroughly reviewed for accuracy and legitimacy. This multi-layered scrutiny helps identify discrepancies early, providing financial protection by catching and correcting potential errors before they can impact the project's budget or financial health.

Creating Approval Workflows in Adaptive

Setting up approval workflows in Adaptive is easy and can be done in a few clicks. The best part? Once created, these workflows run automatically, ensuring that the right people are notified at the right time, every single time, without any additional action on your part. This seamless automation keeps your projects on track and your team aligned, making approvals hassle-free.

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Approval workflows in Adaptive are designed for maximum flexibility, allowing you to tailor your process with as many or as few rules as needed.

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Here’s an example of what a job-specific approval workflow could look like. What this set of rules essentially tells us is this - If the GC receives a bill from ABC Supply Co. or Abita Lumber Co., Inc. on the KM Cost Plus job, then it has to be first reviewed and approved by the projects manager, then by the bookkeeper, and finally get sign off from the Boss.

This structured process ensures that each bill is thoroughly vetted at multiple levels, safeguarding the project’s financial performance. If you’re interested in learning more and exploring approval workflows in adaptive book your demo with us today!

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Ultimately, approval workflows maintain the financial and operational integrity of construction projects, ensuring they stay on budget and on track from start to finish. Implementing structured approval workflows is not just a best practice but a real necessity in the construction industry.

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