13 Best Practices to Modernize Construction and Real Estate AP

In construction and real estate finance, accounts payable (AP) is a strategic lever for cash flow management and project success. Every vendor payment must align with contracts, draw schedules, and compliance documentation. But outdated manual data entry and workflows driven by emails and spreadsheets can’t keep up.

IFOL data shows that teams with limited AP automation process ~3,600 invoices per FTE annually. Advanced teams using accounts payable automation software process nearly 23,000. That sixfold gap represents lost time, capital, and control.

The impact goes beyond processing speed. Automation improves invoice management, enhances audit readiness, and accelerates funding. It also builds trust with vendors, lenders, and capital partners.

This guide shares 13 best practices for modernizing construction AP, grouped into four focus areas: building a strong AP foundation, streamlining intake and approvals, enforcing controls to reduce risk, and fostering continuous improvement through better vendor and lender partnerships.

Build a Baseline for AP Automation Success

Before automating, you need a clear view of how your accounts payable process works and where it breaks down. Without that, you can’t measure impact or improvement.

Best Practice #1:  Assess your current state

Start by mapping your end-to-end AP workflow, from invoice receipt to approval, payment, and reporting. Capture where invoices enter the system, who handles them, how many approvals are required, and how data flows into your ERP.

In construction and development finance, common choke points include the following:

• Inconsistent subcontractor invoice formats
• Lien waivers that must be collected and validated before payment
• Draw schedule dependencies tied to capital disbursement

Disconnected processes make it hard to catch issues before they impact funding. According to IFOL’s AP Benchmark Report, manual processing averages $7.90 per invoice, compared to $3.40 for highly automated teams.

Next, establish baseline metrics to measure improvement. Standard KPIs include the following:

• Average cost per invoice
• Days payable outstanding (DPO)
• Invoice exception rate

For project-based organizations, also track these metrics:

• Draw processing time
• Lien waiver turnaround
• Invoice-to-draw alignment

These benchmarks form the foundation for demonstrating ROI, from faster funding cycles to stronger compliance and fewer construction project delays.

Reimagine Your Approval and Intake Process

With your current workflow mapped, the next step is designing a future state that removes friction and applies automation where it counts, across both standard and project-specific documentation.

Best Practice #2: Use smart, tiered approvals

Not every invoice needs the same approval path. Automating tiered approvals reduces delays while preserving control.

• Low-value invoices can be auto-approved under a set threshold, reducing manual review.
• Mid-value invoices may require a single approver, such as a project manager or department lead.
• High-value, subcontractor, or high-risk invoices should route through multi-level approvals, especially when tied to lien waivers, retainage, or compliance documentation.

In construction and development finance, approval routing should also reflect the following:

• Project type (e.g., commercial vs. multifamily)
• Regional rules (e.g., lien waiver or tax regulations)
• Lender requirements (e.g., draw schedule checkpoints tied to funding)

Best Practice #3: Centralize how invoices arrive

Centralizing intake through a single, controlled channel brings structure, consistency, and visibility from day one.

Here are some common methods:

• Vendor portals with standardized submissions and self-service tracking
• Dedicated AP inboxes paired with intelligent document capture
• Direct ERP or P2P integrations for instant validation

For real estate developers and GCs, this avoids the chaos of contractors emailing different project managers. Everything flows into one system, creating a digital audit trail, surfacing missing lien waivers faster, and reducing the risk of late payments that can stall projects.

Once centralized and automated, invoice processing capacity scales dramatically, from a few thousand per FTE annually to over 20,000.

Choose Technology That Fits Project Finance

The right platform with strong integration capabilities is key to AP automation. It should reduce manual entry, improve accuracy, and integrate cleanly with your ERP and capital systems, especially in construction, where every invoice must align with contracts, draw schedules, and compliance rules.

Best Practice #4: Deploy intelligent document capture

Intelligent document processing powered by machine learning can do the following:

• Extract header and line-item detail with high accuracy, even on complex material or labor invoices.
• Recognize diverse formats (subcontractor bills, progress payment applications, change orders) without requiring templates.
• Continuously improve accuracy as exceptions are corrected.

This is especially valuable in construction, where invoices rarely arrive in a uniform format. By automating extraction at the line-item level, finance teams reduce error rates (manual entry averages 3–4% error rates, while advanced OCR/AI solutions can drop this below 1%) and eliminate the delays caused by mismatched or incomplete invoice data.

Best Practice #5: Connect AP directly to your ERP and capital systems

Automation can’t drive value if your systems are still operating in silos. The most effective AP platforms integrate bidirectionally with your ERP, and, in capital-intensive environments, with your funding systems as well.

Here’s what that means:

• Invoices are validated against contracts, draws, and POs in real time
• Vendor data syncs automatically across systems
• Approved invoices flow straight to the ledger, no double entry, no version control issues

For lender-backed projects, this integration is important. With every invoice, approval, and lien waiver centralized, stakeholders gain a clear, auditable view of how funds align with budget milestones. That visibility builds trust, speeds up approvals, and removes barriers to disbursement.

Redefine the Role of the AP Team

As automation takes over manual tasks, AP becomes a strategic function, driving compliance, vendor relationships, and funding visibility across every project.

Best Practice #6: Shift staff toward exceptions and compliance

Automation frees AP teams from manual approvals and data entry, allowing them to focus on higher-value work.

That includes resolving exceptions, like mismatched lien waivers or delayed payments, and overseeing compliance to prevent project delays and ensure lender confidence.

Teams should build skills in workflow setup, KPI tracking, and anomaly detection. As AP becomes a project control function, those who can analyze exception trends, draw timing, and vendor behavior will guide better decisions, and cleaner audit trails.

Put Controls at the Center of AP

As AP digitizes, strong controls are important to safeguard funds and meet audit standards, especially in construction, where lien releases, retainage, and multi-party funding raise the stakes.

Best Practice #7: Enforce segregation of duties

Segregation of duties (SoD) remains the foundation of financial controls. At minimum, organizations should separate the following:

• Invoice approval
• Payment authorization
• Payment execution
• Vendor master data management

In project-driven environments, this becomes even more important:

• A subcontractor’s invoice may not be released until lien waivers are validated.
• Retainage amounts must be calculated correctly and withheld until project milestones are met.
• Multiple capital providers often require proof that each draw is backed by the correct documentation and approvals.

Automation helps enforce these controls consistently, reducing the reliance on manual checks. Approval hierarchies, audit trails, and role-based permissions ensure no single individual can unilaterally approve and release funds.

Best Practice #8: Maintain automated audit trails

Every approval, exception, and payment release should leave a digital record. Automated audit trails not only simplify compliance reporting for lenders and capital providers but also give AP leaders visibility into who approved what, when, and why. 

For developers and GCs, this transparency reduces disputes with subcontractors. For lenders, it strengthens confidence that funds are tied to valid, compliant documentation at every stage of the draw process.

Use AI and Real-Time Monitoring to Stay Ahead

AI takes AP from reactive to proactive. By surfacing risks in real time, it helps finance teams act faster, stay compliant, and build confidence with capital partners.

Best Practice #9: Apply AI for Smarter Processing and Monitoring

AI auto-assigns GL codes, project tags, and cost codes based on historical patterns. It matches invoices to contracts and draws, flags duplicates across projects, and dramatically reduces errors, all while speeding up reporting.

AI also enables continuous monitoring, surfacing anomalies like duplicate invoices, unusual vendor billing, or fraud signals in real time. Predictive analytics help forecast cash flow needs, identify bottlenecks, and assess vendor performance, giving developers and lenders greater visibility and control.

Keep Improving with Measurement and Reviews

To sustain ROI, AP teams need to measure outcomes, review performance, and adapt workflows over time.

Best Practice #10: Track efficiency, effectiveness, and project-specific KPIs

Tracking the right KPIs helps AP teams monitor both efficiency and effectiveness.

Efficiency metrics include straight-through processing rate, cycle time, and exception resolution speed. Effectiveness metrics cover payment accuracy, vendor satisfaction, and working capital impact.

In construction and development finance, project-specific metrics matter just as much, like invoice-to-draw alignment, lien waiver turnaround, and draw processing time. These measures highlight risks before they stall construction and give lenders confidence that every dollar aligns with valid, compliant documentation.

Best Practice #11: Run quarterly process reviews

Benchmarks lose value if they aren’t revisited. Leading AP teams schedule quarterly reviews to do the following:

• Analyze exception trends and their root causes
• Adjust approval workflows as project size, region, or capital provider requirements evolve
• Refine automation rules and AI models based on recent performance
  Surface new opportunities for automation as invoice formats or compliance rules change

For developers and GCs, these reviews prevent bottlenecks from derailing project timelines. For lenders and private credit firms, they ensure funding flows stay compliant with audit standards and investor expectations.

Strengthen Vendor and Lender Partnerships

Even the best AP automation initiatives fail without vendor and lender adoption. Smooth, timely invoice submission and transparent communication are what keep projects funded and contractors paid on schedule. 

Automation should make these relationships stronger, not create new friction.

Best Practice #12: Communicate changes early and clearly

When implementing new AP workflows, keep subcontractors, vendors, and capital partners in the loop:

• Notify them early when submission requirements or approval processes change.
• Provide clear instructions for new portals, emails, or document formats.
• Offer temporary support options (e.g., accepting both PDFs and portal uploads during a transition period).

Proactive communication reduces confusion, cuts down on exceptions, and strengthens trust. For lenders, it ensures confidence that invoices and compliance docs will flow in the correct format from day one.

Best Practice #13: Position vendors and lenders as partners in automation

AP is about building reliable partnerships that keep projects moving. Vendors who trust that payments will be processed accurately and on time are more likely to do the following:

• Submit invoices promptly through automated systems
• Reduce disputes and resubmissions
• Offer early payment discounts that strengthen working capital

For developers, this smooth adoption reduces project delays caused by invoice backlogs or missing documentation. For lenders, it streamlines draw approvals and strengthens audit trails.

Accounts Payable Automation as a Continuous Journey

AP automation is not a one-time project. It is an ongoing discipline of measurement, refinement, and adaptation. As technology evolves and compliance requirements expand, the most successful organizations will be those that combine automation with strong controls, clear vendor communication, and real-time visibility into project health.

The payoff goes beyond speed. Automation aligns invoices, lien waivers, and draws with capital provider rules, reducing audit risk, accelerating funding, and freeing up AP teams to focus on cash flow and project outcomes.

At Built, we believe AP should operate as a strategic lever, not a bottleneck. From invoice intake to lender reporting, our platform helps finance leaders achieve the accuracy, visibility, and trust they need to keep projects moving and capital flowing.

If you’re ready to see how AP automation can transform your workflows, schedule a demo with our team today.

AP Automation Software for Construction FAQs

How does AP automation help construction firms stay on budget and on schedule?

Automated systems reduce delays by streamlining invoice approvals, surfacing exceptions early, and providing a clear audit trail. This is important when payments are tied to milestone funding or draw approvals.

Faster, more transparent workflows give developers and GCs the visibility necessary to avoid stalled projects and manage timelines.

What makes AP automation software purpose-built for construction?

Generic AP tools often fall short. Construction-focused platforms should support cost code allocation, approval routing, and job-level tracking.

Real-time integration with construction accounting software ensures job costs reflect actual spend instantly, reducing reconciliation errors and manual data entry.

How does AP automation improve cash flow visibility across projects?

Automation provides real-time insights into invoice data, liabilities, and payment status. Dashboards and alerts help finance teams act quickly and manage cash flow across active construction projects without waiting for month-end reports.

What are the risks of sticking with manual AP processes?

Manual processes create risks like lost invoices, missed early payment discounts, and inaccurate job costing. They drain resources and expose your business to compliance gaps, especially as project volume scales.

What should construction finance teams look for in AP automation software?

Look for systems that align with how construction companies manage funding, like supporting draw schedules, lien waiver tracking, and bi-directional sync with capital systems. The right platform reduces risk, simplifies audits, and keeps payments moving.