Where Construction Companies Lose Money

Ask any experienced construction CFO where the money goes, and you won’t hear stories about catastrophic project failures. Those are painful, but they’re visible. Everyone sees them coming.

The harder and more common problem is the money that disappears quietly. Not in a single bad week but scattered across hundreds of transactions and dozens of projects. It’s buried in documentation no one has time to audit carefully. By the time the loss shows up, it’s too late to address — the money is gone.

Construction is one of the few industries where you can execute well and still lose money. Margins are thin, complexity is high, and the gap between operational and financial reality can stay hidden for months. Without serious oversight, maybe forever. This gap is what keeps CFOs and COOs up at night.

Three Leaks That Impact The Bottom Line

Financial leakage costs construction companies big time. But it isn’t dramatic. In fact, financial leakage falls into three categories that rarely trigger alarms — at least not until they’ve done serious damage.

1. Revenue leakage is what happens when work gets done but doesn’t get billed. Time and materials (TM) jobs are particularly vulnerable. Crews log hours. Materials are used. Change orders get approved verbally. Inevitably, somewhere between the field and the invoice, items fall through the cracks. Each individual miss is small, but when aggregated across a portfolio of projects over a year, it can represent a material percentage of revenue earned but never collected.
2. Cost leakage is the mirror image of revenue leakage. Duplicate payments to subcontractors and vendors are more common than most finance teams want to admit. Or in some cases, they don’t recognize the problem until it’s too late to do anything about it. This is a constant struggle in companies managing high volumes of invoices across multiple projects simultaneously. Miscoded labor is another persistent problem. When hours are charged to the wrong job code or cost category, it’s harder to trust your own numbers. And it’s nearly impossible to identify where cost overruns are actually originating. This distortion compounds over time.
3. Cash leakage is the slowdown in cash flow that comes from retention management failures and billing cycle delays. Retention, which is money withheld by owners until project completion, is a significant asset on any construction company’s balance sheet. When retention releases aren’t tracked and collected aggressively, that cash sits idle or is sometimes forgotten entirely. Billing delays have a similar effect. Every day between when work is completed and when an invoice goes out is a day of working capital the business isn’t getting back.

The compounding nature of all three of these leakage types is what makes them dangerous. A 1% revenue leakage rate on a $100M project portfolio is $1 million. A 1% cost leakage rate is another million. Retention delays and billing inefficiencies affect cash flow even when revenue is eventually collected. And in an industry running on margins that often fall between 2% and 5%, these aren’t rounding errors. They’re the difference between a profitable year and a breakeven one.

Why Systems Can’t Solve The Problems

Ask any CIO: the natural response to a business problem is to point to technology. And most construction companies have plenty of technology — they’ve all got ERP systems, project management platforms, accounting software, and all the rest of the platforms, programs, and applications vital to doing business, often along with a few more specialized tools. So, it’s not the absence of systems that’s the problem. It’s that the systems aren’t connected bidirectionally. They can’t talk to each other. Their data is siloed, and the humans in the middle don’t have the bandwidth to bridge the gaps.

Most construction finance teams are running at capacity. Month-end close, WIP schedules, billing packages, subcontractor payment management, and lien waiver tracking take up a lot of time. The workload is enormous and relentless. And when a team is operating at full throughput just to keep up with normal operations, there’s no capacity left to audit for anomalies. Duplicate payments slip through. Unbilled T&M work sits in a field log that no one has time to cross-reference against the invoice. The retention balance ages without anyone following up.

When teams can’t get the data they need from their systems quickly enough, they build their own. Like spreadsheet workarounds. The result is a proliferation of disconnected tracking tools, each one maintained by a different person, in a different format, with a different definition of what the numbers mean. When the project manager’s spreadsheet doesn’t match the ERP, and neither one matches the owner’s Schedule of Values (SOV), someone has to manually reconcile them. That takes time that finance teams don’t have.

Documentation chaos makes it worse. Construction is one of the most paper-intensive industries in existence. Much of that paper, or its digital equivalent, never gets properly indexed, routed, or reconciled with financial records. Change orders get approved in the field and memorialized in email threads. Pay applications move through approval chains that span multiple organizations. When something goes wrong, finding the documentation to resolve it is a herculean project in itself.

The Underlying Data Problem

None of these issues is about effort or intent. Construction finance professionals work hard. The problem is structural. Fragmented data creates a visibility gap that effort alone can’t close.

Research across the construction industry consistently shows that project teams spend roughly 18% of their time searching for information. Data that exists somewhere but isn’t where they need it, when they need it. That’s nearly one full day per person per week spent on information retrieval rather than on decision-making. Meanwhile, another 28% is lost on rework.

The same research points to a 13% cost-saving opportunity for companies that standardize their data practices. That number isn’t about cutting headcount or renegotiating contracts. It’s about closing the gap between what the data shows and what’s actually happening. So, the leakage gets caught before it becomes a loss.

The companies beginning to close that gap aren’t necessarily the largest or the best-resourced. They’re the ones that have decided to treat data as an operational asset rather than a byproduct of doing the work. That’s the decision that must precede everything else.

Boomi Helps Reduce Financial Leakage in Construction

Boomi addresses the problem at its root by connecting fragmented systems that can’t reliably and consistently share data. The following three use cases are common across the construction industry.

Integrating ERP and Construction Management Systems

The most direct construction use case is integrating ERP platforms (NetSuite, SAP, and Sage) with construction management software like Procore. Without that connection, job costing, billing, purchase orders, and timekeeping all require manual reconciliation. This is where duplicate payments, mis-coded labor, and unbilled T&M work accumulate. Boomi has a pre-built NetSuite-Procore Solution Accelerator specifically designed for this.

Real-Time Data Synchronization

Boomi enables near-real-time data synchronization between systems such as NetSuite and Procore, streamlining job costing, budgeting, quoting, billing, and purchase orders, eliminating inordinate manual data work.

Streamlined Source-to-Pay

When all your data sources are connected, it’s easy to catch policy violations and unnecessary spend. Boomi lets you replace manual reporting with AI insights that flag value leakage and validate invoices against orders and receipts for touchless processing.

Connectivity Powers Measurable Success

Mid America Contracting, Inc. (MACI), a commercial construction firm, eliminated 66 hours a month of manual data work after integrating NetSuite and Procore via Boomi, including 40 hours of manual integration work and 26 hours of manual timekeeping and payroll processing, accelerating integration projects 5x.

When interviewed for the Boomi case study, Jim Daech, CFO at MACI, said, “Construction accounting is very complex, and Boomi lets us align systems and orchestrate an enormous volume of information across NetSuite and Procore accurately, reliably, and in near real time. That’s critically important to our business.”

Financial leakage isn’t a people problem. It’s a connectivity problem. Unbilled T&M work, duplicate payments, retention sitting untouched on the balance sheet — all of it comes from systems that weren’t built to talk to each other. Connecting those systems lets the data reach the people who need it to proactively prevent that money from disappearing. And that’s where Eide Bailly and Boomi can help.

If you need help using AI to reduce financial leakage in your organization, contact our team of Boomi experts to discuss how Eide Bailly and Boomi can help your organization.

This is the second in a four-part series on the use of AI in the construction industry, featuring Eide Bailly Technology Consulting, a Boomi partner and business advisory firm specializing in the implementation, customization, and integration of leading ERP, CRM, and cloud technologies.