construction billing process

As we’ll discover, there are several ways to price up a construction invoice. Each project is its own unique beast, so coming up with a one-size fits all sample construction invoice is a fool’s errand. After 6 months of blood, sweat and painful negotiations with subcontractors, you’re looking forward to cashing in your paycheck, having a well-deserved break and looking forward to your next contract.

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Firstly, they are fundamental to maintaining cash flow—vital for the health and operation of any construction business. Timely and precise invoicing ensures that funds are available for ongoing expenses, including payroll, materials, and equipment rentals. In the heavy construction sector, where tasks are complex and range from earthmoving for new roads to laying down infrastructure for utilities, construction invoices must be specific, clear, and accurate. This detailed invoicing is essential to justify the costs and progress of a project to those who may not be familiar with the construction process. This billing method offers transparency, as clients can see the price of each project component. Additionally, this method is useful for larger projects with many components, where estimating the total project cost can be challenging.

construction billing process

Keep invoices clear, but detailed

Underbilling occurs when a contractor does not bill for all the labor and materials delivered in a billing cycle. If there is any inconsistency in regards to the sub or supplier’s company information, it should be confirmed. Be sure that the information lines up with the information in the contract documents. It may seem like a hassle, but this is a crucial part of ensuring accuracy.

construction billing process

Set a time each month for billing

Technological advancements have introduced more flexibility in how contractors use AIA billing documents. Modern construction invoicing software allows contractors to push financial data from budgets to invoices, tailoring pay app information or consolidating details into broader categories. Other information may be required depending on the project and your billing procedures. To create a construction invoice, you will need to include as standard the name of the project, client, contractor, invoice date & number, project details, T&Cs and monies owed. Depending on your billing method, you may need to include other information alongside this.

Make sure that your invoicing covers your cost for the job, overhead expenses, and profit, of course. In addition to the primary AIA billing forms G702 and G703, the payment application process often requires supplementary documentation to substantiate the amounts requested. These additional documents serve to reinforce and provide clarity to the information presented in the main billing forms, ensuring a thorough and transparent billing cycle. Construction invoices are documents that contractors use to work out how much money they’re owed by their clients and when those costs should be paid. Be sure the work was not only actually completed but completed correctly. Or, if the job is botched, you may want to consider withholding payment until the work is brought up to snuff.

We are a subcontractor working at a project and received the waiver of release of liens(MLA appointment). Margins are tighter than ever in this industry, and it shouldn’t take discounts and incentives to be paid fairly. As for penalties – they can be a great tool to encourage timely payment. As with everything else, the use of discounts and penalties will make a lot of sense in some situations, but they aren’t a blanket solution. An easy way to speed up payment is to offer discounts if the invoice is paid before the due date.

And to do that, you need to get to grips with how to create a construction invoice. While joint checks and joint check agreements are common in the construction business, these agreements can actually be entered into… What is a cost-plus contract and how is it used in the construction industry? Lien waivers and lien releases are completely different documents (even though they are often confused by the construction industry).

Offer discounts on advance payments

The client knows the total cost upfront with a fixed-price billing method, which provides clarity and reduces uncertainty. Additionally, the contractor is incentivized to complete the project within the price to maintain profitability. Once payment is received, general contractors can release the lien waiver to the client proving payment has been made.

Time and Materials (T&M) Construction Billing Method

Contractors and their administrative staff may prefer lump sum billing regardless of project size because of the freedom and time-savings it provides. Owners who are not that familiar with the contractor may prefer a more open-book billing construction invoice method that allows them to see what costs and profits there are for the contracted work. This construction billing method is similar to cost-plus, except the “plus” part is an agreed-upon pay rate — that is, an hourly or daily wage.

Procore is committed to advancing the construction industry by improving the lives of people working in construction, driving technology innovation, and building a global community of groundbreakers. Our connected global construction platform unites all stakeholders on a project with unlimited access to support and a business model designed for the construction industry. Construction projects involve a variety of concurrent, coordinated efforts that necessitate a diverse range of expertise to successfully move from blueprint to physical structure. Getting everyone together to discuss billing at the beginning of a project is enormously helpful. Ask to meet with all stakeholders, from the owner to the lender to the construction manager to fully understand what each requires.

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