construction billing process

Make sure everyone knows what they are responsible for and when they have to have it completed. Set a firm deadline for the process to be completed each month but remain flexible when needed. Then reassess the process every few months to make sure it’s still working and everyone’s still happy with it. If you do this, you’ll have a construction billing process that ensures you will have a steady stream of income.

Easy Construction Billing Methods For Contractors & Entrepreneurs

Builders may often mix T&M billing with the previously discussed GMP by setting a “not-to-exceed” clause in their contract. This ensures the client will not be charged beyond a certain limit, even if the project takes longer or requires more materials than estimated. Imagine you’re building a home and every expense that goes into the construction process – from materials to labor – is paid for by your client, plus your markup percentage.

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construction billing process

The AIA billing process allows users to track stored materials so they can be properly included on invoices when they arrive onsite. Construction invoicing software simplifies itemizing services and costs. It also ensures that calculations are accurate and that nothing gets overlooked. Features like construction invoice templates and automatic calculations remove the risk of human error, streamlining the invoice creation process. To ensure accurate billing and maintain finances, the construction company must track all expenses and bill the client accordingly.

Verify that records are accurate

Nonetheless, industry practices do not negate the legal obligation that may arise in contracts requiring official AIA documentation. The ability to customize documents is increasingly valued, and as such, more contractors are asking whether certain columns construction invoice can be hidden or information can be excluded to streamline the billing process. Nobody wants to spend hours digging through job orders and purchase reports, but an effective construction invoice is the key to keeping your construction business profitable.

construction billing process

It also protects you from the financial risk created by change orders and scope creep, as any additional charges are passed onto the customer. You also need to be very clear with the client what constitutes a milestone and who signs that off – as it could lead to disputes later down the line. Progress-based billing is a little more complex – because it’s designed to spread your income over the length of a project. The trick is to make sure your back is covered before the construction project starts. The client hasn’t yet paid their dues and you’re increasingly beginning to wonder whether they’re actually going to. I am reviewing a schedule of value for a project that does not have a % of the project total assigned to project closeout.

Unit price billing method

This can help construction companies plan to come in under budget, ensuring a higher profit margin by the project’s end. The AIA billing process consists of two contract documents, or payment application documents, G702® and G703®, that track previous payments and current payments. These forms work together to provide a clear breakdown of the work completed and the corresponding payments. Stored materials are parts, components or other items that are purchased by the project owner that are kept on or offsite until needed. These can include anything from lumber and drywall to nails, screws and other small items needed for construction projects.

On most projects, there will be a person or a team of people in charge of collecting all the information to complete a progress billing. For smaller companies, the project manager may have to collect all the required materials and distribute them to the administration team. A potential disadvantage of AIA-style progress billing will arise if you do not have a sound job costing system in place.

Client Details

Beyond the basic project details (like date, percentage complete, etc.), progress billing contracts should also include terms that the client and contractors should agree on before the work begins. A payment schedule will outline the details for when invoices should be submitted and paid and should be clearly stated and agreed upon before the project gets underway. This article will compare the most common construction billing methods, which projects best suit each — and suggest some billing best practices to help get contractors paid on time.